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Rachel Reeves has postponed the Treasury’s multi-year spending review to June as the government struggles to grasp the amount of decisions it needs to make about funding priorities.
The British Prime Minister had previously promised to complete the process by “spring 2025”, but officials and ministers told the Financial Times that the schedule had been delayed.
They had previously been working toward a timeline for the spending review to be scheduled “around April,” according to people briefed on the process.
The new June 2025 date comes almost a year after Labor won a landslide victory in the UK general election in July this year.
A source briefed on the process said: “This was supposed to happen in the spring, but as we started talking to ministers they realized it could be a much longer and more complex process.” ” he said.
The UK government uses spending reviews to decide how to allocate funds between government departments. The last multi-year review was in 2021, when then Chancellor Rishi Sunak set allocations for three years. The review, a key event on the Treasury’s calendar, will involve months of haggling as ministers try to stick to the budget.
Labour’s multi-year review delay extends a period of uncertainty for government departments, which waited nearly four months after the election for Mr Reeves’ first budget to pass in October.
Her Budget set out departmental spending limits for 2025-26, amid a £40bn tax increase package that pumps billions of pounds into public services this year and next.
But Reeves postponed making difficult long-term decisions on public spending, saying overall spending growth would slow to a real annual rate of 1.3% from 2025 to 2026. The prime minister has vowed not to budget for further large-scale tax increases.
Next year’s spending review will reveal exactly which sectors will win and lose in the second half of parliament. The review will cover day-to-day spending for a minimum of three years and will also set a five-year capital budget.
The delay in target dates is likely to reflect the difficult trade-offs Labor faces in balancing competing demands for public service investment in areas from health and education to defense and asylum.
The late timing of Labour’s spending review means Mr Reeves is likely to receive a full economic and fiscal outlook from the official watchdog before announcing the results.
The budget office is due to publish two full forecasts for the financial year, meaning the next one is expected to be released by the end of March.
The projections could lead to difficult decisions for the Treasury if the OBR suggests Mr Reeves is at risk of failing to comply with the newly revised fiscal rules.
The Prime Minister has promised to hold only one major “fiscal event” a year, with ministers expecting it to take place in the autumn.
Analysts have warned that the government’s margin of error on fiscal rules is already shrinking due to developments such as rising borrowing costs.
“Further tax rises are not inevitable, but they are more likely than the Chancellor would have us believe,” said Ruth Gregory, UK economist at Capital Economics.
Britain’s public finances are under great strain. Borrowings in the first seven months of this financial year were £96.6bn, up £1.1bn on the same period last year and the third highest since monthly records began.
The exact timing of ‘spring’ varies from person to person, but the UK government’s Met Office says: say For meteorologists, that is until May 31st. When the Ministry of Finance holds a spring accounting event, it has typically been held in March.
“You could write an article looking at the historical precedent for the use of ‘spring’ in Whitehall, one minister joked.”
The Ministry of Finance stated: “The Prime Minister has confirmed that the second phase of SR will begin. [spending review] Expecting a conclusion in late spring, she has made it clear that she will not take the finances lightly. ”
