Reeves vows to ‘renew’ Britain as Tories say it’s just ‘borrow and spend’

Rachel Reeves is expected to focus on regional growth as she unveils £113bn in capital investment as part of her Spending Review on Wednesday.

The Chancellor will outline some of the government’s key priorities and will pledge investment aimed at ensuring “people can see a doctor when they need one, know that they are secure at work, and feel safe on their local high street.”

Reeves will also say the government has put “working people” at the centre of the Spending Review, which will “invest in our country’s security, health and economy so working people all over our country are better off.”

The Chancellor’s speech comes against the backdrop of gloomy jobs figures and an expectation that GDP growth stalled in April. Shadow Chancellor Mel Stride said Reeves’ strategy amounts to “spend more, borrow more, and cross her fingers.”

Elements of the Spending Review have been drip-fed to the public for weeks, with announcements on investment for transport, tech and energy emerging even as disgruntled ministers (and Labour mayors) attempting to strong-arm the chancellor in budget negotiations.

As part of the set-piece announcement, the chancellor is also expected to announce big increases in spending on the NHS and defence.

A contentious process

As departments jockey for funding to accomplish their “missions,” or, manifesto promises, Reeves has said “there are good things that I’ve had to say no to,” because “it is important to have control of the public finances.” 

The chancellor is expected to reiterate the trade-offs she made. “I have made my choices,” she will say, adding that “These are this Government’s choices, these are the British people’s choices.”

‘Growth plan is working’

The chancellor will attribute the “choices” she was able to make in the spending review to ”the stability I have introduced and the choices I took in the Autumn.”

The Autumn Budget raked in an extra £40bn a year in tax hikes, which Reeves said has allowed the Treasury to throw more money than anticipated at the spending review. 

Reeves said this amounts to “£190bn more on day to day spending compared to the plans we inherited.”

Ministers cited improved economic conditions as justification for a u-turn on cuts to the winter fuel allowance, with Keir Starmer saying this week “as the economy improves, we want to take measures that will impact on people’s lives.”

Development across the country

Reeves is expected to acknowledge criticisms of uneven development across the UK, saying that “this Government is renewing Britain, but I know too many people in too many parts of the country are yet to feel it.”

The UK’s regional transport systems will receive a £15.6bn cash injection, spread across eight combined authorities. There will be a four per cent increase in spending, in real terms, across this parliament compared to the last, Reeves will say.  

Urban regions across the North, Midlands, and South West will see the largest uplift. Labour MPs in these regions, particularly in the North, have voiced concerns that a failure to deliver infrastructure projects – roads and railways which would help clear onerous congestion – could threaten Labour support. 

The winners 

Energy Secretary Ed Miliband secured £14.2bn of investment for nuclear power plant Sizewell C, which Miliband promises will create 10,000 jobs. 

£86bn will go to science and technology, which will be meted out to “every corner of the country,” the Department for Science, Innovation and Technology (DSIT) said. 

DSIT Secretary of State Peter Kyle said: “Incredible and ambitious research goes on in every corner of our country, from Liverpool to Inverness, Swansea to Belfast, which is why empowering regions to harness local expertise and skills for all of our benefit is at the heart of this new funding.”

Investment will go towards drug discovery programmes in Liverpool and South Wales’ semiconductor cluster, amongst other areas. 

Starmer promised to increase spending on defence to 2.5 per cent, despite calls to commit to 3 per cent in light of the war in Ukraine and President Trump’s increasing ambivalence towards Europe’s security. 

On Monday, Nato chief Mark Rutte called for defence funding to be hiked to 5 per cent, in a pointed address in London. 

The NHS can also expect more cash. According to the Institute for Fiscal Studies, it will likely receive £202bn this year. 

Angela Rayner’s housing department will receive £25bn over the next decade to go towards social housing. 

Alongside the funding settlement, the government is likely to announce the establishment of a “housing bank,” turning Homes England into a public financial institution to provide cheaper financing to housebuilders. 

In order to meet Rayner’s goal of building 1.5m new homes by 2029, the government has earmarked £10m over the next year to go towards helping councils accelerate environmental assessments. 

The losers

Home Secretary Yvette Cooper has emerged as the most difficult minister to reach a settlement with, with rumors that at one point she was on “resignation watch” – though the Home Office denies this.

The Home Office is vying for an uplift in spending on the police. Several police chiefs have said that any spending cuts could have “far reaching consequences” as services have been “pushed to the brink.”

However, the Home Office is at risk of a £490 million real-terms shortfall, according to House of Commons Library analysis commissioned by the Lib Dems which use Office for Budgetary Responsibility assumptions based on the Spring Statement.

The Lib Dems said the scale of the cuts anticipated is “staggering,” as their analysis indicated that departments – excluding NHS England – the core schools budget and defence, could see real-terms cuts worth nearly £5 billion in total by 2028/29.

This research also suggests there could be £350 million in real-terms cuts to the Ministry of Housing, Communities and Local Government across the next three years.

Tories respond

Mel Stride, shadow chancellor, said Reeves is the “Tin-Foil Chancellor” rather than the “Iron Chancellor.”

Her plan is to “spend more, borrow more, and cross her fingers,” Stride added. 

“Despite a backdrop of economic uncertainty, Labour continues to make uncosted spending pledges,” Stride said, referring to reports that Labour are planning to remove the two-child benefit cap.

According to Stride, “Labour has quietly loosened its own fiscal rules,” resulting in “more than £30bn in additional annual borrowing, fuelling a deficit now 70 per cent higher than what was forecast under the final Conservative budget.”