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Rachel Reeves, the UK’s Chancellor under the current Labour government, has recently followed up her last Budget announcement with a Spending Review. These announcements reveal a great deal about the government’s intended direction on a number of issues.
Contextually, Labour are dealing with a UK economy faced with high public debt and strenuous interest payments. The government have pledged to avoid rises across numerous taxes (like income tax or VAT), but needs to raise money quickly – services like the NHS and sectors such as housing are under increasing strain to stay afloat amidst what has been deemed as chronic under-funding historically.
This announcement is the party’s first multi-year Spending Review since 2009, and has been pitched largely as one ‘renewing Britain’ – a sentiment much-needed after recent polls have suggested weak support for the current government.
The Spending Review covers a wide variety of issues, and so we will break them down into some of the most key areas to determine which sectors are the ‘winners and losers’ coming out of this announcement.
The NHS
Probably the area of public spending most in the press at any given time, the NHS is an institution which the vast majority of the public tend to feel is underfunded. Labour MP Wes Streeting is the current Minister responsible for the NHS, and has held extensive discussions with Rachel Reeves on the issue.
In the latest announcement, the NHS is certainly one of the areas which has received relatively significant increases in funding. The announcement offers a 3% real-term rise, which is relatively major. In fact, the outlay for this NHS funding increase actually uses up more than half of all the budget increases contained within the announcement.
Housing
The Spending Review contains a £39 billion investment into affordable housing over the next 10 years – in other words, government-subsidised housing which aims to reduce the strain of private renting for many families.
Justice
As many aspiring lawyers will be aware, the UK justice system faces a huge number of funding challenges – a backlog of cases, minimal increases in the salaries of staff (including lawyers) working in this area, and dilapidated court buildings are just some of the major concerns the industry has been speaking about for a while (many of which are covered in well-known industry exposé ‘The Secret Barrister’).
The recent Spending Review includes a commitment to offer up to £450 million more per year to the UK’s courts by 2028/29. This could be viewed as a 1.8% increase on a day-to-day basis. In the Law Society Gazette, Law Society president Richard Atkinson praised this announcement, yet also warned that ‘all parts of the justice system have been starved of investment for decades. It will take long-term sustained funding to fix it, including in civil and criminal legal aid to address the crises there’.
Defence
One of the largest ‘winners’ from the announcement is the defence sector. Reeves has said that the capital budget of the Ministry of Defence will increase by over 7% by 2030, with particular investments in security and intelligence.
These increases arrive amidst ongoing political tension in relation to areas such as Russia and the Middle East, while US President Donald Trump has also encouraged allies (including Britain) to increase their spending on defence-related matters. Earlier in June, a UK review found that the British military is lagging behind a number of other international superpowers in regard to much of its technology and warfare capabilities.
Foreign Office
This is arguably the major ‘loser’ coming out of this announcement. Contextually, consider the rising support for anti-immigration organisations like Nigel Farage’s Reform party, and how Labour feel anxious to tap into those voter sentiments.
Average day-to-day spending in this department is expected to fall almost 7% within the next 4 years, especially in areas like overseas aid (which has been widely criticised in particular areas of the press amidst ongoing aid to countries like Ukraine).
Transport
The British public are known for having relatively negative perceptions of their transport system, and it’s not too hard to see why – intercity rail services are notoriously expensive compared to much of mainland Europe, and even within cities, the London Underground was recently named the most expensive metro system in the world.
It may be a difficult pill to swallow, then, that the Department for Transport is facing a spending cut of 5% on a day-to-day basis.
Whether you are an aspiring solicitor at a law firm or an aspiring barrister at chambers, these kinds of stories are incredibly useful to understand in advance of applications for opportunities like vacation schemes or pupillage.
Government spending has an overarching, pervasive impact across the UK economy. Understanding such stories, therefore, are crucial in order to demonstrate your commercial awareness – a skill which a variety of legal employers are always looking for.
One way to interpret these stories is to think about your potential clients, since lawyers are ultimately working in the service industry. Naturally, anyone advising public or semi-public organisations (for example, private bodies which are contracted to carry out otherwise governmental services) will encounter these changes within their work. For example, a government contractor may run into difficulties in regard to its contractual relationships with central government if they are being told to cut spending specifically – lawyers will be leading those negotiations (often needing to find compromises). Lawyers in practice areas such as Public Law are also likely to encounter the impact of these changes quite frequently.
However, private bodies are also going to be affected by these Spending Review changes in ways which might require a little more thought to unpack. For example, if the government increases spending within the Ministry of Defence, this, in practice, means that they are likely to be increasing their expenditure with companies who produce the relevant products, like BAE or Boeing. Some of these suppliers have government contracts worth billions of pounds, and changes in government spending are therefore directly impacting them (whether good or bad).
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