The Government’s 2025 Spending Review is a stark demonstration of current priorities. When Rachel Reeves set out the spending arrangements for the next three years she did so under pressure not only from the fiscal rules but also existing spending commitments. While there was a modest increase in health spending the main headlines were taken by significant rise in military spending, which is set to reach 2.6% in 2027.
In more detail…
Military spending is set to reach 2.6% of GDP by 2027, with a commitment to reach 3% in the next Parliament – albeit with caveats. This is coupled with a sharp increase in capital spending and a £600 million uplift for intelligence services.
The NHS receives a spending boost — £29 billion in real‑terms extra funding, plus £2.3 billion in capital investment.
The schools budget grows modestly (~1.1% real growth annually), and there’s £2.4 billion per year for school rebuilding. Budgets will continue to be under pressure however as there is no commitment from the government to fund future pay-rises for staff.
Home Office day-to-day funding drops by 1.7% annually, despite a significant increase for Border Force.
The Foreign Office endures deep cuts — nearly a 6.9% annual decline, largely due to foreign aid reductions which have been made to fund increases in military spending.
Environment (DEFRA) budgets fall 2.7% a year, with capital spending down 1.8%—even as climate and flood vulnerabilities escalate.
Transport spending contracts by 5% yearly, while HS2 funding is slashed by 9.3% per annum, with further delays also announced.
Local Government only sees a very modest increase at +1.1%, which is unlikely to be enough to meet growing adult social care and SEND pressures .
The Spending Review may have been trailed by Ministers as an end to austerity, aside from the military and NHS departments will continue to face significant pressures with key services like policing, environmental protection, transport, diplomacy, and local services bearing the brunt. Virtually every other department is paying for the increase in military spending.
