 Spending Review June 2025 The Spending Review [SR] published on 11 June looks to make efficiency savings across government, deliver increased capital investment, and increase health and defence spending. The level of complexity within the associated publications is significant, and whilst detailed also requires a lot more information to understand the implications in full. Therefore, here are some of the main points from the SR, along with implications for local infrastructure listed below, with further detail to follow in the coming weeks as further policy announcements are made. Average annual real growth in total departmental spending will increase by 2.3% [£68bn in total] between 2023-24 and 2028-29. This is split into two phases:
This is not an austerity budget [the 2010s saw a real terms cut in departmental spending] but it is front loaded so that most departments will have an even tighter funding settlement in future years. The majority of this additional funding will go to the departments of Defence and Health and Social Care.
Day to day spending will grow on average by 1.2% per year over inflation. This masks significant differences by department with the largest increases for Defence, Health and Social Care, and Science, Innovation and Technology; smaller increases for Local Government, Justice, Police, Education, Work and Pensions, and Net Zero. The major losers are DCMS, DEFRA, overseas aid, Transport, Home Office, Foreign Office. Capital spending will see increases for: • Defence and Intelligence - £14.2bn • Energy and Net Zero - £9bn • Health and Social Care - £4.1bn • Science, Innovation and Technology - £3.8bn • Housing [MHCLG] - £2.6bn • Transport - £1.8bn • Education - £1.5bn • Justice - £0.5bn • Home Office - £0.4bn. The government laid out three principles for reforming services:
You can read more detailed overviews via: The Institute for Government on the day briefing on six key learning points. The Institute of Fiscal Studies analysis. The LGA full review. Health The DHSC day to day budget will increase by 2.8% per annum in real terms, equivalent to £29bn increase in annual resource [£53bn in cash terms]. DHSC has also committed to 5% savings and efficiencies in Phase 2. • up to £10 billion for NHS technology and digital transformation by 2028-29 • £2.3bn real terms increase [£4bn cash] for capital budgets The SR allows for an increase of over £4bn for adult social care by 2028-29, compared to 2025-26. This includes an increase to the NHS’s minimum contribution to adult social care via the Better Care Fund. Further details will be published shortly. Even with this significant budget increase overall, it will be challenging to meet productivity targets [2% per year, releasing £17bn] which by 2028-29 would return the NHS to its pre-pandemic productivity levels. Additionally, 5% in administrative savings will need to be found through the current reorganisations. The NHS 10 year plan is due ‘soon’ which should offer more detail. However, the Institute for Fiscal Studies [IFS] estimates that the improvement in productivity required to meet the statutory target of a maximum 18 week waiting time is unlikely to be met. It is highly likely that health will require additional funding, and the figures will be reviewed again in the 2027 SR. By the end of 2028-29, the NHS will account for 49% of all day-to-day public service spending controlled by Westminster, up from 34% in 2009-10. Local Government Funding Core spending power for local authorities will increase by 2.6% in real terms [above inflation] from 2025-26 to 2028-29 [£3.3bn in additional grant]. However, this assumes both additional grant funding from government and the maximum permitted increases in council tax [5% per annum] over the period. So, whilst the total grant from government is increasing, the majority of the uplift will come from council tax payers. The Local Government Finance Settlement 2026-27 which will confirm multi-year allocations for local authority finances is yet to be published. The settlement will target the government grant allocations to the places and services that need it most. There will be investment in up to 350 deprived communities across the UK, to fund interventions including community cohesion, regeneration and improving the public spaces. The first 25 trailblazer neighbourhoods have been announced which will each receive £20m for long term investment [the same principle as the Plan for Neighbourhoods]. The following combined authorities will also receive an integrated funding settlement from 2026-27 financial year: West Yorkshire, South Yorkshire, Liverpool City Region, North East and London, in addition to Greater Manchester and West Midlands. Whilst an increase of 2.6% is generous in the context of this spending review, it is insufficient to meet the likely 4% increases in costs that councils are expecting. Local authority budgets will continue to be pressured despite increases in funding for children’s services, adult social care and SEND, and more councils may become insolvent. Transformation Fund The Transformation Fund of £3.25bn to the end of 2027-28, will fund: Digital improvements and implementation of AI across government services and finance systems Prevention: - reform of children’s social care through early intervention [£555m 2026-28] - reform of SEND to improve pupil outcomes [£760m 2026-28] - Community Help Partnerships for adults with complex needs [£100m 2025-28] - homelessness and rough sleeping [£88m 2026-28] Productivity and efficiency for civil service [including employee exit schemes], Post Office transformation and reform of asylum system. Other Relevant Headlines • DCMS is one of the departmental losers in the SR facing an overall cut of 1.4% 2025-26 to 2028-29. • Defra will have budgets cut by 2.7% 2025-26 to 2028-29. • A new Crisis and Resilience Fund will be created to replace the Household Support Fund with a budget of £1bn to be administered via local authorities and the VCS. This will also incorporate Discretionary Housing Payments. Further details to follow. • An increase in funding via DWP for employment support to over £3.5 billion by 2028-29, including providing personalised employment and health support for anyone on out of work benefits with a work-limiting health condition or disability [see Pathways to Work Green Paper]. • Extension to funding for 8 youth guarantee trailblazers and 9 inactivity trailblazers announced in the Get Britain Working White Paper. • £1.2bn of additional funding for post-16 / further education. • The Charity Commission budget is increased to reflect the additional work with increasing numbers of charity registrations. • Funding for the community ownership fund has come to an end and will not be renewed. Similarly, there is no more funded support for formal neighbourhood planning. UK Shared Prosperity Fund in England: the government is transitioning away from this and providing long term targeted local growth funding instead. Establishing a new local growth fund, including a 10-year capital settlement from 2026-27 to 2035-36, for specific mayoral city regions in the North and Midlands with the ‘highest productivity catch-up and agglomeration potential,’ i.e. areas that are less productive currently and have the potential to grow quickly, with opportunities to cluster businesses together. This means that UK SPF funding that was available via all councils will instead be targeted to existing mayoral city regions in the North and Midlands with the potential for growth. However, with increased funding via DWP for employment support, post-16 education and Get Britain Working trailblazer programmes, some parts of the UK SPF funding used for employment and training may still be available for VCS and other providers. Further details are still to be published.
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