Chancellor Rachel Reeves today unveiled her Comprehensive Spending Review (CSR), which set out detailed plans for the government’s spending plans for the rest of this Parliamentary term and beyond. Headlining with a 2.3% increase in annual real terms departmental budgets through 2028/29 and significant capital investments, the Chancellor’s attempt was to position the CSR as a vital part of Labour’s growth ambitions.
The announcements included £86 billion for science and technology research, boosting defence spending to 2.6% of GDP by 2027, £39 billion for house building and significant commitments to developing new transport infrastructure and a mention of a new approach to Northern Powerhouse Rail which should also include the new Liverpool – Manchester Railway and will be picked up in the forthcoming 10 Year Infrastructure Strategy and an additional £3.5 billion for TransPennine Route Upgrades. Over the next seven years, Transport for Greater Manchester will also receive £2.5 billion as part of the City Region Sustainable Transport Settlement for continued expansion of the Bee Network with new electric buses, a Metrolink extension to Stockport and building new ‘tram - train’ links. Taken at face value, today’s announcements put some key ingredients for securing economic growth on the table. For Greater Manchester, however, many concerns remain.
Firstly, the actual increases in allocations are marginal even if the headline amounts seem substantial. For example, the £39 billion for housing is over a period of 10 years and the actual increase in social housing spend goes up only by 0.3%. Then, there is the issue of whether the promises are deliverable.
Earlier in the year, the Office for Budget Responsibility (OBR) estimated that Chancellor only had £9.9 billion in fiscal headroom against her fiscal rules, which mandate balancing day-to-day spending with tax revenue and reducing debt as a share of GDP by 2029/30. Ten-year gilt yields have also recently increased imposing higher borrowing costs even as borrowing itself increased more than expected in April. Notwithstanding more than expected growth in UK GDP so far in 2025, the IFS and other commentators have warned that the Chancellor may have to either reset her fiscal rules or raise more revenues, and taxes are likely to go up when the Chancellor comes back this autumn to deliver the Budget. The Chancellor may even have set the scene for tax rises: by her own admission today, the CSR’s ambitious spending was made possible by the October 2024 tax rises, hinting at attempts to raise more revenue via tax rises.
Another concern is whether the CSR makes a sincere effort to address regional economic imbalances. The CSR does indeed allocate funds, primarily for transportation with £15.6 billion for transport projects outside of London and poverty alleviation (funds for the most deprived areas in the country). However, there were even more significant commitments to London and the wider South East: £14 billion for Sizewell C and a four-year settlement for Transport for London. Some commentators have called for the £86 billion of scientific research and development funding to be equitably distributed ensuring that the “golden triangle” of Cambridge, Oxford and London do not monopolise the UK’s scientific research and development. While there is interest in strengthening Manchester’s partnership with the “golden triangle”, the £4.8 million allocated for this ambition is, at best, tokenistic. Although the Treasury is revising its Green Book and key CSR measures indicate an attempt to reach out to less prosperous locations in Labour’s heartlands in the Midlands and the North of England, the funding pot is hardly adequate to address historic underinvestment in areas outside of London.
Ultimately, success depends on execution. Universities, colleges and local authorities in the North need support and grants, not opportunities to make competitive bids against one another. Businesses need certainty and households require protection from further tax rises and unexpected increases to the cost of living. If economic conditions improve and private investment increases, the Chancellor may have a less difficult path ahead. If not, there may be more years of under delivery and broken promises.