Rachel Reeves, the Chancellor of the Exchequer, outlined public spending plans that include increased funding for the military, public transport, and affordable housing.
The British government announced on Wednesday a commitment of hundreds of billions of pounds towards defense, healthcare, and infrastructure investments, establishing its economic priorities for the upcoming years.
In a presentation to Parliament, Reeves detailed the budget allocations for each government department through 2029, coinciding with the next general election. This announcement concludes months of negotiations as she navigates competing priorities and economic challenges both domestically and internationally.
“We are renewing Britain,” Reeves stated. “But I know that too many people in too many parts of our country are yet to feel it.”
The multiyear spending review represents a clear indication of the government’s commitment to enhancing economic growth. This follows recent announcements regarding significant investments in local public transport, the construction of a nuclear power plant, and the development of more affordable housing.
Upon taking office less than a year ago, the Labour Party faced an economy under considerable strain. Public services were overwhelmed, with long wait times for medical appointments, stagnant productivity growth, and recent tax cuts that strained public finances. The repercussions of former Prime Minister Liz Truss’s spending and tax plans still lingered in the public consciousness.
The government, led by Prime Minister Keir Starmer, aims to “fix the foundations” of the economy, focusing on long-term changes such as updating the planning system and investing in affordable energy generation.
However, the government’s plans have been complicated by economic instability stemming from the United States. President Trump's tariffs have caused global economic concerns and warnings of a slowdown, while his administration's support for Ukraine and calls for increased military spending among European nations have further strained budgets.
Despite these challenges, the country experienced unexpectedly strong economic growth at the beginning of the year, prompting the International Monetary Fund to upgrade its growth forecast for the UK to 1.2 percent for the year. Nevertheless, concerns persist regarding the long-term growth potential, which has remained low since the 2008 financial crisis.
A key focus of the spending review is the increase in military funding, with a commitment to raise military spending to 2.5 percent of GDP within two years and 3 percent thereafter, resulting in an £11 billion increase in military expenditure and £600 million for security and intelligence agencies.
This marks a significant shift from over fifty years of reduced defense spending in favor of healthcare and welfare, referred to as the peace dividend, in response to growing Russian aggression.
There is also pressure from NATO Secretary General Mark Rutte for member countries to allocate 5 percent of their GDP to defense.
While military spending is on the rise, the government has ensured that funding for healthcare remains a priority. The National Health Service, being the largest department, will see the most significant budget increase, with an average annual rise of £29 billion until 2029.
“The funding increases for health and defense are substantial,” noted Paul Johnson, director of the Institute for Fiscal Studies. “The corollary, of course, is a less generous settlement elsewhere.”
Other departments, including the home office, foreign office, culture department, and environment and food department, will face budget constraints. Additionally, funding for schools will be limited, particularly after the expansion of free school meals.
Due to a change in fiscal rules implemented by Reeves last year, an additional £113 billion has been allocated for capital investments. Plans include over £15 billion for public transport networks, £39 billion for affordable housing over the next decade, and £30 billion for a nuclear energy future.
“I have made my choices,” Reeves stated to lawmakers. “In place of chaos, I choose stability. In place of decline, I choose investment. In place of pessimism, division, and defeatism, I choose national renewal.”