Spending review is ‘settled’, says Downing Street

The spending review is “settled”, Downing Street has said, after the Home Office was the last department locked in budget negotiations.

Chancellor Rachel Reeves is expected to announce funding increases for the NHS, schools and defence along with a number of infrastructure projects on Wednesday, as she shares out some £113 billion freed up by looser borrowing rules.

But other areas could face cuts as she seeks to balance manifesto commitments with more recent pledges, such as a hike in defence spending, while meeting her fiscal rules that promise to match day-to-day spending with revenues.

On Monday morning, Home Secretary Yvette Cooper was the last minister still to reach a deal with the Treasury, with reports suggesting greater police spending would mean a squeeze on other areas of her department’s budget.

Speaking to reporters on Monday afternoon, the Prime Minister’s official spokesman said: “The spending review is settled, we will be focused on investing in Britain’s renewal so that all working people are better off.

“The first job of the Government was to stabilise the British economy and the public finances, and now we move into a new chapter to deliver the promise and change.”

The Government has committed to spend 2.5% of gross domestic product on defence from April 2027, with a goal of increasing that to 3% over the next parliament – a timetable which could stretch to 2034.

Ms Reeves’ plans will also include an £86 billion package for science and technology research and development.

Last week the Chancellor admitted that she had been forced to turn down requests for funding for projects she would have wanted to back, amid the Whitehall spending wrangling.

Mayor of London Sir Sadiq Khan’s office is concerned that Wednesday’s announcement will include no new funding or projects for London.

The mayor had been looking to secure extensions to the Docklands Light Railway and Bakerloo line on the Underground, along with the power to introduce a tourist levy and a substantial increase in funding for the Metropolitan Police.

A source close to the mayor said on Monday that ministers “must not return to the damaging, anti-London approach of the last government”, adding this would harm both London’s public services and “jobs and growth across the country”.

They said: “Sadiq will always stand up for London and has been clear it would be unacceptable if there are no major infrastructure projects for London announced in the spending review and the Met doesn’t get the funding it needs.

“We need backing for London as a global city that’s pro-business, safe and well-connected.”

Sir Sadiq’s office also fears that London will be among some regions to lose access to money from the shared prosperity fund, growth hubs and the levelling-up fund that support economic growth and efforts to tackle child poverty.

If the Treasury cuts this support it would be “incredibly short-sighted”, the source said.

They said: “They say they want regional mayors to be the drivers of growth but then remove their levers to achieve growth.

“London contributes hugely to the Treasury in tax revenues and could deliver even more with the right support.

“These funds have been incredibly effective in the past, and cutting them will cost jobs, damage the capital as well as other towns and cities, and cut tax revenue.

“What’s worse is that if the Treasury divert money meant to tackle poverty away from areas with high levels of child poverty, it would be a huge mistake and not consistent with Labour values.”