The spending plans for the rest of this Parliament have been set. While the NHS and Defence were winners, some departments are facing real terms cuts.
It could not have been clearer about how politically important Rachel Reeves’ Spending Review announcement was for a government widely perceived to have had a rocky start. The copy of her speech on the Treasury website has no fewer than 41 political redactions scattered throughout the text. Reeves made two barbed references to the MP for Clacton (Nigel Farage) in a speech described as “…full of numbers, few of them useful” by Paul Johnson at the Institute for Fiscal Studies.
As is often the case with Treasury publications, the best way to understand the Spending Review is to head to the back of the document and the annex containing financial data. Here, for example, is a simplified version of the table setting out real terms day-to-day expenditure growth (excluding depreciation):
This shows some of the non-political content which Rachel Reeves chose to redact from her speech:
Overall real day-to-day spending growth is just 1.2% a year for the three year period of the review: the previous two years were about double that.
NHS spending grows by a real 3% a year, which is less than the historic average of 3.6%. NHS day-to-day spending in 2028/29 is set at £232bn out of a total £567.8bn. That equates to a 40.9% share, meaning the higher-than-average spending growth for the DHSC/NHS has a serious impact on the additional resources available for other areas.
The slowdown in total spending growth and the big win for the NHS means many departments will see significantly smaller real day-to-day spending growth over the next three years (2026/27-2028/29) than the first two years of this government (2024/25-2025/26). That shows up as the final column above (covering five years) being higher than the middle column (the trio of year subject to the Spending Review). Whenever any government minister is quoting spending growth, it pays to check whether they are choosing the more favourable figure. Where neither looks good, some other diversionary tactic might be used, such as quoting cash amounts (yearly or even cumulative), unadjusted for inflation.
Eight departments see real terms spending cuts over the Spending Review period, although some declines reflect changed circumstances such as the previously announced cuts to foreign aid at the Foreign, Commonwealth and Development Office (with the savings redirected to investment at Defence).
The absolute numbers for investment spending are smaller – the total in 2028/29 of £149.1bn is 26% of day-to-day spending. Nevertheless, at 1.8% a year investment spending growth will be faster than day-to-day spending growth. Once again, the period covered by the Spending Review (2026-30 in this instance) is much slower than in 2024-26, when real growth exceeded 7% a year. The big winner in investment spending is Defence, which sees real growth of 7.3% a year for the period 2026-2030. However, as Defence accounts for just over a one fifth of investment by 2029/30, the corollary is that a dozen departments suffer real terms falls in investment over the four year period.
Source: Techlink Professional
Essential Wealth Management
1-2 Great Farm Barns
West Woodhay
Newbury
Berkshire RG20 0BP
Tel: 01488 669840
Fax: 01488 669216
Email: [email protected]
Essential Wealth Management is a trading name of Essential Wealth Management and Advice Ltd which is an appointed representative of 2plan wealth management Ltd which is authorised and regulated by the Financial Conduct Authority. Essential Wealth Management and Advice Ltd is entered on the FCA register (www.FCA.org.uk) under no. 518528. Registered office: 1-2 Great Farm Barns, West Woodhay,Newbury, Berkshire RG20 0BP. Registered in England and Wales Number: 04020006.
The Financial Ombudsman Service is available to mediate individual complaints that clients and financial services businesses aren't able to resolve themselves. To contact the Financial Ombudsman Service please visit: http://www.financial-ombudsman.org.uk/contact/index.html
The information on this website is subject to the UK regulatory regime and is therefore targeted at consumers in the UK.
Approved by 2plan wealth management Ltd on 20/05/2025