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Rachel Reeves
National government

Billions pledged for public services in spending review

Jade Wright Profile Image
By Jade Wright Personal Finance Writer
Chancellor of the Exchequer Rachel Reeves delivers her Government's spending review to MPs in the House of Commons <i>(Image: House of Commons/UK Parliament/PA Wire)</i>
Chancellor of the Exchequer Rachel Reeves delivers her Government's spending review to MPs in the House of Commons (Image: House of Commons/UK Parliament/PA Wire)
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Rachel Reeves has pledged billions for the NHS, police, defence, education and other public services in her spending review in the House of Commons.

The chancellor said the tax hikes and looser borrowing rules allowed her to spend £190 billion more on the day-to-day running of public services and £113 billion on investment. The review marks a watershed moment for the Government, almost a year after Labour’s election landslide.

She also promised the “largest settlements in real terms since devolution was introduced” with “£52 billion for Scotland, £20 billion for Northern Ireland by the end of the spending review period, and £23 billion for Wales”.

Rachel Reeves said “we are renewing Britain” as she set out how she plans to spend hundreds of billions of pounds of taxpayers’ money.

The Chancellor said total departmental budgets would grow by 2.3% a year in real terms and promised a “record cash investment” in the NHS, amounting to an extra £29 billion a year.

Ms Reeves promised funding of up to £280 million more per year by the end of the spending review period in 2028/29 for the new Border Security Command and committed to end spending on hotels for asylum seekers by the next election.

She said “we will be ending the costly use of hotels to house asylum seekers, in this Parliament” with funding to cut the asylum backlog, hear more appeal cases and return those with no right to be in the UK.

The plan - full details are here - will save taxpayers’ £1 billion a year, Ms Reeves said.

The Chancellor said her “driving purpose” was “to make working people, in all parts of our country, better off” as she promised cash to rebuild schools and hospitals, confirmed funding for nuclear power schemes and major transport projects across the country.

“We are renewing Britain,” she said. “But I know that too many people in too many parts of our country are yet to feel it.”

As well as changing Treasury rules to support investment in England’s regions, Ms Reeves said the spending review period would provide £52 billion for Scotland, £20 billion for Northern Ireland and £23 billion for Wales.

She said research and development funding would rise to more than £22 billion a year and promised £2 billion for the artificial intelligence action plan “because home-grown AI has the potential to solve diverse and daunting challenges as well as the opportunity for good jobs and investment in Britain”.

The Chancellor promised a cash increase of £4.5 billion a year for the core schools budget by the end of the spending review period, but also pledged up to £2.3 billion a year to repair “crumbling classrooms” and £2.4 billion for a programme to rebuild schools.

Police “spending power” – implying extra cash raised from council tax – will rise by 2.3% a year in real terms over the review period, providing more than £2 billion for forces.

What has actually been announced in the spending review?

The measures include:

  • The NHS will get a real-terms, day-to-day spending increase of 3% per year, equating to £29 billion per year.
  • £39 billion over the next 10 years to build affordable and social housing.
  • A £30 billion commitment to nuclear power, including £14.2 billion to build Sizewell C plant in Suffolk and £2.5 billion in small modular reactors.
  • Defence spending will rise to 2.6% by April 2027, including intelligence agencies. This is made up of an £11 billion increase in defence spending and a £600 million uplift for the security and intelligence agencies.
  • Universities and high-tech industries will get a boost in research and development, with it rising to £22 billion per year by the end of the spending review. £2 billion will go to an AI action plan to support “home-grown AI”.
  • Efforts to stop migrant crossings will get a boost with up to £280 million more per year for the border security command by the end of the spending review. This is on top of £150 million in last year’s budget.
  • The use of hotels to house asylum seekers will end during this Parliament, which the Chancellor said would save £1 billion per year.
  • Schools will get a cash uplift of more than £4.5 billion a year of additional funding for the core schools budget by the end of the spending review. £2.3 billion per year will go to fixing crumbling classrooms and £2.4 billion per year to rebuild 500 schools.
  • Children’s social care will get £555 million to address late intervention and low-quality care.
  • £15 billion for public transport projects in England’s city regions and a four-year settlement for Transport for London.
  • £445 million for upgrades to Welsh railways.
  • A multi-year settlement of £118m to keep coal tips safe in Wales.
  • A further £3.5 billion of investment to upgrade the TransPennine rail route that links York, Leeds and Manchester and £2.5 billion for East West rail between East Anglia and Oxfordshire.
  • A £1.2 billion funding increase for training and apprenticeships.
  • £7 billion to fund 14,000 new prison places and up to £700m per year into reform of the probation system.
  • Increasing police spending power by an average 2.3% per year in real terms over the spending review period – giving more than £2 billion to meet targets to get more neighbourhood police on the streets.
  • An extension of the £3 bus fare cap until at least March 2027.

Campaigners have welcomed the Government's decision to honour its manifesto pledge to fully fund the Warm Homes Plan, but are warning more needs to be done to end the high cost of energy for all.

Simon Francis, coordinator of the End Fuel Poverty Coalition, says: “Today's £13.2bn warm homes boost to insulation and energy efficiency funding is a huge step forward for households suffering in cold damp homes. 

"It comes on top of recent announcements that every new home will benefit from inbuilt renewable energy generation via the Future Homes Standard and millions of pensioners will have their Winter Fuel Payments restored.

“But this is not the end of the crisis as energy bills are still too high - hundreds of pounds a year more than in 2020. 

“The Government must now act to support all homes in fuel poverty through a 'social tariff' and to bring down the cost of electricity in a fair way for everybody. 

“That means implementing a proper plan for electricity pricing reform, including scrapping marginal pricing so that the expensive cost of gas no longer sets the electricity price for the whole market.

"We also need real reform of Standing Charges - a measure backed by all main parties ahead of the last election - so that vulnerable high energy users such as older and disabled people are not unfairly penalised by the system."

But, more still needs to be done, and taxes should be raised for the super-wealthy, says Aleema Shivji, interim Executive Director at Tax Justice UK: “In today’s spending review, the Chancellor has bet the house on cash for infrastructure, while effectively introducing another round of austerity for key services we all rely on.

"This will spell implausible consequences for services already cut to the bone. It’s great the government is stumping up the money for transport and house building, as well as more spending on the NHS.  

"But by taxing the obscene levels of wealth of the super-rich more it could also raise tens of billions more to invest in giving the NHS the money it truly needs to deliver for patients and staff, while cuts to social security payments could be avoided altogether."

Kevin Mountford, co-founder of Raisin UK, comments: “Chancellor Rachel Reeves’ first spending review puts long-term investment front and centre, with a multi-billion-pound plan aimed at improving housing, infrastructure, energy and transport across the UK.

“But for savers and households, the picture is more uncertain. While these plans could boost the economy in the long run, many people may not feel the benefits straight away, especially with tight public spending and the risk of future tax rises still on the table.

“With living costs still high, it’s more important than ever for people to take control of their money by making their savings work harder. For example, they could swap to higher-interest savings accounts, explore cash ISAs, or consider fixed-term bonds. It’s also important to be prepared by reviewing tax allowances, keeping an eye on government updates, and planning for possible changes to tax or policy later this year.”

Iain Reid, Head of Editorial at Carwow says: "The Government’s spending review was a vital moment that helped supercharge Britain’s electric future. At Carwow, we've seen a 77% rise in battery electric vehicle enquiries between May 2024 and May 2025 – so we know that public interest is clear and growing. The introduction of fiscal policies to match that demand – including direct purchase incentives and the scrapping of VAT on public charging – was exactly what was needed.

"This wasn’t just about helping drivers make the switch – it was about protecting jobs, attracting investment, and keeping the UK on track to meet its net zero targets."

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Shadow chancellor Mel Stride was less enthusiastic, calling Rachel Reeves’ spending review a “fantasy” that is “not worth the paper that it is written on”.

He said: “This spending review is not worth the paper that it is written on, because the Chancellor has completely lost control.

“This is the spend now, tax later review, because (the Chancellor) knows she will need to come back here in the autumn with yet more taxes and a cruel summer of speculation awaits. How can we possibly take this Chancellor seriously after the chaos of the last 12 months?”

Rachel Reeves
National government

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