Rachel Reeves pushes back multiyear UK spending review until June

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Rachel Reeves has pushed back the timing of the Treasury’s multiyear spending review to June as the government struggles to get to grips with the volume of decisions it needs to make on its funding priorities.

The UK chancellor had previously pledged to complete the process by “spring 2025” but officials and ministers have told the Financial Times that the schedule has slipped.

They had previously been working to a timetable under which the spending review was expected “around April”, according to one person briefed on the process.

The new June 2025 date will be almost a year after Labour’s landslide election victory at the July UK general election this year.

“This was supposed to be done in spring, but they’ve realised as they’ve started talking to ministers that it could be a much longer, more complex process,” the person briefed on the process said.

UK governments use spending reviews to determine how to allocate funding between government departments. The last multiyear review was in 2021, when then chancellor Rishi Sunak set apportioned money for three years. The reviews, major events in the Treasury’s calendar, involve months of haggling as ministers try to protect their budgets.

The delay to Labour’s multiyear review will extend a period of uncertainty for government departments, which waited nearly four months after the election for Reeves’ first Budget in October.

Her Budget set departmental expenditure limits for 2025-26 in a £40bn tax-raising package that ploughed billions of pounds into public services in the current year and next.

But Reeves deferred difficult longer-term decisions on public spending, with overall expenditure growth set to slow down after 2025-26 to a real-terms rate of 1.3 per cent a year. The chancellor has vowed not to do another big tax-raising Budget.

Next year’s spending review will set out exactly which departments will be winners and losers later in the parliament. The review will cover a minimum of three years of day-to-day spending, and also set capital budgets for five years.

The delayed target date likely reflects the difficult trade-offs Labour faces as it balances competing demands for public service investment in areas ranging from health and education to defence and asylum.

The later timing of Labour’s spending review means Reeves is likely to receive a full economic and fiscal forecast from the official watchdog before she announces the results. 

The Office for Budget Responsibility is meant to publish two full sets of forecasts in a financial year, meaning the next one is due by the end of March.

The forecast could create difficult decisions for the Treasury if the OBR suggests Reeves is in danger of failing to meet her newly reframed fiscal rules.

The chancellor has pledged to hold only one major “fiscal event” a year, with ministers expecting this to fall in the autumn.

Analysts have warned that the government’s margin of error against its fiscal rules has already been whittled down by developments such as higher borrowing costs.

“Further tax hikes are not inevitable, but they are more likely than the Chancellor would have us believe,” said Ruth Gregory, UK economist at Capital Economics.

The UK’s public finances are under heavy strain. In the first seven months of the current fiscal year, borrowing was £96.6bn, which was £1.1bn more than the same period the previous year and the third-highest since monthly records began. 

While people differ on the exact timing of “spring”, the UK government’s Met Office says that for meteorologists it runs until May 31. When the Treasury has held a spring fiscal event, it has generally been in March.

“You could write a piece looking at the historical precedence of the Whitehall use of ‘spring’, one minister joked. 

The Treasury said: “The chancellor has confirmed that Phase 2 of the SR [spending review] will conclude in late spring and has also been clear that she will never play fast and loose with the public finances.”