Departmental spending under Rachel Reeves is growing slower than under Rishi Sunak

Whitehall department budgets under the current Labour government are due to grow more slowly than under the previous Conservative administration, according to analysis by the New Economics Foundation (NEF) of today’s spending review [Wednesday 11 June].

The analysis shows how departmental spending up to 2028 is due to grow on average by 2.3% each year, according to the latest figures released by the Treasury as part of the spending review. This is lower than the 3% growth in department spending, as set out in the last major spending review in 2021 [Figure 1].

Researchers also found that the priority has shifted away from day-to-day spending and towards capital. In 2021, day-to-day spending contributed 2.63% to the total agreed spending increase, with capital spending contributing 0.38%, compared to 1.36% and 0.96% respectively for today’s review.

Today’s announcement also marks the lowest increase in departmental spending since the George Osborne spending review in 2015 [Figure 2].

Theo Harris, economist at NEF, said:

“This may not be austerity, but it doesn’t look like the start of a decade of renewal.

“While the money announced for the NHS and capital investments is crucial, it shouldn’t come at the expense of funding the key services we all rely on. Today’s spending review does not go far enough to undo the damage caused by years of underinvestment.

“Apart from health, defence and education, most government departments are seeing very little change and some are even facing a reduction in their spending. To deliver the change people voted for, the government should free itself from its self-imposed fiscal rules, recognise the value of social spending and be willing to tax wealth fairly.”

ENDS

Contact

James Rush – james.rush@neweconomics.org /​07929 866591

Notes

The New Economics Foundation is a charitable think tank. We are independent of political parties and committed to being transparent about how we are funded.

The graphs below show the annual average increase in total departmental spending in today’s spending review, as compared to previous spending reviews.

The contribution of day-to-day vs. capital spending to the overall spending increase was calculated using data from the government’s spending review publications, converting nominal figures to real using the same GDP deflators as the government.

Historic departmental spending growth rates from spending reviews prior to 2021 were taken from the Institute for Fiscal Studies’ 2021 report Spending Review 2021: austerity over but not undone.

Figure 1

Figure 2