On June 11th, the Chancellor Rachel Reeves delivered her Spending Review, outlining the UK Government’s financial strategy for the upcoming years. As the country continues to struggle with stagnant growth, low productivity, and high public debt, the review was closely monitored for indications of a new economic direction. Ms Reeves characterised her announcements as a rallying cry for “national renewal over defeatism,” presenting a bold vision in the face of economic uncertainty.
The Spending Review outlined both current and capital budgets, providing three-year plans for operating budgets and four-year projections for capital budgets. This approach provides government departments with essential clarity, enabling longer-term planning and potentially enhancing the efficiency of public spending. In theory, this stability should enable departments to make smarter investment decisions, rather than shifting unpredictably from one budget cycle to the next.
What were the key announcements?
- NHS
One of the key elements of the review was a focus on investment in essential public services and infrastructure. The National Health Service (NHS) received an increase in funding, aimed not only at supporting a struggling health service but also at reducing long-term pressure on public finances by investing in preventative and primary care. This should help more people return to work and lead to increased productivity. In total, the NHS is set to receive £29bn in real terms, an increase of 3% on average each year until 2029-2030.
- Education
Additionally, increased funding for schools highlights an emphasis on human capital, which is essential for meaningful productivity growth. The school’s budget is expected to increase by £2 billion over the same period.
- Transport
Transport infrastructure also received a significant portion of the investment. Ms Reeves emphasised that improvements in public transport, particularly outside of London, are crucial for levelling up the UK economy.
Enhanced connectivity can stimulate local economies, attract business investments, and improve living standards. The renewed commitment to the High-Speed 2 (HS2) project, albeit in a scaled-back version, and other regional initiatives align with this broader objective.
- Other public expenditures
A further £14.2 billion will be invested in Sizewell C, over the Spending Review period, marking the first state-backed nuclear power station since 1988.
This investment is a crucial step toward achieving energy security and decarbonisation.
Additionally, £22.6 billion per year has been earmarked for research and development by 2029‑30, in support of the government’s forthcoming modern Industrial Strategy, which is an ambitious bid to drive innovation and long-term competitiveness of the UK.
The UK’s spending on Defence will increase to 2.6% of GDP from 2027 with the aim of increasing to 30% from the next parliament.
What about the announcements affecting you as a business more directly?
- An additional £9.6 billion will be available for financial transactions such as loans and equity, aimed at supporting growth through entities like the British Business Bank. This is welcome news for businesses that have struggled to secure funding since the pandemic. We will have to wait and see how this affects those companies trying to grow.
- HM Revenue and Customs (HMRC) has been allocated funds to hire nearly 8,000 additional staff, which includes an increase of 600 positions since the Spring Statement.
However, these roles will primarily focus on compliance and debt management rather than on front-line services. This may represent a missed opportunity to enhance the taxpayer experience, which has not been great in recent years.
As a result, we anticipate increased scrutiny of your tax affairs. Remember, we are here to help if HMRC comes knocking at your door seeking more money! You can feel calm about your taxes.
Will there be any tax rises soon?
New polling data from a recent Ipsos survey following the spending review suggests the British public thinks so. Research conducted online between June 11th and 12th reveals that nearly 8 out of 10 people believe they will be paying more taxes within the next year.
To accommodate the increased spending, the government plans to reduce administrative budgets across the board by 11% as part of its drive for state reform and digital efficiency enhancements. Whilst substantial, it will not be enough on its own.
So, we will have to see what happens in the Autumn budget, but some tax rises are expected.
This brings us to the central question: will this Spending Review generate the growth the UK so desperately needs?
On one hand, Ms. Reeves has laid some groundwork for long-term growth. Her efforts include improved departmental planning, more stable investment cycles, and targeted funding for health, education, and infrastructure. If executed effectively, these policies could address the structural weaknesses that have plagued the UK economy for years.
However, the UK faces a productivity puzzle: why do we produce less per hour than comparable economies? Marginal funding increases and piecemeal reforms will not solve this issue. We believe that, just as an inefficient business needs a transformational change, the economy also requires a transformational shift. Like in business, sometimes what is required is bold policy action, substantial capital investment, and a coherent strategy.
Many businesses remain cautious. Without stronger incentives for business investment, it is unlikely that public spending alone will generate the dynamism needed for economic growth. Currently, we do not have detailed plans for stimulating private sector growth.
What’s more, the broader macroeconomic context remains challenging. Although inflation is declining, it still limits consumer spending power. Interest rates, while lower than their peaks, remain high enough to suppress borrowing and investment.
Final thoughts
To sum up, Rachel Reeves’s Spending Review is a commendable effort to move away from the short-term mindset that has often hindered UK economic policy. Her focus on planning, public service investment, and infrastructure represents a positive direction.
Yet, we recognise that, given the current fiscal constraints, the Review doesn’t fully address the need for a comprehensive strategy to rejuvenate our nation. While growth is possible, it will require these policies to be part of a more ambitious agenda that tackles challenges in both the public and private sectors.
At Myers Clark, we truly believe that meaningful growth in your business is attainable with thoughtful planning and support. We are here and are serious about you and your ambitions.
If it’s been a while since you’ve had the chance to discuss your goals, now is the perfect time to reconnect.
We invite you to reach out to your usual manager so we can start an open conversation.
If you haven’t worked with us yet, we would be thrilled to hear from you. Please email us at enquiries@myersclark.co.uk for a free consultation to explore how we can support you on your journey.