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How will the recent UK spending review affect the Not for Profit sector?

Carina Ralfs · Posted on: July 15th 2025 · read

Following the Chancellor of the Exchequer’s, Rachel Reeves’s, first Spending Review on 11 June 2025, which set out day-to-day expenditure for the next three years and investment spending for the next four years, Not for Profit sector bodies, such as NCVO and the Charity Finance Group, have been assessing the impact on charities.

Significant announcements included: making £39bn of funding available to help build social and affordable housing over the next ten years, an increase of 3% per year for the National Health Service, and a rise in defence spending to 2.6% of GDP by April 2027.

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This is likely to be good news for charities providing support in areas such as homelessness, domestic abuse, etc., as it may reduce demand in the longer term. However, some departments will also see cuts, including a 1.4% cut to the Department for Culture, Media and Sport over the three-year period.

Although local governments will see a modest increase to its funding of 1.1%, this is not forecast to cover Local Government Core Spending Power increasing 2.6%, meaning an increase in council tax is likely, and pressures on council budgets remain. This is likely to have serious implications for charities which provide services on behalf of local governments.

There was good news for the Charities Commission, with a notable increase in funding from £29.8m in 2025/26 to £37.9m in 2026/27, and then falling to £34.4m in 2028/29. It is thought that such funding will help the Commission deliver its 2024-29 strategy, launched in early 2024.