Inside the 2025 Spending Review: Big Bets on Health, Housing & Growth

Chancellor Rachel Reeves today delivered a far-reaching Spending Review, committing tens of billions to public services and capital projects in a bid to usher in an era of “national renewal”. The statement detailed a landmark cash injection for the health service, a generational investment in housing, and a host of new funding streams for energy, transport, and community renewal, all while tethered to what the Chancellor called her “non-negotiable” fiscal rules.

At the core of the announcement is a record settlement for the National Health Service, which will see its day-to-day budget increase by 3% in real terms for every year of the review. This amounts to an extra £29 billion annually by the end of the period, aimed at delivering “More appointments, more doctors, more scanners”. This investment is coupled with a £10 billion fund to digitise the health service and a pledge to put mental health support teams in all English schools.

Overall departmental spending will grow by 2.3% per year in real terms, a figure Reeves contrasted with the post-2010 austerity era. “Austerity was a destructive choice for the fabric of our society,” she said. “My choices are different. My choices are Labour choices”.

The ‘National Renewal’ Agenda: A Social Spending Overhaul

Beyond the NHS, the Chancellor detailed a sweeping agenda aimed at families, education, and housing.

• Housing: Reeves announced the “biggest cash injection into social and affordable housing in 50 years”, led by a new £39 billion affordable homes programme over the next decade. This will be supplemented with £10 billion in financial investments to “unlock hundreds of thousands more homes”.
• Education and Child Welfare: A raft of policies were announced, including extending free school meals to over half a million more children, continuing the national rollout of breakfast clubs, and allocating £370 million for school-based nurseries. A further £555 million will fund the transformation of children’s social care.
• Schools: The core schools budget will receive an uplift of £4.5 billion a year. This is alongside a major capital investment program, with £2.3 billion per year to fix “crumbling classrooms” and £2.4 billion annually to continue rebuilding 500 schools.

‘Securenomics’: Rebuilding Britain’s Industrial and Tech Base

The Chancellor framed her investment strategy as “securenomics,” stating, “where things are made, and who makes them matter”.

• Energy and Infrastructure: A “£30 billion commitment to our nuclear powered future” will see £14 billion go to Sizewell C and new investment in a Small Modular Reactor program with Rolls-Royce as the preferred partner. The government will also support carbon capture projects in Aberdeenshire and Humberside.
• Transport: A £15 billion investment will connect cities and towns, with further multi-billion pound commitments for the TransPennine (£3.5bn) and East-West Rail (£2.5bn) routes. A new four-year settlement was also announced for Transport for London.
• Industrial Strategy and Skills: To support British manufacturing, the review confirms a £500 million grant to Tata Steel. To foster innovation, R&D funding will rise to a record £22 billion a year, and a £1.2 billion annual investment will support over a million training and apprenticeship placements.

Security, Streets, and Local Pride

A third pillar of the review focused on security and community investment.

• National and Border Security: Defense spending is set to rise to 2.6% of GDP by 2027. A new Border Security Command will see its funding rise by up to £280 million annually, supporting the goal of ending the use of hotels for asylum seekers within this Parliament.
• Justice and Policing: The government is investing £7 billion to fund 14,000 new prison places and increasing police spending power by an average of 2.3% per year in real terms.
• Community and Cost of Living: Funding will be available for up to 350 communities to improve local parks, pools, and libraries. For household budgets, the £2 bus fare cap will be extended to at least March 2027, and a home upgrade programmed aims to save families up to £600 on their annual energy bills.

The Fiscal Straitjacket

Despite the extensive list of new spending, the Chancellor stressed her commitment to fiscal discipline, noting that her department conducted a “zero-based review” to find savings. With total spending rising at 2.3% while protected areas like health (3% rise) and defense (rising to 2.6% of GDP) grow faster, the plan implies a continued squeeze on non-priority departments. The success of the entire strategy hinges on the UK economy delivering the growth needed to support this spending without breaking the “non-negotiable” fiscal rules that the Chancellor has made the foundation of her entire economic approach.

In her closing remarks, Reeves positioned her plan as a definitive choice. “In place of chaos, I choose stability. In place of decline, choose investments… I choose national renewal”.