The UK government’s June 2025 Spending Review, led by Chancellor Rachel Reeves, has unveiled a complex plan aiming to balance pressing fiscal challenges with strategic investments in key areas. The review outlines ambitious funding allocations alongside tough departmental cuts, reflecting the government’s efforts to manage a strained economy while advancing policy priorities.
A major highlight of the Spending Review is the significant boost to defense spending. The government plans to increase defense expenditure to 2.5% of GDP by 2027, with potential rises to 3% by 2034. This commitment includes a substantial £86 billion investment in science and technology, underscoring a focus on enhancing the UK’s military capabilities and technological edge amid growing global uncertainties. Energy infrastructure also receives a notable boost, with £14 billion earmarked for the Sizewell C nuclear power project, signaling a strong push towards energy security and sustainability.
However, the review is marked by difficult decisions elsewhere. Several government departments face real-terms budget cuts, with the Home Office notably hit hard. Despite urgent appeals from the Home Secretary to increase police funding, the government declined, raising concerns about meeting its pledge to recruit 13,000 frontline officers by 2029. Many other public services are expected to operate with tighter budgets, though the NHS and Ministry of Defence remain somewhat shielded from deep cuts.
Welfare spending is another contentious area in the review. The government plans a £4.8 billion reduction in welfare expenditure by 2029/30, primarily through reforms to universal credit and disability benefits. These changes are likely to affect vulnerable groups, sparking criticism from advocacy organizations and opposition parties alike. At the local level, councils face an estimated £8 billion funding gap, threatening essential services like support for vulnerable adults and children with special educational needs. The Local Government Association has warned that without additional funding; many councils may struggle to meet the demands placed upon them.
Economically, the outlook remains cautious. National debt has climbed to around 100% of GDP, with debt servicing consuming a significant portion of public finances. Economic growth projections have been downgraded, with GDP growth expected to slow, and inflation is forecast to remain above the government’s 2% target for the foreseeable future. These factors pose risks to financial stability and complicate the government’s fiscal planning.
Overall, the June 2025 Spending Review reveals a government navigating the delicate task of balancing strategic investments in defense and energy with austerity measures across many public services. The success of this approach will depend on effective implementation and ongoing assessment to ensure that key services are protected while meeting long-term economic goals.
