Chancellor Rachel Reeves delivered the first comprehensive Spending Review in 16 years, outlining day‑to‑day departmental spending up to 2029 and capital budgets through to 2030. Under the banner of “renewal across the United Kingdom,” the Review markedly prioritises investment in health, defence, housing, education and innovation – a decisive break from austerity policies of the past.

Winners & Losers (in Brief)

Winners:

• NHS (England): A 3% real‑terms boost to annual day‑to‑day funding, equivalent to approximately £29 billion per year, exceeds expectations, even though the capital budget holds steady in real terms from 2025-26 to 2029-30.
• Defence: Planned to rise from 2.3% to 2.6% of GDP by April 2027. The MoD’s capital budget is set to increase by 7.3% over the multi‑year period .
• Schools: Core spending grows modestly by 0.4% annually, with per‑pupil funding increasing due to a shrinking school‑age population. Free school meals are extended to universal‑credit households at a cost of around £410 million per year by 2028-29
• Affordable Housing: A £39 billion boost over 10 years, with an additional £10 billion allocated to Homes England for investment.
• Consultancy Delay: Implementation of Whitehall consultancy savings is deferred by three years, postponing £1.2 billion in cuts.

Losers:

• Home Office: Front‑line spending falls by 1.7% annually, though some asylum funding is redirected, yielding a slight net increase toward the end of the period.
• Foreign Office: Faces the largest reduction at 6.9%, driven in part by cuts to foreign aid and a planned reduction in diplomatic staff.
• Environment (DEFRA): Day‑to‑day spending drops by 2.7% and capital budgets by 1.8% even as £4.2 billion is dedicated to flood defences and around £2.7 billion per year toward farming and nature recovery.

 

Investment and Infrastructure Highlights

• £113 billion is earmarked for capital investment through 2029–30, directed at infrastructure including rail, nuclear power, prisons, and highways.
• Northern transport: Approximately £15 billion is allocated to tram, train, and bus networks in Greater Manchester, the Midlands, and Tyne & Wear
• Sizewell C and Clean Energy: The government commits £14 billion for Sizewell C, joins investments in small‑modular reactors and fusion research
• Social housing: As noted, affordable housing receives a major funding uplift alongside guarantees via Homes England

 

Personal Finance: What This Means for Your Finances

1. Winter Fuel Payment Restored
   The government will reinstate winter fuel payments for pensioners earning up to £35,000, reinstating the pre‑2024 universal provision for around nine million pensioners while recouping funds from higher‑earning recipients through the tax system. This move will cost £1.25 billion annually
2. Pension Saving & Allowance Pressures
   With income tax thresholds frozen, high‑net‑worth individuals may face fiscal drag. The annual pension allowance remains at £60,000, but those earning over £260,000 are subject to tapered reductions, potentially down to £10,000.
3. Employer National Insurance Impacts
   Employer NI has increased to 15% from April 2025; business owners should evaluate cost structures and remuneration strategies, aware that this could impact dividend outcomes and hiring budgets.
4. Fiscal Drag Risk
   With frozen thresholds and strong public investment, individuals should monitor inflation and bracket creep that may escalate future tax burdens, especially ahead of anticipated Autumn Budget changes.

 

Contact us on 0330 320 9280, email: info@cravenstreetwealth.com or complete our online enquiry form to discuss how government policy could impact your financial plans.

 

Sources:

Financial Times – Spending Review 2025: winners and losers
https://www.ft.com/content/5cadba2d-d60f-4bb7-901e-1a321f27303f

Financial Times – Rachel Reeves unveils 3% NHS spending boost but cuts other budgets
https://www.ft.com/content/4c8d65cc-d652-4998-9c47-e06763710773

Financial Times – Rachel Reeves to restore UK winter fuel payments to most pensioners
https://www.ft.com/content/bdf3b3f6-b1aa-43b1-bb5c-e5e89809075f

BBC News Live Coverage – Spending Review 2025 updates
https://www.bbc.co.uk/news/live/c2lk21qz5vzt

Sky News – Spending Review 2025: The key announcements
https://news.sky.com/story/spending-review-2025-the-key-announcements-13382050

 

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