LONDON (AP) — Britain’s Labour government sought to regain the political initiative Wednesday as Treasury chief Rachel Reeves set out her spending plans for the coming years, including big increases for health, defense and housing.
Reeves, who has been blamed by many for Labour’s decline in popularity since it returned to power after 14 years in July, outlined the government’s spending and investment priorities, which she hopes will signal to voters that the “change ” promised at the election is being delivered.
“We are renewing Britain,” she told lawmakers. “But I know that too many people in too many parts of our country are yet to feel it. This government’s task, my task as Chancellor, and the purpose of this spending review, is to change that.”
In her first spending review — there were no tax announcements — Reeves announced a 190 billion pound ($260 billion) boost for Britain’s public services, many of which have been hollowed out by the austerity policies enacted by the previous Conservative government in the wake of the 2008 global financial crisis.
Labour won a landslide victory last year on a slogan of “change” and voter anger at the Conservative administration, but its vote share was historically low for a winning party at 35%.
In the months since, Labour has been overtaken in opinion polls by the anti-immigration and recently formed Reform UK. Reeves has been blamed by many for Labour’s struggles, not least her decision in July to withdraw a winter fuel subsidy to all but the poorest retirees.
The outcry, which contributed to Labour’s poor performance in recent local elections, prompted Reeves to about-turn and raise the threshold at which retirees will get the subsidy.
She and Prime Minister Keir Starmer will hope the change will stem the anger and focus voters on other issues, including their plans on improving Britain’s ailing public services.
Among the many announcements, Reeves gave a big funding boost for Britain’s cherished but struggling National Health Service. She also defense spending will ratchet up in the years ahead and will account for 2.6% of national output by 2027 — more than the 2.5% previously anticipated.
She also increased funding for social housing by 39 billion pounds over the coming decade, as the government aims to meet its target of building 1.5 million new homes by the next election, which has to take place by the middle of 2029.
However, some departments appear to have lost out, especially after accounting for inflation. These include culture, the Foreign Office and the Home Office, which oversees everything from housing asylum seekers to funding police.
Reeves insisted that all her plans will meet her self-imposed fiscal rules, specifically of not borrowing to fund day-to-day spending and reducing the country’s debt pile as a percentage of the economy by the end of this parliament.
“My fiscal rules are non-negotiable and they are the foundation of stability and of investment,” she said.
Given her rules, Reeves sought to walk a fine tightrope as too much spending would raise the prospect of higher taxes. However, following her big tax-raising budget last October that mainly targeted businesses, Reeves has very little room for manoever, not least because Labour won the election on a promise it would not increase income or sales taxes.
And with the British economy still growing at historically low levels, the tax take is not expected to get a big lift.
Reeves will hope her investment plans can help change that.
