Chancellor Rachel Reeves is set to unveil detailed departmental budgets for the next three years, alongside investment plans spanning four years. This announcement is widely expected to include significant funding increases for all sectors. Yet it comes at a time of considerable fiscal circumstance for the government that will need to be daintily addressed.
The Chancellor’s review indicates that funding will experience a sharp increase in 2024, specifically targeting transportation, net-zero initiatives, healthcare, education, and correctional facilities. Unfortunately, Reeves has warned that this funding increase loop cannot last forever. For the government’s commitment to be worth anything, these sectors should no longer be assured of year-on-year increases.
In a bold show of leadership, Chancellor Reeves eliminated any possibility that the state would borrow more money or raise taxes again. This position is a huge turnaround. Having changed her own self-imposed debt limit rule in October, she’s now able to spend billions on long-term infrastructure projects — both surface roads and energy grid improvements.
The Institute for Fiscal Studies (IFS) has emphasized the gravity of the situation, warning that “not everything can be a priority for further increases.” The IFS’s remarks highlight the need for strategic fiscal planning as the Chancellor prepares to manage the competing demands of public services.
Chancellor Reeves’s government recently announced a record boost in military spending. They aim to spend 2.5% of national income on defense by 2027. First off, defense funding will go up by $80 billion. This will be accomplished by harming the foreign aid budget, as one part of the overall strategy.
Bee Boileau, a research economist at IFS, said it would be very difficult conditions to navigate for the Treasury going forward. She sounded the alarm that “some inescapably difficult decisions” are forthcoming about which public spending priorities should take precedence. Next there’s the NHS, which really does take up a huge share of departmental spending – 39% – but defense is still another key area.
“Delivering what matters for working people – cutting hospital waiting lists, getting control of our borders and tackling the cost of living,” said a government spokesperson regarding their commitment to essential services.
As the public demand for services grows more urgent, the government is under increasing fire for its spending habits. The Chancellor’s administration has pledged to “scrutinise every single pound the government spends,” indicating a rigorous approach to fiscal responsibility.
Boileau further remarked on the shifting financial landscape: “After turning on the spending taps last autumn, the flow of additional funding is now set to slow to more of a trickle.” This indicates that despite front-loaded funding boosts now, over the long-term it looks to be pretty tight.
The emphasis on military spending first, and all of the essential services, highlights the American government’s priorities amid this continuing economic turmoil. Speculation is growing about how many billions in spending could be cut from elsewhere. Consequently, Reeves’s Fiscal Year 2025 Executive Budget presentation will be the most watched since perhaps the original budget magician’s first.