The Chancellor has announced a wave of spending in her Budget. Here we break down the winners and losers
Britain’s tax raid appears to have one clear winner.
The NHS will enjoy the largest real terms growth in its budget since 2010, outside of the pandemic. An extra £25 billion over the next two years – equivalent to the entire rise in employers’ National Insurance contributions – will take the overall budget of the Department of Health and Social Care (DHSC) beyond £200 billion for the first time.
Last month, an independent inquiry into the NHS concluded that it had been “starved” of capital funding, with doctors wasting ever more time because of a lack of beds, diagnostics and other kit. The budget boost includes £3.1 billion for capital, taking spending to a new high of £13.6 billion by 2025-26.
More than £2 billion will be devoted to NHS technology, with ministers pledging to use this to drive productivity improvements, freeing up staff and improving patient access to care.
But even before Rachel Reeves stood up to deliver the Budget on Wednesday, she had made one point crystal clear: this is just the start.
“I don’t think, in one Budget, you can undo 14 years of damage,” the Chancellor said, raising the prospect that this year’s tax raid will not be the last.
She said the £22.6 billion increase in the day-to-day health budget was merely a “down payment” on a 10-year plan for the NHS that would be published in spring.
In addition, further details of the Government’s review of new hospitals – which would require “a rolling programme of major investment” – would not come until later this year, she said.
Amanda Pritchard, the chief executive of NHS England, was among the first to welcome “record levels of capital investment, which will help us repair and modernise hospitals, GP practices and other facilities, as well as continuing to roll out technology and other reforms which will boost productivity for the benefit of patients and the taxpayer in the long term”.
However, experts note that NHS England – which has committed to making 2 per cent productivity improvements – is already working to a budget around £14 billion bigger than was planned in the spring, having received huge top-ups from the DHSC.
This has not stopped the NHS from facing an unfunded overspend of £4.8 billion, the Nuffield Trust warned last week, suggesting that an increase of around 3.6 per cent would only allow the NHS to keep up with existing pressures.
In fact, the health service got slightly more – an average of 4 per cent over two years, and a 3.8 per cent rise for the wider DHSC budget.
And even as the Chancellor gave, she took.
The NHS is Britain’s largest employer, so a 1.2 per cent rise in employer contributions to National Insurance, combined with changes in thresholds, could cost the service around £1.5 billion.
Meanwhile, the care sector said it was facing a £2.4 billion funding hole, with providers facing a steep increase in the national living wage, on top of the national insurance increase, which would be little helped by a £600 million grant announced by the Chancellor.
Think tanks said patients should not expect to feel much benefit from this week’s settlement, and suggested a far bigger spending spree for the NHS lay ahead.
Labour has pledged to cut waiting lists, and and limit waits to 18 weeks. But lists have risen since Labour won the election, to 7.7 million in England.
Siva Anandaciva, chief analyst at The King’s Fund, said: “The Chancellor has said that ‘change must be felt’, but the health spending announced today is unlikely to be enough for patients to see a real improvement in the care they receive.
“On the whole, this Budget has been a starting point for the investment and reform that is needed to begin to stabilize the trajectory of NHS performance, but it is not enough for the system to deliver the wholesale shift needed for a health and care system fit for the future.”
Matthew Taylor, chief executive of the NHS Confederation, said the Budget was “an important first step towards putting the NHS back on to a sustainable footing” but said the money had a lot to do – including covering recently agreed staff pay deals, improving waiting list performance, and meeting growing demand.
Defence
A £2.9 billion uplift for defence “won’t touch the sides” of what the Armed Forces needs, military chiefs have said.
The Treasury said the additional funding would grow the Ministry of Defence’s budget by 2.3 per cent per year on average in real terms, compared to 2023-24.
However, one senior Navy source described it as a “real terms cut compared to this year”, while a senior Army source said the money was not enough.
“It won’t touch the sides,” the Army source said, adding that “given the pressure on other departments it’s probably enough for John Healey [the Defence Secretary] to feel reassured”.
It also committed to continue supporting Ukraine by providing £3 billion per year until Russia’s assault is over.
The Treasury said the funding would “enable the UK to modernise the Armed Forces” while playing a “leading role” in Nato and cited the nuclear deterrent, combat and surveillance aircraft, surface and submarine fleets, forward land forces, Special Forces and cyber and space capabilities as means to do so.
However, Ms Reeves failed to commit to a timeline of when Labour would achieve spending 2.5 per cent of GDP on defence, instead saying this would be established at “a future fiscal event”.
One Whitehall source insisted the £2.9 billion was “an important boost”.
“It shows it’s a government that values defence and recognises its importance,” they said. “It was one of the better settlements compared to other departments and it helps to start fixing foundations of the forces, but we recognise we still face challenging circumstances.”
Sir Ben Wallace, the former defence secretary, told The Telegraph he was concerned how the Ministry of Defence had done in comparison to other government departments.
“It is still disappointing that in comparison to the high settlements, defence under Labour is clearly very low down on their priorities,” he said.
He also tweeted at Mr Healey, the Defence Secretary, to congratulate him on ensuring a one-year defence increase, adding that this would leave the “door open for 2.5 per cent of GDP in the future”.
Sir Ben cautioned that while “the devil will be in the detail”, the increase was an “important signal of a cross-party acceptance” that Defence required more funding.
“We need to make sure this figure doesn’t include the £3 billion for Ukraine otherwise it is in fact a cut to the core budget,” he said.
Mark Francois, a former Armed Forces minister, also called for clarity over the £3 billion figure as he accused the Government of playing “smoke and mirrors” with the defence budget. “They appear to have thrown in the money we give to Ukraine as if it was part of the core defence budget – which it isn’t,” he said.
Education
Ms Reeves announced a 19 per cent uplift in the Department for Education (DfE) capital expenditure limit next year to fix “crumbling” schools and help “rebuild the fabric of our nation”.
The DfE will be granted £6.7 billion of capital investment in 2025-26, up from £5.5 billion this year. It will include £1.4 billion to refurbish the 500 schools in England in the worst condition, marking a £550 million increase in funding for the scheme compared to this year.
The package also includes £2.1 billion to improve the rest of the school estate – a boost of £300 million compared to this year.
Ms Reeves and Bridget Phillipson, the Education Secretary, are understood to have been enraged by the reinforced autoclaved aerated concrete (RAAC) crisis that emerged last summer. Around 230 schools in England were identified as containing RAAC, a lightweight concrete prone to disintegration.
The Chancellor repeatedly referenced this throughout her inaugural Budget speech, warning that “school roofs are crumbling” and “school buildings [are] not fit for our children”.
She also drew on her own education, spent in “a couple of prefab huts in the playground”, at a comprehensive school in Beckenham, south London, telling the public she was determined not to repeat this for future generations.
Both money to address this and a tripling in funding for free school breakfast clubs to £30 million next year were trailed last week ahead of the Budget – something Ms Reeves received a slap on the wrist for from the Deputy Speaker.
Other parts of the education sector also received cash injections. She announced a £2.3 billion increase in the core schools budget, including £1 billion to support the special educational needs and disabilities (Send) system.
It follows a report published last week by the National Audit Office (NAO), which said the Send system was seriously failing pupils despite costing more than £10.7 billion a year.
The Chancellor said she would also provide an extra £300 million for further education colleges.
A separate study published by the Institute for Fiscal Studies (IFS) last week warned about the dire financial situation within further education, with the number of colleges in England shrinking from 348 to 218 since 2010.
Ms Reeves pledged £2 million per year to improve Holocaust education, with the Chancellor paying tribute to Auschwitz survivor Lily Ebert, who died earlier this month aged 100.
The Chancellor also recommitted to a £1.8 billion uplift to fund the Government’s childcare expansion in England. This was first announced by Jeremy Hunt in the former chancellor’s spring Budget last year.
Transport
Commuters face rises in train ticket prices of more than double the rate of inflation from next year, the Government has said.
Rail ticket prices will increase by 4.6 per cent from March 2 next year, loading hundreds of pounds a year on to the cost of train travel. Most railcard prices will also rise by £5.
The Government said in the Budget that the nation’s railways were suffering from a “shortfall” of cash thanks to changing commuting habits.
Ministers want to “recover this shortfall” by charging passengers more.
The increase, which is more than twice the current 1.7 per cent rate of inflation, will see more than £500 added to the price of a season ticket from Swindon, Wilts, to London.
Traditionally, train fares are increased by the previous year’s Retail Price Index figure for the month of July.
Andy Bagnall, chief executive of trade body Rail Partners, criticised the rise and said: “The focus must be on growing passenger numbers, not making current passengers pay more.”
The controversial HS2 railway line will also receive extra funding so tunnels can be dug between its terminus at Old Oak Common in west London and Euston station.
Ministers said this funding for the tunnels alone would “catalyse private investment into the station and local area”.
Ms Reeves also committed the Government to finishing rail electrification upgrades across Manchester and Yorkshire, even though these were completed and tested under the Conservatives earlier this year.
Elsewhere, the Chancellor promised an extra £500 million for councils to fix their roads, a sum she claimed would exceed Labour’s manifesto promise to fix a million road defects per year.
Edmund King, president of the AA, welcomed the extra funding for the coming year but called for it to be “ring-fenced with an emphasis on preventative maintenance”.
David Giles, chairman of the Asphalt Industry Alliance, said the half-billion sum “falls short of the long-term funding horizon the sector has been calling for. This additional allocation is a fraction of what’s needed to prevent further decline.”
Widespread speculation that Ms Reeves would increase fuel duty and introduce some form of pay-per-mile road pricing proved unfounded, with petrol and diesel taxes remaining frozen until early 2026.
Investment
A landmark decision to redraw the fiscal rules will release £100 billion for public investment in schools, rail, and hospitals, Ms Reeves announced.
The Chancellor has changed how debt is calculated in a move that will release huge amounts of cash in capital spending over the next five years.
Previously, Mr Hunt had set a fiscal rule to get debt falling as a share of GDP by the end of the forecast period.
Ms Reeves has taken on this rule, but she announced on Wednesday that she had changed the way that the level of debt was defined.
From now on, debt will be defined as public sector net financial liabilities, or “net financial debt”. This measure incorporates not only the Government’s liabilities but also its financial assets.
“This means that we count the benefits of that investment, not just the costs, and we free up our institutions to invest,” Ms Reeves said.
This money will be spent by bodies such as the new National Wealth Fund, which is designed to catalyse private investment and has a requirement to secure returns that are at least as large as rates on government bonds.
Ms Reeves must meet this rule to get this measure of debt falling by 2029-30, until this becomes the third year of the forecast period, at which point the rule must be met in the third year.
It is an attempt to reverse the UK’s position in last place in the G7 when it comes to business investment as a share of the economy.
“The UK has fallen behind in the race for new jobs, new industries and new technology,” Ms Reeves said.
Housing
Another £5 billion is pledged to boost housebuilding amid warnings Ms Reeves will struggle to hit her target of 300,000 new homes a year.
Almost two-thirds of the cash injection will go on addressing the “desperate lack of affordable housing”.
She also confirmed the Government will pump money into hiring “hundreds of new planning officers” to speed up the approval of developments.
But industry figures warned the money would “sadly not go far enough” and that she needed to be “much bolder” to hit her house-building targets.
Ms Reeves said the £5 billion outlay included a £3.1bn boost to the Affordable Home Programme, which would “deliver thousands of new homes. That pledge represents a £500 million – or 20 per cent – increase to the scheme’s budget.
The Chancellor also said the Government would underwrite £3 billion worth of low-cost loans to small and medium-sized housebuilders to boost production.
Ms Reeves released cash for major renovation projects such as Liverpool Docks as well as “funding to help Cambridge realise its full growth potential”.
Before the election, Labour promised to ensure the construction of 1.5 million homes, or 300,000 every year, over its first five years in power.
Ms Rayner has announced plans to overhaul the planning system, including allowing developers to build more homes on the greenbelt.
But the housing industry has warned the Government it will still struggle to hit its target after starts on new homes slumped to just 29,820 in the first quarter of this year.
John Anderson, the chief executive of Allison Homes, said: “While investing in local authority planning teams and affordable housing are positive steps, it will sadly not go far enough.”
Melanie Leech, chief executive of the British Property Federation, added: “The promised housing strategy needs to be much bolder and go much further.”
Ms Reeves confirmed that the Government is to slash right-to-buy discounts, meaning it will be more expensive for council tenants to buy their own homes.
Angela Rayner, the Housing Secretary, is behind the move, despite the fact that she herself benefitted from the Thatcher-era scheme.
Currently, tenants who want to buy their own social home can do so at a discount of 70 per cent, but that is now expected to be cut to just 25 per cent. Ministers have argued the change is necessary to stop the erosion of England’s social housing stock.
The Chancellor also announced a £1 billion investment next year to help “remove dangerous cladding” from buildings.
Welfare
The Chancellor unveiled a crackdown on sickness benefits which will cut more than £4 billion from Britain’s ballooning welfare bill.
The Chancellor said she would press ahead with Tory reforms to strip the most generous handouts from those with mild mental health conditions.
She also announced plans to grant fraud investigators new powers to access welfare claimants’ bank accounts and recover lost cash.
But official forecasts showed that overall spending on welfare is still set to rise by £1.3 billion more than it would have under the Conservatives.
The Office for Budget Responsibility said that Britain’s benefits bill would hit £361.4 billion by 2028-29, a rise of more than 20 per cent on last year.
Rishi Sunak unveiled plans last year to save up to £12 billion by clamping down on access to sickness benefits and getting more people back into work.
A quarter of that amount was to be saved by tightening up the criteria that determine who is granted the most generous handouts. Tory ministers warned that people with mild mental health conditions were being put into the top bracket, meaning they are not required to look for work.
Under their reforms, 400,000 people who are signed off long-term would be made to engage with job centres and prepare for employment.
Ms Reeves confirmed she would “deliver those savings”, saying they were part of “fundamental reforms to the health and disability benefits system”.
She also announced a “crackdown on fraud in our welfare system” saying the Government would target the criminal gangs behind false benefits claims.
Ms Reeves said the two measures combined would save £4.3 billion a year by 2028-29.
She added that Liz Kendall, the Work and Pensions Secretary, would shortly publish the Government’s plans for getting more people back to work.
It came as she announced that five Whitehall departments would face real-terms cuts to their budgets over the next five years.
The Home Office, the Culture Department, the Transport Department, the Department for Environment and the Cabinet Office will all receive less cash.
Officials said that the 3.2 per cent drop in the Home Office’s real-terms budget was a result of falling asylum costs as migrants are moved out of hotels.
