Chancellor Rachel Reeves will on Wednesday announce her major Spending Review, setting out government budgets for future years – here’s everything you need to know
Rachel Reeves will this week announce her major Spending Review, setting out government budgets for the next three years.
The Chancellor will take to the despatch box in the Commons at 12:30pm on Wednesday, after Prime Minister’s Questions. She will set out how much each department has been allocated in her spending plans over the next few years. Billions of pounds will be splashed on the NHS, schools and tech, but some areas are expected to face painful cuts.
Negotiations went down to the wire, with Cabinet ministers battling it out for bigger allocations of cash from the Treasury. Downing Street said the Spending Review was finally “settled” on Monday, just two days before Ms Reeves’s big statement.
No10 said tough decisions had to be made in the first few months of the Labour Government, but claimed the economy was on a firmer footing after the mess the Tories made of the public finances.
Speaking to reporters on Monday afternoon, the PM’s official spokesman said: “The spending review is settled, we will be focused on investing in Britain’s renewal so that all working people are better off. The first job of the Government was to stabilise the British economy and the public finances, and now we move into a new chapter to deliver the promise and change.”
Here’s everything you need to now about the Spending Review.
READ MORE: Rachel Reeves to splash billions of pounds on NHS and schools – but other cuts loom
What is a Spending Review?
The Spending Review is how the Government hashes out departments’ budgets. Ms Reeves will set out detailed plans for day-to-day spending over the next three years and for capital budgets for the next five years.
Day-to-day spending refers to funding for resources, including salaries and supplies, for areas including the NHS, the armed forces, the police, prisons and other public services. Capital spending involves the investment allocated for long-term projects like infrastructure and buildings, such as new roads or hospitals.
Ms Reeves launched this phase of the Spending Review in December. She ordered Cabinet ministers to go through every single pound the government spends to find savings and efficiencies in their budgets. It is the first time in over a decade and a half that government departments have been asked to take such an approach.
Chief Secretary to the Treasury Darren Jones earlier this year embarked on a tour of nations and regions to shadow doctors, nurses and police officers to learn how taxpayers’ cash is being spent across Britain. He spent time on the frontline observing public sector workers to review what money is spent on but also how public services can be modernised so money is spent more efficiently.
What is the process of a Spending Review?
The Spending Review was only settled on Monday – two days before Ms Reeves will announce the plan in Parliament.
Negotiations went down to the wire, with multiple members of the Cabinet said to be dissatisfied with the level of funding proposed. Fears have been raised in recent weeks that the Government’s key pledges – such as to hire 13,000 new neighbourhood police officers and PCSOs or to build 1.5million new homes – will be put at risk if not enough funding is allocated to those areas.
Deputy PM and Housing Secretary Angela Rayner and Home Secretary Yvette Cooper were the last two Cabinet ministers to agree a deal, with both said to be unhappy with the amount of money offered to their departments.
The Spending Review process is competitive, with departments being forced to go head-to-head to win funding from a limited pot of money. Advisers have been keeping their cards close to their chest, remaining tight-lipped about how much their department has been offered. One source said: “You take the best deal you can get.”
What will be in the Spending Review?
There will be a £190billion increase in funding for day-to-day spending over the period, funded partly by tax hikes in the Budget in the autumn. A shake-up of borrowing rules has also freed up around £113billion for capital investment for big ticket items like homes, transport and energy projects.
One of the biggest winners of Wednesday’s Spending Review is expected to be the science and technology sector, which will get an £86billion package of funding into research areas, including into new drug treatments and longer-lasting batteries.
The health service is also expected to be a big winner, with a 2.8% hike to the Department of Health’s annual budget – amounting to around £30billion in additional funding by 2028/29. The Mirror understands schools will also get a major boost to per pupil funding, with £4.5billion extra for the core schools budget. This includes a major expansion of free school meals to 500,000 more pupils.
The Ministry of Justice, which was one of the first departments to settle its budget, will see a £4.7billion funding injection to build three new prisons amid an ongoing overcrowding crisis in jails. The Ministry of Defence also already had a clearer idea of its funding settlement, with the PM having earlier this year announced plans to increase defence spending to 2.5% of GDP by 2027, with an aim to get it to 3% by 2034.
Some £15.6billion will also be handed to mayors for major transport projects across the country. This will go towards plans to improve trams, trains and buses in the North and the Midlands.
While huge amounts of cash will be announced in the Spending Review, departments are also expected to face deep cuts. Ms Reeves last week admitted not every department will “get everything they want”. “I have had to say no to things that I want to do too,” she said. “That’s not because of my fiscal rules. It is a result of 14 years of Conservative maltreatment of our public services, our public realm and of our economy.”
What won’t be in the Spending Review?
Unlike Budgets, Spending Reviews have no legal basis. Instead, they set out what the Government intends to do with its spending plans over the following years.
There will be no tax changes in the Spending Review as these require new legislation. When the Chancellor presents the Budget, all the measures on taxation are contained in an annual Finance Bill. Parliament debates the Budget and scrutinises the Finance Bill. This does not happen with a Spending Review.
It means some announcements – including the winter fuel payment U-turn – might be mentioned at the Spending Review. But details on exactly where the money will come from to pay for the policy are not expected until the Autumn Budget later this year.
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