Hey big spender! Will Rachel Reeves’ borrowing splurge fuel growth and curb Reform’s rise?

12 June 2025, 08:11 | Updated: 12 June 2025, 08:43

By Natasha Clark

@NatashaC

The Chancellor’s spending review may mark, finally, the beginning for this Labour government.

A turning of the page on the last lot, and the start of getting on with what they want to do.

What we saw from the spending review was more significant than just pots of money for the NHS, homes, energy and defence.

It was about Sir Keir Starmer and Rachel Reeves starting to show the nation – this is what Labour is, and what Labour do.

For the last ten months, there’s been a huge struggle at the top of Whitehall to set this out.

Huge messes to clear up, no financial wiggle room to do anything major, and a government eager to deliver change after 14 years under the Tories.

But there was a sense of drift, competition, and even a bit of panic at the top of government, as Cabinet ministers, and possibly even the prime minister, figured out where on earth to start.

I don’t want to relive the missions, milestones, first steps and pillars touted by the prime minister again, or I might shed a few tears of frustration.

No government can do everything it wants to do – it’s constantly about choices, priorities, and picking certain things to do right.

Yesterday marked the first time we’ve seen tangible evidence of what this government wants to prioritise for the next three years.

It’s not hugely surprising – shoring up our defence, repairing the NHS, boosting schools, building more homes, developing an energy system fit for the future.

Many of those are the same things Labour campaigned hard on in the election.

Now we see what those look like in practice, and a plan to get there.

Can it be delivered, and will it work?

Labour MPs I spoke to last night were delighted to see this vision and action plan from Downing Street.

And the £120 billion borrowing splurge to pay for infrastructure across their constituencies was welcomed by most, who were told by the Chancellor last night to “go out and sell it” to voters.

More investment in their own areas to shout about – and crucially – to tackle the Reform threat.

It’s no coincidence the Chancellor decided to name-check areas like Sheffield, Blackpool and Preston throughout her hour-long address to MPs.Repairing Southport Pier, anyone?

No longer are Labour just making promises; now MPs feel they actually have some policies to point to.

Short-term sweeties like the £3 bus cap extension and more free school meals give them a story to sell.

But there were also deep worries about the gamble the Chancellor’s taken – and if it will pay off.

Chief Secretary to the Treasury, Darren Jones, admitted they were making a “big bet”.

Borrowing billions of pounds more in the hope of much-needed growth tomorrow, adding billions to our already spiralling debt interest, is a worry for millions of small c conservative voters.

Economists and the Opposition say the tight budgets for day-to-day spending will leave the Chancellor with no choice but to look again at tax rises in the autumn to balance the books once again if anything goes even the slightest bit off plan.

It leaves her incredibly vulnerable to the markets, inflation, and the jobs market, which is already looking wobbly after her National Insurance hike.

That’s not to mention some of the incredibly ambitious 5% cuts to departments that this spending review says have been marked out, which I’m sceptical will ever come to bear fruit.

Some government insiders privately admit that the cuts to police will also be a political problem.

I predict the hole in that budget won’t last very long before being hastily filled later this year – it’s too politically risky to ignore.

And the admission that this government isn’t going to stop the boats and drive down the asylum spend over the next four years is also going to be a major thorn in the side for Sir Keir – and music to the ears of Reform sensing political opportunity.

Another roll of the dice for the so-called ‘Iron Chancellor’.

Her political future – and that of this government – rides on it paying off.

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Natasha Clark is LBC's Political Correspondent.

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