Chancellor Rachel Reeves Unveils Multi-Year Spending Review
Chancellor Rachel Reeves has outlined the UK’s first multi-year Spending Review in four years, setting departmental budgets for day-to-day services over the next three years and long-term investment through to 2030. The comprehensive review outlines how billions will be spent across sectors like health, education, defence, and infrastructure, shaping the country’s public service landscape and economic priorities.
Here are the main takeaways from the announcement:
Health
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NHS Funding Boost: England’s NHS will see an average 3% annual real-terms increase in its day-to-day budget, reaching £226bn by 2029.
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Tech Investment: Up to £10bn will be spent by 2029 on digital upgrades, including expanding the NHS App and introducing single patient records.
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Efficiency Targets: The Department of Health must deliver £9bn in efficiency savings by 2029, part of a broader government-wide goal of £13.8bn.
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Capital Spending: Investment budgets will be maintained in real terms, following previous increases.
Education
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Modest Growth: Core schools funding in England will rise by 0.4% per year in real terms, hitting £69.5bn by 2029.
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Free School Meals Expansion: Around 500,000 more children will receive free school meals starting September 2026, costing £490m annually.
Crime, Justice & Borders
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Home Office Cut: A 1.7% real-terms cut in the Home Office’s day-to-day budget over the next three years.
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Asylum Hotel Phase-Out: Ministers aim to reduce and eventually eliminate the use of hotels for asylum seekers.
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Police Funding: Despite departmental cuts, police spending power is set to rise 1.7%, partially funded through higher council taxes.
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Justice Spending: The Ministry of Justice will see a 1.8% average annual increase in day-to-day spending, though investment will drop 2.1% in real terms.
Defence
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Increased Military Investment: A 7.3% annual rise in capital spending and 0.7% growth in day-to-day defence funding.
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Spending Commitment: Defence spending to grow from 2.3% to 2.5% of GDP by 2027, amid mounting NATO pressure.
Housing & Local Government
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Departmental Cuts: MHCLG faces a 1.4% real-terms cut in its day-to-day budget.
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Council Funding Flexibility: Councils’ core spending could still rise, if they hike council tax to the legal limit.
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Social Housing Boost: A £39bn commitment to social housing over a decade from 2026, nearly doubling current average yearly investment.
Transport & Environment
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Transport Cuts: A 5% real-terms cut in the Transport department’s daily budget. Government expects savings as rail services transition to public ownership.
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Regional Investment: £15.6bn earmarked for city-region transport outside London from 2027–2031.
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Bus Fare Cap Extended: £3 single bus fare cap to continue until March 2027.
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Environment Department: Faces a 2.7% real-terms cut in operating budget.
Energy
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Slight Rise: Energy Security Department budget to rise 0.5% for day-to-day and 2.6% for investment.
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Sizewell C: An additional £11.5bn allocated to help fund the Sizewell C nuclear power station in Suffolk, alongside private sector investment.
International Affairs
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Foreign Office Hit Hardest: Day-to-day budget to fall by 6.8%, primarily due to reduced overseas aid.
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Aid Spending: Foreign aid to stay at 0.3% of national income by 2027, in line with earlier plans.
Science & Technology
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Big Budget Boost: The Department for Science, Innovation and Technology will get a 7.4% average annual increase in real terms.
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AI and Supercomputing: £2bn set aside for the AI “opportunities action plan” and £750m to fund a new supercomputer at Edinburgh University—reversing an earlier proposed cut.
Devolved Nations
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Additional spending in England triggers £5.7bn per year on average in extra funding for Scotland, Wales, and Northern Ireland, in line with the Barnett formula.
What’s Next?
The Spending Review marks a significant moment in shaping the UK’s fiscal direction. With some departments facing cuts and others receiving substantial boosts, attention will now turn to implementation, and whether these projections can hold amid uncertain economic headwinds.