Rachel Reeves’s spring statement in March was characterized by significant cuts to disability benefits, which has drawn much criticism. The Treasury aims for the upcoming spending review to be remembered for the generosity of the chancellor.
Despite announcing tax increases worth £40bn annually by the end of the parliament and changing the fiscal rules, Reeves’ efforts have not been widely recognized for unlocking additional investment.
The Treasury highlights more than £100bn in additional capital investment over the next five years compared to expectations under Jeremy Hunt.
Reeves is addressing under-investment as a persistent issue in the UK economy. She revised fiscal rules to allow borrowing for investment and redefined government debt to include taxpayer-owned financial assets.
On Wednesday, Reeves will announce a range of transport investments outside of London, as part of the increased investment plan. Further announcements are planned for next week.
In preparation, the chancellor is briefing Labour MPs on high-profile projects in their constituencies, although concerns exist about the pace of materialization and electoral benefits.
Following cabinet discussions, the spending review will allocate funds for the next three years across government departments, focusing on infrastructure, health, defense, and economic growth, including the government’s industrial strategy.
Commentators expect certain departmental budgets to be tight by the end of the three-year period covered by the spending review.
Darren Jones, the chief secretary to the Treasury, advocates for innovation and reducing waste to optimize resource allocation within departments.
Reeves is likely to defend her fiscal rules, despite internal party objections, asserting their importance for economic stability and market confidence.
However, critics argue that the rules lead to decisions such as welfare cuts to meet fiscal targets and that the means-testing of the winter fuel allowance could face scrutiny.
Reeves may be asked about funding for Labour’s priorities, such as child poverty, and whether the spending review will focus on investments rather than cuts.
