Spending Review Explained: NHS Cash Boost, £39bn For Housing And A Pledge To End Asylum Hotels

5 min read11 June

Chancellor Rachel Reeves announced her long-awaited Spending Review to the House of Commons on Wednesday.

The speech was widely seen as an important moment for the government, as it provided a clear indication of Labour's priorities between now and the next general election.

Here are the key announcements:

Asylum hotels to be phased out

Reeves said on Wednesday that the government would end the use of hotels to house asylum seekers “in this Parliament” by 2029.

The Chancellor said the use of hotels for asylum accommodation was “leaving people in limbo and shunting the cost of failure onto local communities”.

She added that funding announced as part of the Spending Review will “cut the asylum backlog; hear more appeal cases; and return people who have no right to be here”.

Reeves claimed the move would save the taxpayer £1bn a year.

She also announced funding of up to £280m more per year by the end of the spending review for the new Border Security Command.

'Biggest cash injection' into social and affordable housing

Reeves said that the government would put £39bn into a new Affordable Homes Programme over the next decade, which the Chancellor said was “the biggest cash injection into social and affordable housing in 50 years”.

She said Blackpool, Preston, Sheffield and Swindon already have plans to bring forward bids to build new houses.

“As we build a strong, secure and resilient economy, working people must feel the benefits. That starts with the security of a proper home,” Reeves said.

Defence spending to rise to 2.6 per cent of GDP by 2027

Reeves said on Wednesday that defence spending would rise to 2.6 per cent by 2027.

This is slightly higher than the 2.5 per cent pledged by Starmer by 2027 previously.

The Prime Minister said previously that the government would also set a "clear ambition" for defence spending to rise to 3 per cent of GDP in the next Parliament, which may not be until 2034.

The UK is set to come under pressure to commit to 3.5 per cent of GDP amid rising global threats.

The announcement today included an £11bn increase in defence spending and a £600m uplift for security and intelligence agencies.

Reeves said the investment will deliver renewal through investment and jobs across England and Scotland.

NHS the big winner

Health was the top beneficiary of the Chancellor's Spending Review, suggesting that improving the NHS is at the heart of Labour's strategy for regaining power at the next general election.

Real-terms day-to-day spending will be hiked by 3 per cent for every year covered by the spending review.

It was also announced that the NHS technology budget would increase by almost 50 per cent.

The NHS will also receive £10bn to bring an "analogue health system into the digital age", including through the NHS app.

Reeves said the investments will enable the delivery of the government's 10-year plan for health and put the NHS "firmly on the path to renewal".

Energy

Earlier this month, the government announced £14bn for Sizewell C nuclear power station in Suffolk.

Reeves said today that the plant would produce the energy to power six million homes and support more than 10,000 jobs, including 1,500 apprentices.

The government also announced a further £13.2bn between 2025-26 and 2029-30 for the Warm Homes Plan, to help people find ways to save money on energy bills and deliver warmer, cleaner heat to homes.

Great British Energy will also receive £8.3bn over the course of the Parliament, of which £300m will go towards offshore wind supply chains.

Money for police and prisons

Reeves announced an increase in police spending power by around 2.3 per cent per year over the next three years, which Reeves said is equivalent to more than £2bn.

The Chancellor said that the move would help the government meet its Plan for Change commitment of delivering 13,000 more neighbourhood police officers in England and Wales.

There are questions, however, over whether police leaders will deem the funding sufficient to grow officer numbers and help the government meet its crime reduction pledges.

Additionally, the government will spend £7bn on 14,000 new prison places, while another £700m will be spent on the reform and probation system per year.

Education

The schools budget will get an extra £4.5bn a year as part of the Spending Review settlement.

Last week, the government announced that free school meals (FSM) would be extended to 500,000 children to include all those pupils from households eligible for universal credit.

There will also be £370m for school-based nurseries and £555m of transformation funding over the period.

Reeves also pledged £2.3bn per year to fix crumbling classrooms.

She said: "The previous Conservative government oversaw another generation of kids herded into cold, damp buildings as school roofs literally crumbled. It wasn't acceptable when I was at school, and it isn't acceptable now."

On skills, Reeves announced £1.2bn a year by the end of the three years to support over a million young people into training and apprenticeships.

Transport

Reeves said: "It is no good investing in new skills, new jobs and new homes if they are not properly connected".

Last week, the government announced £15bn of investment in transport to connect cities and towns.

Investments in buses in Rochdale were also announced, as well as train stations in Merseyside and Middlesbrough, mass transit in West Yorkshire and metro extensions in Birmingham, in Tyne and Wear and in Stockport.

As expected, Reeves claimed that she had heard concerns that past governments had “underinvested in towns and cities outside London and the South East” and “they are right”.

Mayor of London Sadiq Khan welcomed the 4-year settlement for Transport for London announced on Wednesday, which the Chancellor said would bring "certainty and stability for our largest local transport network to plan for the future".

But Khan said he was concerned that this Spending Review didn't include a commitment "to invest in the new infrastructure London needs", including Tube extensions.

PoliticsHome reported this week that London Labour MPs had publicly expressed concern over London missing out in the Spending Review.

Reeves also confirmed that the £3 bus fare cap would be extended to 2027.

Government figures show that the Department for Transport is among the losers when it comes to overall departmental spending.