As Chancellor Rachel Reeves prepares to deliver her first multi-year Comprehensive Spending Review next Wednesday, expectations are high—and so are the stakes. This review will set departmental budgets through the remainder of the Parliament and will be a defining moment for the Government’s fiscal strategy.
1. Fiscal Rules vs. Public Service Demands
Reeves has committed to maintaining fiscal discipline, including reducing debt as a share of GDP. This comes amid mounting pressures on public services, particularly in health, education, and local government. Reeves must balance these competing priorities while delivering on Labour’s broader missions, such as economic growth and improved public service performance.
2. Capital vs. Current Spending
Whitehall insiders suggest that while capital budgets may be protected, potentially supporting infrastructure and green investment, day-to-day departmental spending will be cut. Departments have been asked to model scenarios involving flat or reduced real-terms budgets, raising concerns about service delivery and workforce morale.
3. Departmental Winners and Losers
While the NHS and schools may see some protection, other departments—such as the Department for Energy Security and Net Zero, the Home Office, and Ministry of Housing, Communities and Local Government—are likely to face tighter settlements.
4. Welfare and Workforce
Welfare reform is a key area of focus for the Chancellor, with the Treasury targeting a £4.2bn net saving by 2029–30. However, this programme faces increasing political resistance due to its impact on vulnerable groups. Public sector pay remains a flashpoint, especially in light of ongoing recruitment and retention challenges in health and education.
5. Regional Rebalancing
Expect a renewed focus on regional inequality. Labour regional mayors have privately highlighted stark disparities in public spending across England. The Government is likely to use the review to reinforce its commitment to so-called Red Wall areas through targeted investment in underfunded regions by updating the Treasury’s Green Book, which sets out guidance on how to appraise policies, programmes and projects.
This Spending Review will be a test of Labour’s ability to govern under tight financial constraint. With limited fiscal headroom and high public expectations, the choices made next week will shape the political and economic landscape for years to come.
