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Chancellor’s spending review sets ambitious path for growth and renewal

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Professor Joe Nellis June 12th 2025

The Chancellor’s Spending Review has set an ambitious tone for economic renewal, unveiling a sweeping programme of investments designed to resonate with the Labour Party’s traditional base and beyond.

Key highlights include:

3% annual real-terms increase in NHS funding over the life of this Parliament

Significant investments in defence, social housing, transport, and the energy transition

£39 billion allocation to social and affordable housing

New transport initiatives extending beyond London

A bold push into nuclear energy

The Chancellor also declared her ambition to position Britain as a ‘defence industrial superpower,’ with infrastructure projects supported by British industry and built using materials sourced from homegrown firms such as British Steel.

This Spending Review signals a decisive shift. It represents not only an effort to jump start growth in the short term but also to lay the groundwork for the longer-term, sustainable growth needed to lift living standards and tackle the challenges that lie ahead.

"The Chancellor’s plan for front-loaded capital expenditure, financed through borrowing but kept within her fiscal investment rule, will be welcomed by many in the business community. However, the sustainability of this spending spree will ultimately hinge on reigniting economic growth. Without a robust rebound, the Chancellor may find herself forced to contemplate tax increases in the Autumn Budget to keep public finances on track."

Professor Joe Nellis, Chief Economic Advisor to MHA