The 6 biggest changes announced in Rachel Reeves’s Spending Review
Chancellor Rachel Reeves has published the 2025 Spending Review, outlining where the government plans to allocate public funds and the budget for all departments over the coming years.
The government said that day-to-day spending will increase by an average of 1.2% for each of the three years covered by the review, and it projects that investment will increase by an average of 1.3% per year for four years.
The spending review is aligned with the government’s Plan for Growth, Reeves said, and includes significant announcements in goverment spending on areas such as energy, defence, and technology.
Below are the biggest changes announced by Rachel Reeves in the 2025 Spending Review.
U-Turn on winter fuel payments for pensioners
As previously confirmed by Treasury, the government has reversed its decision to implement winter fuel payment cuts for pensioners following a public outcry over the proposed cuts.
All pensioners in England and Wales with an income of, or below, £35,000 per year will continute to receive winter fuel payments, Reeves said.
This extends eligibility to the vast majority of pensioners, with around 9 million benefitting at a cost of £1.25 billion in England and Wales.
The government is expected to save around £450 million on winter fuel payments thanks to its means-tested threshold of £35,000 per year.
This threshold is well above the income level of pensioners in poverty and is broadly in line with average earnings.
Defence spending at the cost of overseas aid
Reeves announced that defence spending will rise to 2.6% of GDP by April 2027, with the goal of increasing this percentage even further.
This increase amounts to around an extra £5 billion per year that the government will spend on defence. It will pay for this additional spending by cutting international aid programmes.
The recently published Strategic Defence Review outlines the UK’s military development strategy for the coming years as it moves to ‘warfighting readiness’ against a backdrop of geopolitical turmoil.
12 new nuclear-powered attack submarines will be built, munitions stockpiles and manufacturing capacity will be increased, and £15 billion will be invested in the sovereign nuclear warhead programme this parliament.
End to asylum hotels
Reeves announced that before the end of this Parliament, the government would bring an end to the use of hotels to house asylum seekers.
This would save the taxpayer around £1 billion per year, Reeves said.
This change will be enabled by a further £280 million per year of funding that will be allocated to the new Border Security Command.
Boost to NHS funding
Reeves also announced a significant increase to funding for the NHS, with the health service slated to receive an additional £29 billion per year.
This equates to a 3% increase in everyday funding of national healthcare services.
Reeves called the NHS “our most treasured public service”, saying that it should always remain publicly funded and free at the point of use.
As part of the spending review, Reeves said she would be increasing the NHS’s technology budget by 50% with £10 billion of investment.
She also said thousands more GPs would be trained and funding would be allocated to deliver an additional 700,000 urgent NHS dentist appointments a year.
Nuclear energy, science, and technology
The government has announced significant investments in energy, science, and technology as part of its drive for economic growth.
These announcements include a £14.2 billion investment to help build the Sizewell nuclear reactor, and a record investment in the development of fusion energy, investing over £2.5 billion over five years.
Reeves has also set aside £86 billion for science and technology funding over the current Parliament, which will help the UK take advantage of fast-growing industries such as life sciences and artificial intelligence.
A new Local Innovation Partnerships Fund will grant mayoral authorities in England £30 million apiece to be dedicated to investment in science and technology projects.
“This government is investing in the biggest rollout of nuclear power for half a century, a £30 billion commitment to our nuclear-powered future,” Reeves said.
“In an age of insecurity, the government must step up to provide security for working people and resilience for our national economy.”
£39 billion for affordable housing
Reeves also announced that the government would allocate £39 billion to invest in building affordable housing over 10 years, helping to grow Britain’s inadequate housing stock.
This funding will be available for local authorities, private developers, and housing associations to build affordable housing across the country.
The government will hope that this spending helps it to realise its commitment to build 1.5 million homes by the end of this Parliament.
Reeves said this was the biggest cash injection in building social and affordable homes in 50 years.
“I have made my choices,” Reeves said.
“In place of chaos, I choose stability. In place of decline, I choose investment. In place of pessimism, division, and defeatism, I choose national renewal.”
