The British state is slowly turning into a National Health State,
with half of all public-service spending set to allocated to
health and social care by the end of the decade, according to the
Resolution Foundation's overnight analysis of Spending Review
2025.
Key findings from the overnight analysis, which show that the
other big winners from Spending Review 2025 are lower-income
families and the defence industry, include:
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An NHS state... Yesterday's NHS-dominated
settlement continues a pattern of recent Spending Reviews,
which has led to a major reshaping of the state. By the end of
the decade (2028-29), the health service will account for half
(49 per cent) of all day-to-day public service spending
controlled by Westminster – up from a third (34 per cent) in
2009-10.
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…and shrunken public services
elsewhere. While real, per-person funding for
health has increased by 36 per cent between 2009-10 and
2028-29, it has fallen by 16 per cent for Justice, 31 per cent
for Work and Pensions, and 50 per cent for Housing, Communities
and Local Government over the same period.
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Defence dominates infrastructure plans while total
non-defence investment sees cuts. The £9.7 billion a
year increase in capital spending between 2025-26 and 2029-30
includes an increase of £5.9 billion of financial
transactions (primarily loans), with around two-fifths of the
Warm Homes Plan now being funded by loans rather grants. Once
these financial transactions are stripped out, the £7.4 billion
a year increase in defence contrasts sharply with the £3.6
billion cut to real investment across all other departments.
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The rise, fall and rise again of public service
spending. Real day-to-day spending is now rising again
in the 2020s (2019-20 to 2028-29) by 2.2 per cent a year,
following a 0.5 per cent fall per year in the 2010s (2009-10 to
2019-20). In the decade prior to that, spending rose by 4.3 on
average each year (2001-02 to 2009-10).
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Lower-income families get a benefits-in-kind
boost. The extra funding for hospitals, schools
and the police relative to plans set out by the previous
Government will deliver important benefits-in-kind to families.
The Foundation estimates that a middle-income household will
gain £1,400 on average for extra public service provision (in
2028-29), rising to £1,7000 for the poorest fifth of families.
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From a summer of spending to another autumn of tax
rises? The large increase in public spending has
been funded in large part by the £39.7 billion of tax rises (in
2028-29) announced in the Budget last Autumn and £3.6 billion
of benefit cuts (in 2028-29) announced in the Spring Statement
– equivalent to £1,550 for every family in Britain. But the
combination of a weaker economic outlook, an unfunded spending
commitment on Winter Fuel Payments, and just £9.9 billion of
headroom against the Chancellor's fiscal rules, mean further
tax rises are likely to be needed this autumn.
Ruth Curtice, Chief Executive of the Resolution
Foundation, said:
“The Spending Review was a huge deal as the Chancellor set out
details of nearly £300 billion of extra spending over the second
half of the Parliament. But as the dust settles a few clear
winners have emerged.
“Health accounted for 90 per cent of the extra public service
spending, continuing a trend that is seeing the British state
morph into a National Health State, with half of public service
spending set to be on health by the end of the decade.
“After two rounds of painful tax rises and welfare cuts,
low-to-middle income families are the other big winners from the
extra spending announced relative to the previous government's
plans, with the poorest fifth of families gaining £1,700 on
average from extra funding for schools, hospitals and the police.
“Defence dominates the Chancellor's future investment plans, so
much so that total non-defence investment sees cuts on average
for the rest of this Parliament.
“The extra money in this Spending Review has already been
accounted for in the last forecast. But a weaker economic outlook
and the unfunded changes to winter fuel payments mean the
Chancellor will likely need to look again at tax rises in the
Autumn.”
