Chancellor Rachel Reeves is set to present the Labour government’s first multi-year spending review, outlining a broad fiscal vision that channels significant investment into public services, infrastructure, and defense, but leaves limited flexibility for unforeseen shocks. Central to the plan is a £39 billion investment in affordable housing, the largest such pledge in a generation, with an aim to build 1.5 million homes by 2030. Alongside this, over £113 billion will be directed toward infrastructure projects, including nuclear energy development, regional transport upgrades, and AI innovation, with a clear emphasis on supporting regions beyond London. The National Health Service is slated for a £30 billion annual funding increase, a 2.8% real-terms rise intended to address chronic staffing shortages and reduce patient wait times. However, independent forecasts suggest the NHS may still struggle to meet key performance targets, such as treating 92% of patients within 18 weeks, by the end of the current parliament.
Defense spending is also set to rise, with a commitment to increase it to 2.5% of GDP by 2027, funded in part by reductions in international aid. Other areas, however, face tighter constraints. The Home Office will receive only modest increases, with little room for police expansion, while post-Brexit farming subsidies are likely to see cuts. Education will receive a boost of £4.5 billion annually by 2029, and a further £14 billion is earmarked for the Sizewell C nuclear project, as well as over £13 billion for home energy efficiency.
Science and technology will benefit from £86 billion through 2029, while the justice system is set to receive £4.7 billion for prison construction and reform. Despite the scale of investment, the review reflects a tightly balanced fiscal strategy. Some government departments will experience real-term reductions to their service budgets to allow for these spending increases, revealing the narrow fiscal margins Reeves is working within. The review reflects Labour’s attempt to balance ambitious public investment with credibility on economic management, but it also underscores the lack of maneuverability in the face of potential economic or geopolitical disruptions. With limited reserves or contingency funds evident in the current outline, Reeves’s strategy will depend heavily on steady growth projections and disciplined implementation to avoid shortfalls or politically difficult trade-offs as pressures evolve over the parliament’s term.
