Reeves sets out spending review as Labour government moves to new phase

Rachel Reeves said “we are renewing Britain” as she set out how she plans to spend hundreds of billions of pounds of taxpayers’ money.

The Chancellor said total departmental budgets would grow by 2.3% a year in real terms and promised a “record cash investment” in the NHS, amounting to an extra £29 billion a year.

Setting out the spending review in the House of Commons, Ms Reeves said the tax hikes and looser borrowing rules allowed her to spend £190 billion more on the day-to-day running of public services and £113 billion on investment.

The review marks a watershed moment for the Government, almost a year after Labour’s election landslide.

Prime Minister Sir Keir Starmer told the Cabinet that the spending review “marks the end of the first phase of this Government, as we move to a new phase that delivers on the promise of change for working people all around the country and invests in Britain’s renewal”.

In a sign of the difficulties which face Sir Keir and the Chancellor, migrants continued to cross the English Channel in small boats on Wednesday.

Ms Reeves promised funding of up to £280 million more per year by the end of the spending review period in 2028/29 for the new Border Security Command and committed to end spending on hotels for asylum seekers by the next election.

In an attack on the Conservative legacy, she said: “The party opposite left behind a broken system: billions of pounds of taxpayers’ money spent on housing asylum seekers in hotels, leaving people in limbo and shunting the cost of failure onto local communities.

“We won’t let that stand.”

She said “we will be ending the costly use of hotels to house asylum seekers, in this Parliament” with funding to cut the asylum backlog, hear more appeal cases and return those with no right to be in the UK.

The plan would save taxpayers’ £1 billion a year, Ms Reeves said.

The Chancellor said her “driving purpose” was “to make working people, in all parts of our country, better off” as she promised cash to rebuild schools and hospitals, confirmed funding for nuclear power schemes and major transport projects across the country.

She said the Government would set out plans for “Northern Powerhouse Rail” in the coming weeks and an additional £3.5 billion to upgrade the TransPennine route.

“We are renewing Britain,” she said. “But I know that too many people in too many parts of our country are yet to feel it.”

As well as changing Treasury rules to support investment in England’s regions, Ms Reeves said the spending review period would provide £52 billion for Scotland, £20 billion for Northern Ireland and £23 billion for Wales.

She said research and development funding would rise to more than £22 billion a year and promised £2 billion for the artificial intelligence action plan “because home-grown AI has the potential to solve diverse and daunting challenges as well as the opportunity for good jobs and investment in Britain”.

The Chancellor promised a cash increase of £4.5 billion a year for the core schools budget by the end of the spending review period, but also pledged up to £2.3 billion a year to repair “crumbling classrooms” and £2.4 billion for a programme to rebuild schools.

Police “spending power” – implying extra cash raised from council tax – will rise by 2.3% a year in real terms over the review period, providing more than £2 billion for forces.

Sharon Graham, general secretary of Unite, said: “Workers and communities need to see action now, promises of jobs can’t always be promised for tomorrow and never actually be delivered.

“This must include a comprehensive and tangible jobs agenda that deals with the wave of job losses on the horizon, for example in the oil and gas industry.

“We need a joined up industrial strategy that sees investment in Grangemouth and much-needed procurement decisions on buying British in defence.

“Growth and profits need to convert to jobs and wages.

“Today was a missed opportunity to lay out the funding to tackle key issues, including the energy costs crippling British industry and the local authority debt which is straight-jacketing services in our communities.

“Spending cuts will be seen as austerity, those are the facts. Labour needs to pick up the pace on change otherwise it will be stuck in the political slow lane while other voices get louder.”

Published: 11/06/2025 by Radio NewsHubClick here to read this story in full at Radio News Hub