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Even for those of us who follow these kinds of things on a regular basis, the spending review is, frankly, a bit of a headache.

This is one of the biggest moments in Britain’s economic calendar – bigger, in some respects, than the annual budget.

After all, these reviews, which set departmental spending totals for years to come, only happen every few years, while budgets come around every 12 months (or sometimes more often).

Yet trying to get your head around the spending review – in particular this year’s spending review – is a far more fraught exercise than with the budget.

In large part that’s because the Office for Budget Responsibility (OBR), the quasi-independent body that scrutinises the government’s figures, is not playing a part this time around.

There will be no OBR report to cast light, or doubt, on some of the claims from the government. Added to this, the data on government spending are famously abstruse.

So perhaps the best place to start when approaching the review is to take a deep breath and a step back. With that in mind, here are five things you really need to know about the 2025 spending review.

1. It’s not about all spending

That might seem like a strange thing to say. Why would a spending review not concern itself with all government spending? But it turns out this review doesn’t even cover the majority of government spending in the coming years.

To see what I mean you need to remember that you can split total government spending (£1.4trn in this fiscal year) into two main categories.

First there’s what you might call non-discretionary spending. Spending on welfare, on pensions, on debt interest.

Source: Sky/OBR

This is spending the government can’t really change very easily on a year-to-year basis. It’s somewhat uncontrolled, but since civil servants wince at that idea, they have given it a name that suggests precisely the opposite: “annually managed expenditure” or AME.

Then there’s the spending the government has a little more control over: spending in its departments, from the Ministry of Defence to the NHS to the Home Office.

This is known as “departmental spending”. This is what the spending review is about – determining what departments spend.

The key thing to note here is that these days departmental spending (actually, to confuse things yet further, the Treasury calls it Departmental Expenditure Limits or DEL) is quite a bit smaller than AME (the less controlled bit with benefits, pensions and debt interest costs).

In short, this spending review is actually only about a fraction – about 41p in every pound – of government spending.

You can break it down further, by the way. Because departmental spending can be split into day-to-day spending (Resource DEL) and investment (capital DEL). But let’s stop with the acronyms and move on to the second thing you really need to know.

2. It’s a “zero-based” review. Apparently

The broad amount the government is planning to spend on its departments was set in stone some time ago. The real task at hand in this review is not to decide the overall departmental spend but something else: how that money is divided up between departments.

Consider: in this fiscal year (2025/26) the government is due to spend just over £500bn of your money on day-to-day expenditure.

Of that, by far the biggest chunk is going to the NHS (£202bn), followed by education (£94bn), defence (£39bn) and a host of other departments. That much we know.

Source: Sky/OBR

In the next fiscal year, we have a headline figure for how much day-to-day spending to expect across government. What we don’t have is that breakdown.

How much of the total will be health, education, defence and so on? That, in a sense, is the single biggest question the review will set out to answer.

Now, in previous spending reviews the real debate wasn’t over those grand departmental totals, but over something else: how much would they increase by in the following years?

This time around we are told by Rachel Reeves et al that it’s a slightly different philosophy. This time it’s a “zero-based review”.

For anyone from the world of accountancy, this will immediately sound tremendously exciting. A zero-based review starts from the position that the department will have to justify not just an annual increase (or decrease), but every single pound it spends.

It is not that far off what Elon Musk was attempting to implement with the DOGE movement in US government – a line-by-line check of spending.

That’s tremendously ambitious. And typically zero-based reviews tend to throw out some dramatic changes.

All of which is to say, in theory, unless you believed government was run with incredibly ruthless efficiency, if this really were a zero-based review, you’d expect those departmental spending numbers to yo-yo dramatically in this review. They certainly shouldn’t just be moving by small margins.

Is that really what Whitehall will provide us with in this review? Almost certainly not.

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3. It’s the first multi-year review in ages

What we will get, however, is a longer-range set of spending plans than government has been able to provide in a long time.

I said at the start that these reviews are typically multi-year affairs, setting budgets many years in advance.

However, the last multi-year review happened in the midst of COVID and you have to look back to 2015 for the previous multi year review.

That certainty about future budgets matters for any government department attempting to map out its plans and, hopefully, improve public sector productivity in the coming years.

So the fact that this review will set spending totals not just for next fiscal year but for the next three years is no small deal.

Indeed, for investment spending (which is actually the thing the government will probably spend more time talking about), we get numbers for four successive years. And the chances are that is what the government will most want to talk about.

Source: Sky/OBR

4. It’s not “austerity”

One of the big questions that periodically returns to haunt the government is that we are heading for a return to the austerity policies prosecuted by George Osborne after 2010.

So it’s worth addressing this one quickly. The spending totals implied by this spending review are nothing like those implemented by the coalition government between 2010 and 2015.

You get a sense of this when you look at total public spending, not in cash or even inflation-adjusted terms (which is what the Treasury typically likes to show us), but at those figures as a percentage of GDP.

Day-to-day spending dropped from 21.5% of GDP in 2009/10 to 15% of GDP in 2016/17. This was one of the sharpest falls in government spending on record.

By contrast, the spending envelope for this review will see day-to-day spending increasing rather than decreasing in the coming years.

The real question comes back to how that extra spending is divided between departments.

Much money has already been promised for the NHS and for defence. That would seem, all else equal, to imply less money for everyone else.

But overshadowing everything else is the fact that there’s simply not an awful lot of money floating around.

5. It’s not a big splurge either

While the totals are indeed due to increase in the coming years, they are not due to increase by all that much.

Source: Sky/OBR

Indeed, compared with most multi-year spending reviews in the past, this one is surprisingly small.

In each year covered by the 2000 and 2002 comprehensive spending reviews under Gordon Brown, for instance, capital investment grew by 16.3% and 10.6% respectively.

Source: Sky/OBR

This time around, it’s due to increase by just 1.3%. Now, granted, that slightly understates it. Include 2025/26 (not part of this review but still a year of spending determined by this Labour government) and the annual average increase is 3.4%.

Even so, the overall picture is not one of plenty, but one of moderation.

While Rachel Reeves will wax lyrical about the government’s growth plans, the numbers in the spending review will tell a somewhat different story. If you can get your head around them, that is.

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SEC Chair calls tokenization an ‘innovation’ in sign of regulatory shift

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<div>SEC Chair calls tokenization an 'innovation' in sign of regulatory shift</div>

<div>SEC Chair calls tokenization an 'innovation' in sign of regulatory shift</div>

In a media interview, Chair Paul Atkins pledged to empower businesses to innovate through tokenization.

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Just 25% of public think Sir Keir Starmer will win next election – with welfare row partly to blame

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Just 25% of public think Sir Keir Starmer will win next election - with welfare row partly to blame

Only a quarter of British adults think Sir Keir Starmer will win the next general election, as the party’s climbdown over welfare cuts affects its standing with the public.

A fresh poll by Ipsos, shared with Sky News, also found 63% do not feel confident the government is running the country competently, similar to levels scored by previous Conservative administrations under Boris Johnson and Rishi Sunak in July 2022 and February 2023, respectively.

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The survey of 1,080 adults aged 18-75 across Great Britain was conducted online between 27 and 30 June 2025, when Labour began making the first of its concessions, suggesting the party’s turmoil over its own benefits overhaul is partly to blame.

The prime minister was forced into an embarrassing climbdown on Tuesday night over his plans to slash welfare spending, after it became apparent he was in danger of losing the vote owing to a rebellion among his own MPs.

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Govt makes last-minute concession on welfare bill

The bill that was put to MPs for a vote was so watered down that the most controversial element – to tighten the eligibility criteria for personal independence payments (PIP) – was put on hold, pending a review into the assessment process by minister Stephen Timms that is due to report back in the autumn.

The government was forced into a U-turn after Labour MPs signalled publicly and privately that the previous concession made at the weekend to protect existing claimants from the new rules would not be enough.

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While the bill passed its first parliamentary hurdle last night, with a majority of 75, 49 Labour MPs still voted against it – the largest rebellion in a prime minister’s first year in office since 47 MPs voted against Tony Blair’s Lone Parent benefit in 1997, according to Professor Phil Cowley from Queen Mary University.

It left MPs to vote on only one element of the original plan – the cut to Universal Credit (UC) sickness benefits for new claimants from £97 a week to £50 from 2026/7.

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Govt makes last-minute concession on welfare bill

An amendment brought by Labour MP Rachael Maskell, which aimed to prevent the bill progressing to the next stage, was defeated but 44 Labour MPs voted for it.

The incident has raised questions about Sir Keir’s authority just a year after the general election delivered him the first Labour landslide victory in decades.

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And on Wednesday, Downing Street insisted Rachel Reeves, the chancellor, was “not going anywhere” after her tearful appearance in the House of Commons during prime minister’s questions sparked speculation about her political future.

The Ipsos poll also found that two-thirds of British adults are not confident Labour has the right plans to change the way the benefits system works in the UK, including nearly half of 2024 Labour voters.

Keiran Pedley, director of UK Politics at Ipsos, said: “Labour rows over welfare reform haven’t just harmed the public’s view on whether they can make the right changes in that policy area, they are raising wider questions about their ability to govern too.

“The public is starting to doubt Labour’s ability to govern competently and seriously at the same levels they did with Boris Johnson and Rishi Sunak’s governments. Labour will hope that this government doesn’t end up going the same way.”

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Emotional Reeves a painful watch – and a reminder of tough decisions ahead

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Emotional Reeves a painful watch - and a reminder of tough decisions ahead

It is hard to think of a PMQs like it – it was a painful watch.

The prime minister battled on, his tone assured, even if his actual words were not always convincing.

But it was the chancellor next to him that attracted the most attention.

Rachel Reeves looked visibly upset.

Chancellor of the Exchequer Rachel Reeves (right) crying as Prime Minister Sir Keir Starmer speaks. Pic: Commons/UK Parliament/PA
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Chancellor of the Exchequer Rachel Reeves (right) crying as Prime Minister Sir Keir Starmer speaks. Pic: Commons/UK Parliament/PA

It is hard to know for sure right now what was going on behind the scenes, the reasons – predictable or otherwise – why she appeared to be emotional, but it was noticeable and it was difficult to watch.

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Her spokesperson says it was a personal matter that they will not be getting into.

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Even Kemi Badenoch, not usually the most nimble PMQs performer, singled her out. “She looks absolutely miserable,” she said.

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The Tory leader asked the PM if he could guarantee his chancellor’s future: he could not. “She has delivered, and we are grateful for it,” Sir Keir said, almost sounding like he was speaking in the past tense.

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Image:
Rachel Reeves looked visibly upset behind Keir Starmer at PMQs. Pic PA

It is important to say: Rachel Reeves’s face during one PMQs session is not enough to tell us everything, or even anything, we need to know.

But given the government has just faced its most bruising week yet, it was hard not to speculate. The prime minister’s spokesperson has said since PMQs that the chancellor has not offered her resignation and is not going anywhere.

But Rachel Reeves has surely seen an omen of the impossible decisions ahead.

How will she plug the estimated £5.5bn hole left by the welfare climbdown in the nation’s finances? Will she need to tweak her iron clad fiscal rules? Will she come back for more tax rises? What message does all of this send to the markets?

If a picture tells us a thousand words, Rachel Reeves’s face will surely be blazoned on the front pages tomorrow as a warning that no U-turn goes unpunished.

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