Day-to-day spending on the NHS will increase by £29bn a year, Rachel Reeves has announced as she accepted voters are yet to feel an improvement under Labour.
Delivering her spending review, the chancellor also declared an end to the use of asylum hotels this parliament by investing in cutting the backlog and returning more people with no right to be here – which she said would save the taxpayer £1bn a year.
Politics live: Reaction to spending review
Government to stop housing asylum seekers in hotels
Ms Reeves acknowledged that almost 12 months on from Labour’s landslide election victory, "too many people" are yet to feel their promise of national renewal.
She said the purpose of her spending review is "to change that", with total departmental budgets to grow by 2.3% a year in real terms until 2028-29.
Key settlements include:
- NHS: The health service gets £29bn for day-to-day spending – a 3% rise for each year until the next election;
- Housing: £39 billion over the next 10 years to build affordable and social housing;
- Defence: Spending will rise from 2.3% of GDP to 2.6% by 2027, made up of an £11bn uplift on defence and £600m for security and intelligence agencies;
- Science and tech: Research and development funding will hit £22bn with AI plans getting £2bn;
- Transport: £15bn for new rail, tram, and bus networks in the North and the West Midlands, a new rail line between Liverpool and Manchester, and a four-year settlement for TfL, plus the £3 bus fare cap extended to 2027;
- Nations: Scotland gets £52bn, Northern Ireland £20bn, and Wales £23bn, including for coal tips;
- Education: Free school meals extended to 500,000 children, while the extra £4.5bn per year will also go on fixing classrooms and rebuilding schools;
- Nuclear: A £30 billion commitment to nuclear power, including £14.2 billion to build Sizewell C plant in Suffolk and £2.5 billion in small modular reactors;
- Prisons: 14,000 new prison places will be funded with a £7bn injection;
- Police: 13,000 more police officers will be paid for with £2bn;
£11bn increase in defence spending
Read more: The key announcements
Many of today’s announcements have been front loaded by cash injections made since Labour took office, meaning that from 2025-26 the increase is a more modest 1.5% on average.
Over the course of the whole parliament, it equates to spending £190bn more on the day-to-day running of public services and £113bn more on capital investments than under the previous government’s spending plans, the chancellor said.
Ms Reeves drew a distinction between her review and the Tories’ austerity agenda in 2010, saying they cut spending by 2.9%.
She said austerity was a "destructive choice for the fabric of our society" and "different choices" would be made under Labour.
However while overall departmental spending will increase day to day, some departments face a squeeze.
Home Office budget squeezed
This includes the Home Office, whose spend will reduce by 1.4% over the next three years, including daily spend and capital investments.
Daily spend covers the daily running costs of public services, while capital investment is spending by the state on the creation of fixed, long-term assets, such as roads and railways.
Combined, the foreign office and DEFRA also face reductions, as does the departments of culture media and sport and the cabinet office.
Paul Johnson, the director of the Institute for Fiscal Studies, said 3% a year increases in NHS spending "does mean virtually nothing on average for current spending elsewhere".
Reeves attacks Tory economic record
Ms Reeves said the cash boost for the NHS would fund more appointments, more doctors and more scanners.
She used this to draw dividing lines with Reform UK, saying they have called for an "insurance-based system" whereas Labour created the NHS, protected the NHS and under this government would "renew the NHS".
Read More: The spending review: Five things you need to know
Tax rises speculation
Ms Reeves said she was able to raise the money through decisions made in her autumn budget and spring statement, which saw taxes raised by £40bn and cuts made to the welfare budget.
However the Tories said the review "isn’t worth the paper its written on" and further tax hikes will be needed.
Shadow chancellor Sir Mel Stride said "this is the spend-now, tax-later review" adding Ms Reeves "knows she will need to come back here in the autumn with yet more taxes and a cruel summer of speculation awaits".
The Lib Dems said the "smoke and mirrors" spending review would leave a black hole in social care as local government budgets remain at breaking point.
"Putting more money into the NHS without fixing social care is like pouring water into a leaky bucket," said the party’s Treasury spokesperson Daisy Cooper.