News Analysis: Britain's spending review signals ambition, but faces fiscal, delivery test

The Star11-06-2025

By Zhao Xiaona, Larry Neild
LONDON, June 11 (Xinhua) -- Britain's Labour government has launched its most ambitious spending review in over a decade, pledging large-scale investments in health, defence, housing and regional infrastructure as part of a broader plan to "renew Britain."
The review signals a clear break from past austerity and outlines the country's fiscal and political direction through 2030. However, analysts caution that the bold agenda, unveiled against a backdrop of high public debt and economic uncertainty, will ultimately be judged on whether it delivers tangible results without compromising fiscal sustainability.
AMBITIOUS PLANS WITH MIXED BUDGETS
British Chancellor of the Exchequer Rachel Reeves presented the first full-scale spending review of the new government to Parliament on Wednesday. It sets departmental budgets through 2029 and capital investment plans to 2030, framed as a blueprint for long-term renewal.
Reeves pledged an end to austerity, insisting on fiscal discipline.
The review includes a 29 billion pounds (39 billion U.S. dollars) annual uplift in the National Health Service's operational budget, representing a 3 percent real-terms annual increase to support general practitioner training, school-based mental health care, and digital transformation in health services.
Defence spending is set to rise from 2.3 percent to 2.6 percent of gross domestic product by 2027, with funds allocated to nuclear deterrence, munitions production, and military housing.
In housing, the government pledged 39 billion pounds over 10 years for social and affordable homebuilding, along with 10 billion pounds in financing to attract private investment.
A further 15.6 billion pounds will be directed toward local transport upgrades, including the Oxford-Cambridge rail corridor and the TransPennine Route in northern England.
However, not all departments will see gains. The Home Office will face a 1.7 percent annual average real-terms cut to its operating budget, while the Foreign Office will see a 6.9 percent reduction, largely from scaled-back overseas aid.
The Department for Environment, Food and Rural Affairs will face a 2.7 percent cut, and budgets for culture, non-core education, and digital policy are expected to remain flat or decline by the end of the review period.
Meanwhile, the government expects savings from ending hotel accommodation for asylum seekers - estimated to save around 1 billion pounds annually.
FROM BLUEPRINT TO BUDGETARY STRAIN
While the review was welcomed by some as a strategic reset, experts and opposition voices raised concerns about its fiscal viability and delivery risks.
Professor Iain Begg of the London School of Economics told Xinhua that the plan marked a "strategic adjustment" rather than a structural overhaul. He welcomed investment in long-neglected northern regions but cautioned that expected savings from digitisation in health and tax administration "often fall short of government hopes."
Britain's fiscal headroom remains limited. Public debt now exceeds 100 percent of gross domestic product, and borrowing in the 2024 to 2025 fiscal year reached 148.3 billion pounds. Debt interest costs have nearly doubled since 2018, now accounting for nearly 10 percent of total public spending. Despite leading G7 nations in first-quarter 2025 growth at 0.7 percent, the economy still faces inflation at 3.4 percent and rising unemployment at 4.6 percent.
Against this backdrop, the review's ambitions face significant delivery risks. Paul Johnson, Director of the Institute for Fiscal Studies, observed that while headline spending appears generous, much of it is front-loaded in the first two years of the current Parliament.
"Take Phase Two alone, from 2026 to 2029, and the picture is tighter," he said. He pointed out that eight departments will actually see real-terms cuts by the end of the review period, with schools, the environment, and overseas aid among the biggest losers.
Johnson also questioned whether the NHS funding increase would be sufficient to achieve its most ambitious target: restoring the 18-week waiting time guarantee for hospital treatment.
Much of the Chancellor's strategy relies on expanded capital investment. The government plans to spend an additional 113 billion pounds on long-term infrastructure over the life of the Parliament, from green energy projects to new rail lines and prisons.
But the same period is also expected to see 140 billion pounds in additional borrowing, a figure that raises concerns about the cost of debt servicing. "The question is whether the extra investment will deliver enough benefits to justify the rising cost of public debt," said Johnson.
The opposition Conservative Party strongly criticised the plan. British Shadow Chancellor Mel Stride warned of "a cruel summer of speculation" over future tax hikes, arguing that Labour's reliance on borrowing would soon demand fiscal correction. The leader of the Conservative Party Kemi Badenoch added that such borrowing risked "choking private investment and burdening the next generation."
Britain has struggled with delays and cost overruns in public infrastructure. The NHS faces chronic staff shortages, and some expected savings, such as from ending hotel use for asylum seekers or rapid digitalisation, remain speculative.
With public expectations high and economic conditions fragile, analysts stress that implementation will be the ultimate test. "The Treasury has shown its priorities," said Johnson. "The question is not just whether the money is enough, but whether it will be well spent." (1 pound = 1.35 U.S. dollar)

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