U.K.'s Reeves Sets out Over £2Tn of Spending to Revive Government

• British Finance Minister Rachel Reeves announced on Wednesday, June 11, 2025, a focus on increased spending in health, defence, and infrastructure projects. The initiative aims to stimulate economic growth and revitalise the Labour government's promise of a brighter future to an increasingly disillusioned electorate.
• Keen to promote increased investments in housing, transport and cleaner energy projects, Reeves aimed to demonstrate that the Labour government was delivering on its plan for change. However, with more money going to health and defence, day-to-day spending in other areas of government will face budget constraints. Importantly, Reeves set the overall total for spending in an October budget, financing her plan with the biggest tax rise in a generation, and looser fiscal rules making it easier for her to borrow for long-term investments.
• Nonetheless, her choices must start paying off quickly if Labour is to achieve its goals of boosting Britain's growth rate and improving the quality of overstretched public services. She said the government's departmental budgets would grow by 2.3% a year in real terms, offering a further £190Bn (US$257Bn) for day-to-day spending on public services compared with the previous Conservative government's plans.
• Total spending over the period will exceed £2Tn, though much of the money has been front-loaded. Reeves' 2.3% figure refers to average annual spending growth since 2023-24, while after 2025-26 - the period covered by the spending review - real-terms growth slows to 1.5%.
• Departments with above-average spending settlements include defence, where spending will rise 3.6% a year in real terms if 2023-24 is used as the baseline, and the health service, which accounts for nearly 40% of day-to-day government spending and got a 2.8% rise. Most areas of government will see at least some real-terms increase, including a 2.3% annual rise in policing resources.
• However, Britain's foreign ministry will see a 5% annual fall, reflecting an earlier decision to curb foreign aid funding, and interior ministry functions, excluding policing, will see a 4.5% annual cut, which the government hopes to fund in part through a cheaper system for handling asylum seekers. Furthermore, all government departments will be expected to deliver at least 5% efficiency savings, including at least a 15% reduction in administrative costs.

(Source: Reuters)