Officials running health, education and housing budgets were among the winners while the home office, foreign office and London were losers as the UK’s chancellor of the exchequer Rachel Reeves set out its spending priorities for the next three years.
Ms Reeves, whose polling suggests she is as unpopular with Britons as Liz Truss’s chancellor Kwasi Kwarteng, sought to distance the Labour government from years of Tory-led austerity by splashing billions on infrastructure and regional development.
Spending on the National Health Service, cherished in Britain, is in line for a £29 billion boost. She also announced a 70 per cent boost in state spending on housing to an average of £3.9 billion a year over the decade to 2036, a victory for deputy prime minister Angela Rayner, who also runs housing and pushed hard in negotiations.
Ms Reeves’s political opponents in the Conservative Party, however, branded her the “spend now, tax later” chancellor and warned she would have to raise taxes to pay for the splurge, which had been demanded by many of Ms Reeves’s Labour colleagues.
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The mood among Labour MPs drinking on the Palace of Westminster terrace on Tuesday evening, ahead of the spending review, was that they needed to “govern more like a Labour government”.
Ipsos polling last week indicated that as many British people – half overall – disapproved of Ms Reeves’s handling of the economy as they did of Mr Kwarteng’s, after his disastrous mini-budget that almost crashed the UK’s national finances in 2022.
The poll also showed that a majority of British people believed the nation was still in a period of austerity, even though Labour has mostly reversed some of its earliest spending decisions such as restrictions on winter fuel payments for pensioners.
When Ms Reeves rose to speak in the House of Commons just after 12.30pm on Wednesday, she seemed determined to telegraph that she had heard the concerns of her colleagues, while still insisting she would be responsible with the UK’s finances.
Past periods of austerity, said Ms Reeves, had been “a destructive choice for the fabric of our economy” as she laid out plans to boost spending by an average of 2.3 per cent across government departments over the three years ahead.
Tories in the chamber tried to shout her down, however. At one point, when the chancellor referred to fiscal liabilities, one of her counterparts from across the house shouted: “Who is the liability?”
Ms Reeves persisted, however, announcing an NHS budget increase by 3 per cent a year above inflation to £229 billion by 2029. She promised an extra £1 billion to extend free school meals.
On infrastructure, she announced £15 billion for transport investment outside London and £30 billion for the nuclear power sector – welcomed by business groups. London mayor Sadiq Khan, however, criticised a lack of spending in the capital. Northern Ireland, the Treasury later revealed, would continue to enjoy public spending an average of 24 per cent per head higher than England, Wales and Scotland.
The foreign office budget was cut by more than 6 per cent due to overseas aid cuts, while home office spending wound be down almost 2 per cent due to less cash budgeted to spend on asylum seekers.
The chancellor said in her speech that current spending would have to be covered by tax receipts, and not borrowing. The economic growth she covets to pay for her plans remains anaemic, however, and is forecast at just 1 per cent this year.
The Tories warned of a “cruel summer of speculation ahead” on the tax rises they insisted Ms Reeves would eventually be forced to implement.
