Rachel Reeves has announced an extra £29bn a year for the NHS in England, alongside funding increases for defence, housing, AI, and transport, as part of the government’s spending plans through the decade.
While pledging to deliver "security, economic growth and an NHS fit for the future," her review will see some departments, including the Foreign Office and the environment department, face tighter day-to-day budgets.
Conservative shadow chancellor Sir Mel Stride criticised it as a "spend now, tax later review," warning of "a cruel summer of speculation" ahead of the autumn Budget, where he expects tax rises.
Ahead of the chancellor’s Commons announcement, Prime Minister Sir Keir Starmer told his cabinet the day marked “the end of the first phase” of government as it moves to deliver “change for working people.”
After a rocky first year, the government hopes higher NHS spending and long-term investments will reassure voters, though many departments face tight budgets.
Sources said Reeves urged Labour MPs to “sell” the plans, highlighting NHS funding and free school meals, while downplaying departmental cuts.
Final deals saw Housing Secretary Angela Rayner secure £39bn over 10 years for affordable housing, while the Home Office budget will fall 1.7% over three years, with police funding rising 2.3%.
Reeves pledged to end hotel use for asylum seekers by 2029 through reducing small boat arrivals and building new accommodation.
NHS funding will rise 3% annually for three years, and defence spending will climb from 2.3% to 2.6% of national income by 2027. The Foreign Office, transport, and environment departments will face cuts of up to 6.9%.
Key announcements: £280m for border security, £7bn for 14,000 new prison places, £3 bus fare cap extended to 2027, £2bn for AI projects, £750m for a supercomputer in Edinburgh, £86bn for science and tech, £15bn for transport links, £11.5bn for Sizewell C, and £1bn for expanded free school meals.
Reeves ruled out austerity, but critics warned rising debt and tight public service budgets may test voters' patience.
Naomi Clayton, Chief Executive of the Institute for Employment Studies, said: “Today’s Spending Review comes amid concerns over a stalling labour market and global uncertainty. With 2.8 million people out of work due to long-term ill health, it’s encouraging to see the £1bn Pathways to Work investment protected, alongside continued support through Connect to Work, WorkWell, and a new employment programme. However, it’s unclear if this will be enough to offset planned benefit cuts.
“The focus on young people is also welcome, with 12.5% not in education, employment, or training. Extending youth trailblazers, rolling out Youth Hubs, and investing in training are positive steps. The challenge now is scaling up to ensure every 16-24-year-old can access quality job and training opportunities through the Youth Guarantee.”
Chaitanya Kumar, head of economic and environmental policy at the New Economics Foundation, said: “While extra NHS and capital project funding is welcome, the Chancellor hasn’t done enough to reverse years of cuts. Many departments face stagnant or reduced budgets, leaving people struggling with essentials.
“This won’t deliver the change voters expect. The government needs to relax its fiscal rules, value social spending, and tax wealth fairly to meet the scale of today’s challenges.”
Jagjit S Chadha, Professor from the daculty of Economics at Cambridge University said, "The British economy has been in the doldrums since the financial crisis and Brexit has acted to extend our poor performance. The lack of economic growth has placed a considerable strain on fiscal policy. Public debt now hovers at around 100% of GDP. This has made it very hard for successive governments to address our long-standing structural issues of low public investment and the pressures on taxes. The fiscal rules have not helped support public investment and ultimately have probably acted to further immiserate the economy. We desperately need a more balanced regional approach to economic policy and a serious conversation with financial markets about how we will fund investment and ensure that public debt is brought under control by hopefully a faster growing economy. But this is no simple matter.
Business optimism fades as economy shrinks
The UK economy shrank by 0.3%—worse than the expected 0.1%—marking the first contraction in six months, new GDP data shows. Experts and business owners are voicing concerns over the slowdown and government missteps.
Riz Malik, Director at R3 Wealth, said: "With the economy shrinking and weak jobs data, we may see further rate cuts despite inflation remaining above target. Ironically, bad news for the economy could be good news for borrowers."
Entrepreneur Kundan Bhaduri of The Kushman Group added: "The economy feels like it’s treading water in lead boots—demand is patchy, costs remain high, and recovery still feels theoretical. There’s little confidence in Westminster’s leadership, which remains reactive rather than strategic. Taxes are rising, investment incentives are down, and hiring is too complex. Fragile confidence in sectors like real estate and SME lending will persist unless there’s bold, long-term reform. Without it, we face another year of stagnation masked by flat GDP figures."
