Spending review 2025: The key announcements
Rachel Reeves has set out her spending review in the House of Commons.
It outlines how much day-to-day funding government departments will get over the next three years, until 2029, which is used on things like wages.
It also covers a department’s investment (also known as capital) budget over the next four years, until the end of 2030. This money is used to pay for things like new infrastructure projects.
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The last spending review was held during the COVID-19 pandemic, and before that, in 2015.
Here’s what’s been announced:
Department winners and losers
Sky News’ data and economics editor, Ed Conway, has crunched the numbers to see which government departments have benefited after the spending review, and which have seemingly lost out.
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Ed Conway analyses the spending review
In the chart below sets out which departments are getting the biggest increase in their day-to-day budgets.
The second chart maps the biggest increases in capital spending.
Defence
A major recipient of funds is the Ministry of Defence. Defence spending will rise from 2.3% of gross domestic product (GDP) to 2.6% by 2027. This equates to an £11bn uplift and a £600m uplift for security and intelligence agencies.
Within that there’ll be £4.5bn of investment in munitions made across the country and more than £6bn to upgrade to nuclear submarine production.
The department is one of the biggest winners of the spending review.
In total, an extra 3.8% will be spent from this year to the end of 2029, when the spending period ends.
Much of that increase will be capital spending – a rise of 7.3%, whereas day-to-day spending will only go up 0.7% in the same period.
Ms Reeves said it was because of cuts to foreign aid that such defence rises are possible.
The Foreign, Commonwealth and Development Office was among the biggest losers, with spending set to fall 8.3% in total over the next three years.
Its capital spending will drop 6.8%, with day-to-day spending down 6.9%.
NHS
The chancellor announced an extra £29bn a year will be spent on the NHS, an annual rise of 3% on current levels.
She says she is increasing the NHS technology budget by almost 50%, and £10bn to bring the “analogue health system into the digital age”.
The department in control of the NHS, the Department of Health and Social Care, is also a “real big winner”, Ed Conway says.
Day-to-day spending will rise 2.8%, while there will be no increase in capital expenditure.
Asylum and border security
The chancellor says border security funding will increase, with up to £280m more per year by the end of the spending review for the new Border Security Command.
She said the Home Secretary Yvette Cooper will end hotels being used to house asylum seekers by 2029.
The chancellor says funding she has announced today, including from the transformation fund, will also cut the asylum backlog, see more appeal cases heard and “return people who have no right to be here”.
This will save the taxpayer £1bn a year, she claimed.
As a result of these savings, the Home Office will have 1.4% less to spend by 2029, compared to this year.
Broken down on a day-to-day basis, it’s a 1.7% drop but a 0.7% rise in capital expenses.
Education and training
The chancellor confirmed that free school meals will be extended to over half a million more children and said that the policy will lift 100,000 children out of poverty.
Nearly £2.3bn a year will go to fix crumbling classrooms. A further £2.4bn will be spent on rebuilding 500 schools.
Another record investment amount was announced by Ms Reeves for training and upskilling – £1.2bn a year by the end of the spending review will go to support more than a million young people into training and apprenticeships.
School-based nurseries have been given £370m. The core schools budget is rising by £3.5bn a year.
Housing
Government funding of social and affordable housing has been allocated £39bn, over the next 10 years – which Ms Reeves called the “biggest cash injection into social housing in 50 years”.
She says she is providing an additional £10bn for financial investments, to be delivered through Homes England, to help unlock hundreds of thousands more homes.
Energy
A commitment to nuclear power was reiterated, with £30bn allocated.
Of this, £14.2bn is being poured into the Sizewell C nuclear power station – which was announced earlier this week – on the Suffolk coastline.
Another £2.5bn will be invested in a new small modular reactor programme.
Science and technology
The chancellor says she wants the country’s high-tech industries in Britain to continue to lead the world in the years to come.
Research and development funding will go to a record high of £22bn a year by the end of the spending period.
Artificial Intelligence
The chancellor has backed “home-grown AI” with a £2bn investment.
She says the technology has the potential to “solve diverse and daunting challenges” and create “good jobs”.
Transport
The chancellor announced £15bn for new rail, tram and bus networks across the West Midlands and the North. She’s also given the green light to a new rail line between Liverpool and Manchester.
She says investments in buses, train stations, metro lines and transit will be made in places including Rochdale, Merseyside, Birmingham and West Yorkshire.
In London, Ms Reeves says there will be a “four-year settlement” for the Transport for London and a “fourfold increase” in local transport grants by the end of this parliament.
As expected, the £3 bus cap has been extended to March 2027. It had been £2 up to the end of 2024.
Justice
To fund 14,000 new prison places, £7bn will be invested, with £700m a year going to reform the probation system.
In order to reach the goal of 13,000 more police officers in England and Wales, £2bn will be allocated.
Nations
On the nations of the UK, the chancellor announced:
• Scotland has been allocated £52bn
• Northern Ireland has been allocated £20bn
• Wales has been allocated £23bn.
The mistaken release of an asylum seeker who was jailed for sexual offences has prompted widespread condemnation – and an extensive police operation.
Hadush Gerberslasie Kebatu, 38, had assaulted a 14-year-old girl and a woman in Epping, about a week after he had crossed the Channel and arrived in the UK by boat.
Last night, the teenager’s father was visibly upset as he turned up at HMP Chelmsford – asking for answers on how Kebatu was freed just one month into a 12-month sentence.
He did not want to speak on camera – but told Sky correspondent Mollie Malone that he was “frustrated” at the thought of the Ethiopian national being back on the streets.
“The justice system has let us down,” he said.
Footage has emerged that appears to show Kebatu in Chelmsford town centre following his release – dressed in prison clothes and clutching his belongings in a see-through bag.
He then headed to the railway station and boarded a train bound for London’s Liverpool Street, which departed at 12.41pm yesterday.
Follow latest developments on manhunt
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Accidental release ‘damaging’ for government
‘You couldn’t make it up’
Kebatu’s case had a high profile and led to weeks of protests outside the Bell Hotel in Epping, where he was staying alongside other asylum seekers.
When he was sentenced last month, Judge Christopher Williams warned he posed a “significant risk of reoffending”.
The Liberal Democrat MP for Chelmsford, Marie Goldman, told Sky presenter Barbara Serra she was “appalled, frustrated and angry about how this could possibly happen in the first place”.
She said it is clear something went “fundamentally wrong” at HMP Chelmsford – and her constituents are “fed up” with systems not working and underinvestment.
“It just destroys trust at a time when emotions are riding high. We’ve seen protests over the past few weeks and months, and there’s a lot of fear out there,” Ms Goldman added.
“It is so easy to lose trust and really hard to gain it – we need the government to get a grip on this.”
Protests were held at The Bell Hotel for several weeks
Shadow home secretary Chris Philp described Kebatu as a “dangerous illegal immigrant” – and said his premature release shows “staggering incompetence”.
He told Sky News: “We also need an urgent apology from Home Secretary Shabana Mahmood and Justice Secretary David Lammy who have presided over this fiasco.”
Mr Lammy, who also serves as deputy prime minister, has said he is “appalled” and “livid on behalf of the public that Kebatu is at large”.
He confirmed a full investigation is being launched, adding: “He should be deported back to Ethiopia after the sexual assaults that he’s committed.”
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Manhunt continues for Kebatu
Extensive policing operation under way
Multiple forces are now involved in the manhunt for Kebatu – including Essex Police, the British Transport Police and the Metropolitan Police in London.
Policing commentator Graham Wettone told Sky presenter Gillian Joseph that detectives will be carefully piecing together his movements after walking free from HMP Chelmsford.
“All these forces will now be looking at the CCTV from the train itself – trying to locate him on the train and trying to identify at which stop he went off at, and where he went from that station,” he explained.
Mr Wettone said information from Essex Police’s initial investigation – including the contacts, friends and associates he had at the Bell Hotel – will also be a factor.
Questions will also be asked of the prison authorities: “Has he had any visits or phone calls? Has he got any friends or family in the country?”
He added that additional officers will have been allocated to the manhunt: “The Met will have some significant resources looking for him – maybe the Territorial Support Group or additional borough-based officers in and around Liverpool Street first of all.”
The British Transport Police could also be involved in further inquiries if Kebatu ended up travelling on the Underground.
“It really depends on where that thread goes – if they can locate where he got off, and then where he went to,” Mr Wettone said.
“This work is very, very fast-paced – there are detectives and intelligence officers working in the background, chasing up on leads and updating the teams on the ground.”
Experts are warning that without “fast changes” the UK could run out of drinking water in the future.
The first seven months of 2025 were the driest since 1976, with reservoirs across England only 56.1% full on average, according to the Environment Agency.
“I think that we do need to worry about the fact that there is this possibility we could run out,” Hannah Cloke, professor of hydrology from Reading University, told Sky News.
“It’s only if we start thinking like that, that we’re going to start conserving our water, otherwise we just take it completely for granted.
“It is all of our fault, we have not been paying attention to what’s going on… we need some very fast changes to the way that we are using water and the way that we’re storing water in order to stop this being a problem in the future, because our summers are only going to get hotter.”
By 2050, the government says that England could face a shortfall of five billion litres of water every day.
‘Growing pressure’ on water system
A Department for Environment, Food and Rural Affairs spokesperson said: “This government recognises the growing pressure on our water system and is taking decisive action.
“We’re delivering over £104bn of private investment to fix leaking pipes, build nine new reservoirs and secure our water supply for the future.”
Latest figures suggest that around 2,690 megalitres of water is lost every day in England through leaks – the equivalent of 1,076 Olympic-sized swimming pools.
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‘We have invested an extra £10m’
“Leaks are a really important issue for us. We have invested an extra £10m just to deal with the weather that we’ve seen this summer,” said Dr Geoff Darch, head of strategic asset planning for Anglian Water.
Anglian Water is also hoping to build two new reservoirs in the East of England.
“We don’t want to stop people using water, it is absolutely essential for everything that we need it to do,” Dr Darch said.
“But I think we’ve got to a point now where we have to realise that water is a precious resource, it’s something that we all have to look after so that we have it for future generations and for the environment and with climate change and drought, we will need more reservoirs.”
The government claims it is fast-tracking new reservoirs to address the problem
Concerns about ‘whole system starting to collapse’
In August, the UK received just 62% of its average rainfall, according to the Met Office, which is leading a group of residents to monitor their water stocks closely.
“We collect all our own water from the rain, and so if we don’t have the rain that’s a significant issue,” explained Simon Tilly, director of the Hockerton eco housing project in Nottinghamshire.
He told Sky News they were working together to use less water.
“I suppose I’m most concerned about the whole system starting to collapse. There’s potential for longer droughts and us having a lot of water stress, there’s potential for a lot of floods when the drought finishes… and just generally that system going into random patterns where we’re getting more droughts and more floods,” he added.
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