On Wednesday, the government unveiled its long-awaited Spending Review, a pivotal moment in shaping the UK’s fiscal direction and investment priorities. The review sets departmental budgets for day-to-day spending over the next three years, and for investment spending over the next four years.
What Was Expected Ahead of the Review
Prior to the announcement, the government had already signalled that any increases in both daily operational and capital investment spending would be modest. Investment, for instance, is set to rise by an average of just 1.3% per year over the four-year period.
Chancellor Rachel Reeves also previously committed to revising the way public debt is measured a technical change intended to unlock more funding for infrastructure development.
Given the contrast between limited budget increases and the ambition to deliver significant infrastructure projects, the Spending Review required some tough choices on funding allocation, balancing growth ambitions with fiscal responsibility.
Transport: Major Investment in the North
Earlier this month, the government confirmed multi-billion-pound transport investments focused primarily on Northern England. These include:
- £2.5bn for Greater Manchester to expand the Metrolink and develop the Bee Network
- £2.4bn for the West Midlands, funding tram extensions and the East Birmingham to Solihull Metro
- £2.1bn for West Yorkshire to initiate the Mass Transit programme and improve bus stations in Bradford and Wakefield
- £2bn for the East Midlands to design a new transit system linking Derby and Nottingham
- £1.8bn for the North East to extend the Metro to Sunderland via Washington
- £1.6bn for the Liverpool City Region to introduce three rapid bus transit routes and new bus fleets
- £1.5bn for South Yorkshire to modernise its tram network and bus system
- £1bn for the Tees Valley
- £800m for the West of England
- £445m for rail improvements in Wales
Project-Specific Transport Commitments
Additional, project-level commitments included:
- The green light for the Liverpool to Manchester section of Northern Powerhouse Rail (further funding details pending)
- £3.5bn to continue delivering the Transpennine Route Upgrade
- £2.5bn for the ongoing construction of East-West Rail
- A four-year settlement for Transport for London
- Continued investment in the Midlands Rail Hub
More detailed planning is expected to be clarified in next week’s forthcoming 10-Year Infrastructure Strategy.
Energy: Nuclear and Clean Tech
The government reaffirmed its commitment to nuclear energy, allocating:
- £14.2bn for a new nuclear plant at Sizewell, Suffolk
- £2.5bn for the development of small modular reactors (SMRs)
Funding was also announced for carbon capture and storage (CCS) initiatives, with further details likely to be included in the Infrastructure Strategy.
Education: Upgrades and Rebuilds
In the education sector:
- £2.3bn per year will go toward repairing existing schools
- An additional £2.4bn will fund the rebuilding of 500 schools
Housing: Boost for Social Homes
£39bn has been allocated to Homes England over the next ten years, supporting the Affordable Homes Programme to deliver more social housing. The spend would be almost double the previous programme and provides more certainty for a longer period.
Conclusion: What Comes Next?
The Spending Review offers the green light for several infrastructure projects that have been in limbo over the past year. These long-awaited commitments should enable many of those schemes to now progress quickly.
For devolved authorities, the process may take longer as they prioritise how best to deploy their transport funding and prepare for delivery. Nonetheless, the overall outlook is optimistic especially for the rail and light rail sector and Affordable Homes as investment in integrated public transport for the North and the most ambitious programme of investment in Affordable Homes starts to take shape.