2025 UK Spending Review: Where the Money’s Going and What It Means for the Economy

From defence boosts to digital NHS upgrades and housing reform—here’s how Rachel Reeves is allocating funding through 2030

A Comprehensive Look at the 2025 Spending Review

Chancellor Rachel Reeves has unveiled her latest Spending Review, outlining how the UK government will allocate day-to-day and capital spending over the next several years. The review sets funding plans for departments through to 2029 for daily spending, and up to 2030 for investment in long-term infrastructure.

This marks the most significant fiscal roadmap since the COVID-era review, promising transformative shifts across health, defence, transport, housing, and technology.

Defence: One of the Biggest Winners

• Defence spending will rise from 2.3% to 2.6% of GDP by 2027—an £11 billion uplift
• An additional £600 million will go to security and intelligence services
• Includes £4.5bn for munitions and £6bn to upgrade nuclear submarine production

This surge is largely made possible by cuts to foreign aid. The Foreign Office, a major loser in the review, faces an 8.3% budget cut over three years.

NHS: Major Investment in Digital Transformation

• An extra £29bn per year will go to the NHS—a 3% annual increase
• £10bn committed to modernise technology systems
• NHS tech budget boosted by nearly 50%

This makes the Department of Health and Social Care one of the top winners, with a 2.8% rise in day-to-day funding, though capital spending remains flat.

Border Control and Asylum Reform

• £280m per year allocated for the new Border Security Command
• Hotel use for asylum seekers to end by 2029
• Changes expected to save £1bn annually

Despite the reforms, the Home Office budget will drop 1.4% overall, with a modest 0.7% rise in capital spending.

Education, Skills and Training

• Free school meals expanded to 500,000 more children
• £2.3bn annually to fix unsafe school buildings
• £2.4bn earmarked to rebuild 500 schools
• £1.2bn yearly for apprenticeships and skills training
• £370m for school-based nurseries

Total schools budget rises by £3.5bn per year, with education positioned as a core pillar of future economic growth.

Housing: Historic Commitment to Affordable Homes

• £39bn over 10 years for social and affordable housing
• An extra £10bn via Homes England to unlock new developments

Reeves calls this the largest social housing investment in 50 years.

Energy: Nuclear Power at the Centre

• £30bn committed to nuclear energy
• Includes £14.2bn for Sizewell C and £2.5bn for small modular reactors

This positions the UK to boost long-term energy security and reduce reliance on imports.

Science, AI, and Innovation

• Record £22bn per year for research and development
• £2bn investment in home-grown AI to support job creation and productivity

Reeves aims to solidify the UK’s status as a global tech leader.

Transport: Major Investment in the North and Midlands

• £15bn for rail, tram, and bus upgrades outside London
• New Liverpool-Manchester rail line confirmed
• Local transport funding to quadruple by 2029
• £3 bus cap extended to March 2027

London will receive a dedicated four-year funding package for Transport for London.

Justice and Policing

• £7bn for 14,000 new prison places
• £700m per year to improve probation
• £2bn to recruit 13,000 police officers

Regional Allocations

• Scotland: £52bn
• Wales: £23bn
• Northern Ireland: £20bn

What This Means for Investors and the Economy

The 2025 Spending Review prioritises infrastructure, defence, housing, and digital transformation, reflecting a shift towards long-term growth investments. However, with Trump’s US tariffs pressuring UK exports, these domestic boosts may help cushion the blow.

Investors should watch sectors receiving capital injections—particularly construction, healthcare tech, nuclear energy, and AI startups—as these areas are poised for accelerated growth under government backing.

Source: (SKY.com)