UK’s health, defense and housing are big winners as Treasury chief delivers spending review

LONDON (AP) — Britain’s Labour government sought to regain the political initiative Wednesday as Treasury chief Rachel Reeves set out her spending plans for the coming years that included big funding boosts for health, defense and housing.

Reeves, who has been blamed by many for Labour’s decline in popularity since it returned to power after 14 years in July, outlined the government’s spending and investment priorities, which she hopes will signal to voters that the “change” promised at the election is being delivered.

“We are renewing Britain,” she told lawmakers. “But I know that too many people in too many parts of our country are yet to feel it. This government’s task, my task as Chancellor, and the purpose of this spending review, is to change that.”

In her first spending review, Reeves announced a 190 billion pound ($260 billion) boost for the daily running of Britain’s public services, many of which have been hollowed out by the austerity policies enacted by the previous Conservative government, when it came back to power in 2010 with the aim of fixing the public finances following the damage wrought by the global financial crisis.

Labour won a landslide victory last year on its slogan of “change” — in addition to voter anger at the Conservative administration — but its vote share was historically low for a winning party at 35%.

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In the months since, Labour has been overtaken in opinion polls by Reform UK, the anti-immigration party that won its first seats in Parliament at the last election. Reeves has been blamed by many for Labour’s struggles, not least her decision in July to withdraw a winter fuel subsidy to all but the poorest retirees. The outcry prompted Reeves to about-turn and raise the threshold at which retirees will get the subsidy.

She and Prime Minister Keir Starmer will hope the change will stem the anger and focus voters on other issues, including their plans on improving Britain’s ailing public services.

Among the many announcements, Reeves gave a big funding boost for Britain’s cherished National Health Service, which has particularly struggled to play catch-up the wake of the coronavirus pandemic.

Another big winner was defense, as previously laid out Starmer, with spending set to account for 2.6% of national output by 2027 — still way below levels being sought by U.S. President Donald Trump and backed by NATO members, including Britain.

Some departments lost out, including culture and the Foreign Office, especially after accounting for inflation.

The Home Office appeared to be a big loser, though it seems that its planned budget reduction is largely predicated on the government succeeding in reducing the number of migrants arriving in small boats across the English Channel and ending the practice of housing those that do in hotels by 2029.

In addition to allocating day-to-day spending, Reeves announced 113 billion pounds worth of investments, including an array of transport and energy projects outside of London, much of which will be funded by borrowing.

The biggest single investment plan was an investment of 39 billion pounds on social housing over the coming decade, as the government aims to meet its target of building 1.5 million new homes by the next election, which has to take place by mid-2029.

Reeves insisted that all her plans will meet her self-imposed fiscal rules, specifically of not borrowing to fund day-to-day spending and reducing the country’s debt pile as a percentage of the economy by the end of this Parliament.

Following her big tax-raising budget last October that mainly targeted businesses, Reeves has very little room for manoever, not least because Labour won the election on a promise it would not increase income or sales taxes.

Mel Stride, the economy spokesperson for the opposition Conservatives, said the spending review was a “fantasy” and that Reeves would be forced to raise taxes again.

Reeves will hope that borrowing costs will have come down by the time she presents her next budget in the fall and that growth will be on the up. Both would ease the pressure on her to tax more.