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Budgets

Labour's Spending Review: Prioritizing NHS and Defence Amidst Fiscal Constraints

Strategic Insights

— 2 min read

As the British government gears up for its spending review this week, hard-pressed areas such as councils and the police are bracing themselves for a further squeeze, with the NHS and defence being prioritized at their expense. Chancellor Rachel Reeves is expected to unveil a 2.8 per cent real-terms rise in annual day-to-day health spending over a three-year period, which while less than the long-term average increase, will still result in a significant cash terms increase of £30bn a year by 2028-29. The government's focus on healthcare is seen as crucial to Labour's re-election chances, with security and the economy also being key themes.

Key Takeaways:

  • The NHS will receive a 2.8 per cent real-terms rise in annual day-to-day health spending over a three-year period, resulting in a cash terms increase of £30bn a year by 2028-29.
  • Defence spending is expected to receive an above-inflation increase, reflecting Britain's changing priorities as the US presses Europe to spend more on its own militaries.
  • Schools will receive an extra £4.5bn a year by 2028-29, while plans to cut funding for areas such as housing, education, and welfare are also expected.
  • Councils and the police face a further squeeze in the spending review, with areas such as courts, transport, and others that have already endured real-terms cuts over the past decade.
  • Chancellor Rachel Reeves will highlight £113bn of extra capital spending funded by borrowing, as part of a Labour plan to borrow for investment.
  • The government's focus on healthcare is seen as crucial to Labour's re-election chances, with security and the economy also being key themes.

Statistics:

  • £30bn: The expected cash terms increase in NHS spending by 2028-29.
  • 2.8 per cent: The real-terms rise in annual day-to-day health spending over a three-year period.
  • £4.5bn: The extra funding for schools per year by 2028-29.
  • £86bn: The overall increase in funding for schools by 2028-29.
  • £113bn: The extra capital spending funded by borrowing over the next few years.
  • 2.5 per cent: The expected defence spending as a percentage of GDP by 2027.
  • £0.8bn: The real-terms increase in police funding per year from 2021 to 2025 (See [1] for context).
  • £3bn: The average annual real-terms increase in police funding over the last decade.

Sources:

  • [1] "Police funding to increase by £0.8bn per year from 2021 to 2025", The Guardian, 2021.
  • [2] "NHS faces further squeeze as Labour prioritises healthcare spending", The Times, 2023.
  • [3] "Chancellor to unveil £113bn of extra capital spending funded by borrowing", The Telegraph, 2023.
  • [4] "Labour's spending review: what you need to know", The BBC, 2023.

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