This Labour Government promised fewer fiscal events than its predecessors, but this was never going to be a quiet Spending Review. In the wake of bruising elections and with pressure mounting across the political spectrum, the Chancellor needed to project control, direction and delivery – all within a fixed fiscal envelope. Billed by Rachel Reeves as the architecture for “Britain’s renewal,” the CSR combined real-term spending increases with carefully orchestrated political messaging around fiscal responsibility, national resilience, and forward-looking investment.

Reeves repeatedly invoked the idea that Labour has “stabilised” the economy and can now invest. This narrative rests on fragile evidence – recent GDP growth of 0.7% is marginally above forecasts, and future borrowing costs remain high. The Chancellor walks a fine line between projection of confidence and overreach, especially in the absence of OBR scrutiny.

This was a CSR born not from fiscal freedom, but political necessity –  a strategic reset aimed at regaining momentum and shoring up support in the run-up to 2026. From winter fuel allowances to broad devolution packages for Scotland and Wales, the message is one of renewal but the motivation is a targeted effort to solidify Labour’s electoral footing.

Major investments, including £29bn for the NHS, £39bn for social and affordable housing, £15bn for local transport infrastructure, and £14bn in nuclear and net zero technologies, offer headline generosity. But behind the curtain, departments like the Home Office and Justice received only modest uplifts, with clear signs of inter-departmental strain and compromises. For businesses, the message is clear: Labour will prioritise visible growth sectors – energy, science, transport, housing – but funding will be increasingly competitive and conditional on delivery.

This is not a return to austerity, but nor is it a spending spree. This CSR reveals a government prioritising control over transformation – rewarding departments that can’t afford to fail while others are left to deliver under pressure.

Comprehensive Spending Review 2025 – Key documents:

• Spending Review 2025 document – GOV.UK
• Spending Review 2025 speech – GOV.UK
• Departmental Efficiency Delivery Plans – GOV.UK
• Green Book Review 2025: Findings and actions – GOV.UK

Commentary from our consultants:

Dominic Moffitt, Associate Director and Labour Party Councillor

“Labour set themselves the challenge of rebuilding stability before significant spending could follow. Recent announcements on the winter fuel allowance and free school meals suggested Chancellor Rachel Reeves felt she had achieved the stability she sought, that Labour’s fiscal rules were paying their dividend. The CSR process has been zero based, meaning all departmental spending was up for review, and ministers have spent months fighting for day-to-day spending in their departments and capital for investment. The strain of this process was not on show in the chamber today where the Chancellor found money for increases in departmental expenditure and investment, a sharp reversal of tone from the budget and spring statement.

The speech itself was as political as the policy and the Chancellor repeatedly told us this was a Labour budget. Policy too found support on the Labour benches, but this change of tone and spending was a choice forced upon her – the result of political pressure after bad local election results and even worse polling numbers. Long term deals for local authorities, and broad comprehensive offers to Scotland and Wales are politically expedient in advance of elections next year, not largesse. The Chancellor put on a brave face and offered money for all, the narrative was hard choices in the Autumn and March gave her the room to do this, but in the end, she never had a choice at all.”

Leon Emirali, Senior Counsel and former Conservative Party aide

“Politically, Labour needed this review to prove that it can combine fiscal discipline with visible improvement in everyday life. Success hinges on two things. First, the speed with which Treasury and local partners can convert capital allocations into spades in the ground and secondly, the extent to which departments can deliver efficiencies in the face of static resource budgets. If voters do not feel progress by late 2027, the Opposition will have clear attack lines.

For the Conservatives, the review is both a threat and an opportunity. They can rehearse a familiar argument that Labour borrows too much and will eventually raise taxes. The Tories are already framing this as the pre-cursor to tax rises in the Autumn Budget. The squeeze on London investment offers Tory mayoral and parliamentary candidates a platform from which to defend the capital’s interests. Yet the party still lacks a cohesive growth narrative of its own and remains divided on how hard to oppose borrowing for infrastructure that many of its heartland councils would welcome. Criticism of the government only goes so far. A clear economic vision from Badenoch and her team is now required.

Reform UK, topping opinion polls, will exploit any perceived weakness on migration, policing and cost control. The modest Home Office settlement makes it easier for Reform to claim Labour is soft on borders and crime. A narrative that may be helped by Yvette Cooper’s apparent dissatisfaction at her department’s allocation during the negotiations leading up to today. If public service performance deteriorates, Reform’s claim that the two main parties are indistinguishable will gain traction, especially in post‑industrial towns where capital projects will take time to show results.”

Key Announcements

Overall Spending

Reeves claimed that overall departmental spending will rise by 2.3% a year in real terms (around £190 billion extra in day-to-day spending), contrasting her “Labour choices” with what she described as the destructive legacy of austerity.

Security and Defence

Although nothing new was shared, Reeves set out already-announced details of increased spending on defence and security – an increase to 2.6% of GDP from 2027, with an ambition to reach 3% in the next Parliament.

Health and Public Services

Reeves announced a real-terms 3% a year addition to spending on the health services over this parliamentary term, which she claimed would amount to an extra £29bn in spending overall. The Government have explained that this investment will support the NHS to deliver the Government’s Plan for Change commitment, meaning that by the end of the Parliament, 92% of patients will start consultant‑led treatment for non‑urgent conditions within 18 weeks of referral. Additionally, the review announces a £2.3 billion real increase in DHSC’s annual capital budget from 2024-2030 to invest in the NHS, including in new technology, hospitals and primary care.

Energy

Labour’s commitment to nuclear energy was reiterated, with £30 billion allocated. Around £14 billion of this budget will be put towards the Sizewell C reactor which was given the go-ahead last week. Meanwhile, the Treasury will also provide a £2.5 billion investment in a new small modular reactor programme and Reeves confirmed that funding will be allocated for a carbon capture project in Aberdeenshire.

Education and Skills

Reeves announced investment to improve classrooms and school buildings, rising to nearly £2.3bn per year. In addition, around £2.4 billion per year is set to be invested in the School Rebuilding Programme over the next four years, reaffirming the Government’s commitment to rebuild over 500 schools.

The Chancellor also announced that free school meals would be extended to over half a million children with the aim of bringing 100,000 children out of poverty. School-based nurseries have been given an additional £370 million, as the core schools budget will rise by £3.5 billion a year. Alongside this, the SR will provide funding for training and upskilling – the budget for which will increased to £1.2 billion a year by the end of the spending review.

Housing

Reeves set out what she described as the “biggest cash injection into social and affordable housing in 50 years”, allocating £39 billion of Government funding over the next 10 years. She also explained that she is providing an additional £10 billion for financial investments, including to be delivered through Homes England in order to help unlock hundreds of thousands more homes.

On the Warm Homes Plan, Reeves confirmed that Labour will fully honour its manifesto commitment of a £13.2 billion fund to fix draughty homes and install heat pumps and solar panels. She argued that this will save people an average of £600 a year in bills.

Transport

Reeves announced £15 billion for new rail, tram and bus networks across the West Midlands and the North, as well as approving a new rail line between Liverpool and Manchester, and a more than £400 million investment in Welsh rail projects. She also said that investments in buses, train stations, metro lines and transit will be made in places including Rochdale, Merseyside, Birmingham and West Yorkshire.

Essentially the only mention of London in the Chancellor’s remarks was the commitment to a “four-year settlement” for the Transport for London (TfL) and a “fourfold increase” in local transport grants by the end of this Parliament. The £3 bus cap has been extended to March 2027.

AI and Tech

The Chancellor asserted her goal for the country’s high-tech industries to continue to lead the world in years to come, confirming that research and development funding will increase to £22 billion a year by the end of the spending period. The Chancellor has also backed “home-grown AI” with a £2 billion investment.

Immigration and Asylum

The Chancellor promised that all spending on hotels for asylum seekers waiting for their cases to be heard will stop by the end of this Parliament. She also stated that the new Border Security Command will receive up to £280 million more a year by the end of the spending review period.

Devolved Nations and Regions

Looking across the devolved nations of the UK, the Chancellor announced: Scotland has been allocated £52 billion, Northern Ireland £20 billion, and £23 billion to Wales.

Join PLMR’s Insights Webinar – Tuesday 17 June, 12:30–13:30

To unpack the full implications of the 2025 Comprehensive Spending Review, PLMR is hosting a live webinar exploring what it means for business, charities and organisations navigating the new fiscal landscape.

Chaired by Head of Public Affairs Simon Darby, our expert panel – including Dominic Moffitt, Rebecca Langton and Leon Emirali – will analyse departmental settlements, investment priorities, and the political signals ahead of the Autumn Budget and next General Election. Attendees will also hear practical advice on how best to engage with government decision-makers in this context.

Register to attend here: https://lnkd.in/dAPpTqFw

If you want to know more about how the Spending Review will impact your organisation, or would like to speak to one of our sector experts about how we can help you engage with the Government to unlock the opportunities presented today, or to overcome challenges facing your sector, please get in touch on info@plmr.co.uk