Spending Review

2025 Spending Review: Could the Government be bolder?

The 2025 Spending Review was never going to please everyone, but this one has managed to deliver more funding for some government departments than was expected, which is no mean feat in the circumstances.

Setting spending plans for government departments for the next three years has been made more challenging than usual for the Chancellor due to significant economic headwinds and self-imposed fiscal rules that constrain budgeting decisions.

As expected, defence and health were among the winners. The Government had already announced a commitment to increase defence spending to 2.5% of GDP by 2027, with an ‘ambition’ to raise it to 3%. For health, the decision to increase funding for the NHS by 3% in real terms for annual day-to-day spending for the next three years, will be well received in the circumstances, despite falling below the historical long-term average growth rate of 3.6% in real terms.

The £39bn grant funding announced for new social and affordable housing was not widely expected and certainly stole the show at this year’s Spending Review. The headline funding for the new Affordable Homes Programme was more than the industry expected, and the decision to spend it over the next 10 years will bring much-needed certainty and stability for registered providers at an extremely challenging time. Early calculations are this will almost double the annual spend from £2.3bn to £4bn per year, which underlines the significance of this announcement. As usual, we must wait for the detail to find out how and when the funding will begin to filter through, enabling development work to start. It can’t come soon enough.

Elsewhere capital funding announcements for infrastructure projects will help to boost the economy. The £15.6bn funding for Transport City Regions for nine eligible mayoral authorities is welcome news and, in the context of devolution, could be seen as a reward for the Combined Authorities. This could prompt more local authorities to reconsider the value of regionally devolved government.

For the many social care providers who are responsible for caring for some of the most vulnerable people in our society, there was no new funding announcement. For many of these organisations, there is no relief in sight with staff vacancies in the sector at an all-time high.

As a social purpose law firm whose clients include social care and social housing providers, local government and charities, Anthony Collins believes the Government still holds more keys for unlocking new models of delivery. For example, the Government has yet to take action on its manifesto promise to double the size of the co-operatives sector and the recently announced Casey Review of social care is further delaying overdue reform of the social care sector. This Spending Review will come as a pleasant surprise for some but there is still a long way to go to address some of the most pressing needs of society.

Peter Hubbard is managing partner at Anthony Collins.