Spending Review 2025: UK’s £600bn Budget Unpacked

Spending Review 2025: A Clear Breakdown of the £600bn UK Budget Plan

As the Chancellor Rachel Reeves stepped into the House of Commons on 11 June 2025, all eyes turned to one of the most anticipated financial outlines in years.

With a total value of £600 billion, the Spending Review 2025 sets the tone for how Britain will fund its essential services, from health and housing to defense and education, through to the next general election.

Although this review doesn’t touch tax policies directly, like an annual budget, it still plays a massive role in shaping the economic direction and daily lives of UK citizens. While some departments celebrated budget boosts, others are facing stricter limits. Let’s take a look at what this means for everyone.

What Is a Spending Review, and Why Is 2025 Different?

This year’s announcement marks the most ambitious and comprehensive spending review in a decade, covering essential sectors like housing, health, and transport.

In simple terms, a spending review is when the government decides how much money each department can spend over a set period. It’s not just about one year; it covers several.

This year’s review:

• Sets resource spending (daily services) from 2026/27 to 2028/29
• Outlines capital investment (like roads and buildings) until 2029/30

What makes 2025 unique is its zero-based budgeting approach. That means departments weren’t just given small increases. They had to justify every pound, starting from scratch.

Where Is the £600 Billion Going?

The 2025 spending review acts as a government finance review blueprint, detailing how £600 billion will be spent across all departments over the next four years. Here’s a simplified look at some of the top areas being funded:

The NHS: A Vital Priority

Under the NHS spending review, the health service will receive a £30 billion funding boost, with a focus on cutting waiting times and modernizing care systems. 

With the health service under strain, it’s no surprise that £30 billion is being added to its annual budget by 2028. Health Secretary Wes Streeting believes this will get the system “back on its feet.”

This move brings NHS funding to £202 billion by 2025/26, nearly 40% of total departmental spending. However, that also means less room for others, unless taxes increase in the future.

Housing: 1.5 Million Homes on the Way

Addressing the UK’s housing crisis is at the heart of Labour’s promises. With a £39 billion commitment, the goal is to create affordable and social housing that’s accessible across the country.

Angela Rayner, who led housing talks, said this is “the biggest boost to affordable homes in a generation.”

Defence: Responding to Global Challenges

Military spending is also rising, with a clear aim:

• 2.5% of GDP for defence by 2027
• Long-term vision of hitting 3% in the next parliament

This reverses decades of reduced defense funding and reflects rising international security concerns.

Schools and Education

Investment in the education sector includes support for new classrooms and expanded free school meals, particularly targeting children whose families receive Universal Credit.

It’s a solid step, but with tight overall budgets, schools must stretch every pound.

Transport and Infrastructure Across the Regions

Tired of seeing London get most of the transport upgrades? This review changes that:

• £15.6 billion for transport projects in Manchester, the Midlands, and the Northeast
• £3 bus fare cap extended until March 2027

Add to that the £14 billion nuclear investment in Sizewell C, and it’s clear that infrastructure remains central to Labour’s growth strategy.

But Is There Room for Error? Experts Are Cautious

While many have praised the scope of the plan, the Institute for Fiscal Studies (IFS) has raised red flags. Director Paul Johnson said:

“There’s very little wiggle room. If forecasts shift slightly, more tax increases could be needed this autumn.”

To put it simply, the numbers work only if everything goes right.

Why It’s Not a Budget (Yet Still Very Important)

While the autumn budget and spending review serve different purposes, both are crucial in shaping the UK’s fiscal future; one manages tax and revenue, and the other allocates departmental funding.

This spending review doesn’t include

• Changes in taxes (like VAT or income tax)
• Immediate updates to national economic forecasts

However, it still determines

• How schools, hospitals, police, and councils will run
• Whether infrastructure and housing projects actually begin

It’s the backbone of government delivery—and what the Autumn Budget will build upon.

How Did Politicians React?

Labor:

Keir Starmer celebrated the housing plans, calling them key to fixing the crisis and making homeownership more realistic for many.

Conservatives:

Their social media campaign mocked Reeves with a satirical “Jaws”-themed attack, suggesting she would dig into citizens’ pockets.

Liberal Democrats:

They warned that the government must now prove it can deliver on these promises or face disappointment.

Conclusion:

Spending Review 2025 is a powerful signal of what the government values: healthcare, housing, defense, and transport. It’s also a test of whether these bold commitments can be delivered in a tight fiscal climate.

For now, Reeves has avoided new taxes and met her fiscal rules. But the true challenge lies ahead.

As we move toward the Autumn 2025 Budget, all eyes will be on whether these promises turn into real-world improvements and if they can be funded without further financial pressure on working families.

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