Reeves delivers record spending plan triggering “spend now, tax later” concerns

Rachel Reeves has delivered her first Spending Review as Chancellor, pledging billions in extra funding for public services, infrastructure and industrial development while offering little detail on how the government will foot the bill.

Unveiled in the Commons on Wednesday, the announcement triggered immediate political pushback.

Sir Mel Stride branded the review “not worth the paper that it is written on”, warning: “This is the spend now, tax later review because the Chancellor knows that she will need to come back here in the autumn with yet more taxes and a cruel summer of speculation awaits.”

Still, Reeves stood firm.“An extra £29bn per year for the day-to-day running of the health service,” she told MPs.

“That is what the British people voted for and that is what we will deliver. More appointments. More doctors. More scanners. The National Health Service: Created, by a Labour government. Protected, by a Labour government. And renewed, by this Labour government.”

A funding spree – on credit?

With no tax changes announced today and a backdrop of slow growth and persistent inflationary pressure, economists and accountants alike are asking: where’s the money coming from?

Total day-to-day departmental spending is set to rise by 2.3% annually in real terms—amounting to £190bn over the parliament. That includes:

• £29bn annually for the NHS, including £10bn on technology and digitisation, and funding for 700,000 extra urgent dental appointments.
• £4.5bn a year for schools, alongside £2.3bn to fix crumbling buildings and £2.4bn to build new ones.
• £2bn for police and community safety, with a commitment to recruit 13,000 new officers and support staff.
• £39bn for social and affordable housing over 10 years, the largest such injection since the 1970s.
• £30bn on nuclear power, including £14bn for Sizewell C and £2.5bn for a new small modular reactor programme.Budget 2025
• £15.6bn for local transport projects, including major rail upgrades and fourfold increases in regional transport grants.

The politics of presentation

The tone of the announcement was classic Reeves: part technocratic ambition, part ideological reset. She framed the review as a corrective to “14 years of mismanagement and decline”, while repeatedly stressing that the ability to spend now was made possible by “tough decisions” in last autumn’s Budget.

But despite the flourish, many of the numbers were already trailed in advance. Some key pledges—including the social housing programme, AI investment, and East-West rail expansion—were all briefed in the days leading up to the statement.

Others, like the plan to end hotel accommodation for asylum seekers, came with vague timelines. Reeves said the costly hotel use “will stop by the end of this parliament”—five years away.

Corporate accountants take note

For finance professionals, the detail beneath the headlines will matter most. Here are some of the points likely to land on desks in boardrooms and public sector finance offices this week:

• Digital transformation in healthcare: The £10bn earmarked for NHS tech investment could translate into major procurement opportunities and outsourcing contracts.
• AI and R&D: A £2bn investment in “home-grown AI” and a rise in R&D funding to £22bn a year by 2030 are set to drive innovation credits, tax relief reviews, and sector-specific incentives.
• Infrastructure accounting: With £15bn in rail, tram and bus upgrades and plans to revise the Green Book, capital accounting frameworks may shift in favour of regionally distributed spending—an area many local councils have struggled to keep up with.

Devolved settlements and fiscal fairness

The devolved administrations were awarded their largest real terms settlements since devolution began:

• Scotland: £52bn overall, with 20% higher per capita spending than England.
• Wales: £23bn, also 20% higher per capita.
• Northern Ireland: £20bn, 24% higher.

While this offers a shot in the arm for local service delivery, it also comes with scrutiny over fiscal fairness and regional accountability. The Treasury confirmed changes to its public spending appraisal model—revising the Green Book—to better reflect regional impact, but practical implementation will be key.

What comes next?

The Chancellor’s strategy hinges on one major assumption: that growth, spurred by public investment, will do the heavy lifting. But with no new tax revenue measures announced, and debt interest already among the fastest-growing items in the public accounts, pressure is building.

If Reeves is to deliver both on her spending ambitions and fiscal discipline, the autumn Budget will need to either plug the gap—or justify a longer lead time for return on investment.

For now, accountants will be busy updating forecasts. And politicians? Preparing for round two.