Spending Review

Westminster 11 June 2025 - The Chancellor of the Exchequer delivered the outcome of the government’s Spending Review.

There are two phases to the review: Phase 1 - up to Spring 2026 and Phase 2 - the remainder of the Parliament. The Chancellor’s announcements on 11 June were mainly concerned with Phase 2. The die is therefore largely cast until 2029 .¹

Capital expenditure will increase in some areas (notably defence, house building, energy/net zero, transport infrastructure outside of London etc. Day-to-day expenditure will also increase overall but this will probably be insufficient with the result that problems with service provision will continue. The main “winners” here are Defence and Health whilst areas such as agriculture have not done well.

The likelihood is that tax rises will be found necessary in the Autumn budget and the only questions are which taxes and by how much. This is borne out by a statement from Rachel Reeves who refused to rule out future tax rises after the UK economy contracted due to increased taxes for businesses, increased household bills and decreased exports to the USA - BBC News 12 June 2025. Further tax rises will of course shrink the economy further. Another question is how much more will the UK borrow up to 2029. The answer is not clear.

We all know that the Labour government is facing a difficult background both nationally and internationally. Serious pressures exist because of the Trump presidency’s America First policy, war in Ukraine, and domestic matters such as an ageing population.² Also, the 14 years of Conservative government can hardly be said to have been an economic success story.

Is the present government heading in a better direction? I am not convinced by the spending review but, at least, it does not seem to have rocked the financial world. That is something to be grateful for.

Those are just my views and expert analysis will doubtless appear over the coming days as the economic and financial gurus digest the detail.

Please see the links below …..

Official materials

This provides the official detail

Parliament - Hansard - Spending Review 11 June 2025

UK government - Spending Review Documents published 11 June 2025

Early reaction

Institute for Government - Six things we learned from Rachel Reeves’ announcement

Institute for Fiscal Studies - Initial Response

Tax Research - The spending review: a non-event that won’t meet any expectation

Tax Research - It’s austerity from Reeves

Later reaction

For a deep examination of the spending review see this video (12 June 2025) by the Institute for Fiscal Studies

1. The next general election must be held no later than Wednesday 15 August 2029 but can be held before that if the Prime Minister so decides.

2. Health care is now having to cope with an ageing population which successive governments have failed to plan for and it always seems to come as a surprise to Westminster politicians that those born during the 1940s in the aftermath of World War 2 are now over 75.