UK Spending review 2025 – impact and challenges for the public sector

Day-to-day spending and investment spending have generally increased in real terms in recent years. However, as a proportion of the economy, spending totals are below where they were in 2010-2011. That said, this year's spending review includes many welcome increases that are sure to help boost our economy. For example, it's great to see the focus on technology spending, and hopefully, this is matched by similar investment in the skills to use it wisely and in places where there are more significant cuts. Technology and AI should provide the catalyst to radically drive productivity. The delivery of great public services is important to us all, and we know many services aren't as efficient as we'd like them to be. We hope that any reductions encourage government departments and cross-cutting missions to work more closely, reduce duplication, and find innovative solutions to tackle problems. Now, hear from our experts across the team, who will share our views on the most significant impacts and the pressing challenges of the spending review.

It's great to see £15.6 billion of funding for transport projects in the North. This will turbocharge economic growth outside London. However, it will also be a mammoth task to deliver. Regions need to develop the capability to ensure these projects deliver on time and within budget.

An increased investment in justice is vital, given the need to solve the prison crisis and reduce court backlogs. However, this is a real-terms cut over the last ten years, and any investment is playing catch-up to ever-increasing demands and pressures. Now is the time to think seriously about leveraging the use of technology and AI across the justice system to get the most value per pound spent.

Ahead of the ten-year health plan being published later this year, an increase in health spending is good news. This is investment that will benefit us all and have a positive knock-on impact on the wider economy. I'm most excited about the potential for digital and data investments, such as a single patient record, to deliver benefits for both patients and clinicians. Now, it's critical that teams get on the front foot in the coming weeks and months and prioritize writing robust business cases with clear benefits.

It's great to see the government's commitment to the Warm Homes plan. This will make homes across the country warmer, greener, and cheaper to run.

The reality of the spending review for policing is that it will require a strong prioritization of the outcomes in the Safer Streets mission. This will mean some difficult decisions and targeted investments in the people, the tooling, and the technology that reduce the cost to serve and meet public expectations.

The UK Defence Spending Review will increase funding from 2.3% to 2.5% of GDP by 2027. This is the largest increase in a quarter of a century. But staying ahead demands more than just incremental improvements. There is a need for cutting-edge technology to stay competitive amidst ambitious goals. The key challenge will be whether this is enough to address the real threats facing the security of our nation.

The tighter settlements for policy departments like the Cabinet Office and HM Treasury mean they need to consider how they reduce costs over this Parliament. Rather than salami-slicing and opting for volunteers to exit from across the department, it should be a real opportunity to think strategically about what the department should be doing going forward and what needs to be stopped.

The announcement in the Spending Review that Sizewell C will go ahead is fantastic news. Combined with the news of Rolls-Royce as the technology partner for GBN, it gives the kind of confidence we need in both the nuclear industry and in the infrastructure delivery supply chain. Nuclear is a key part of the energy infrastructure strategy, so now, time and finding and developing the right skills are key to making it happen.

There are clear winners and losers from this Spending Review, but the biggest challenges facing government, including climate change, regional inequality, economic growth, and population health,1 don't fit neatly into departmental boundaries. Going forward, putting top-down practical structures in place to support a mission-led approach to delivery will be vital.