Rachel Reeves has an unenviable task as she puts the final touches to the government-wide spending review she will unveil on Wednesday. It will be a defining moment for the Labour government as she sets out departmental spending limits up to the next general election.

The headlines garnered in the run-up to the chancellor’s big day are misleading. We have been promised £15.6bn for local transport projects, mainly in the North and Midlands; £4.5bn a year for schools; £22.5bn a year for science and tech, and £187m to bring digital skills and AI learning into classrooms and communities.

While all are worthy, the government is playing a rather cynical game. Some of its pre-announcements stem from the extra £113bn of capital spending for which Ms Reeves created room last October by sensibly changing her fiscal rules so investment projects do not count towards her target to balance revenue and spending by 2029-30.

However, her determination to stick to her fiscal rules to prevent a wobble on the financial markets means that Wednesday’s statement will impose a squeeze on day-to-day budgets. Although overall spending will rise by an average of 1.2 per cent a year on top of inflation, big increases for health and defence will mean real-terms cuts for other budgets, possibly including the Home Office (which funds the police), housing and local government. So there has been a bruising round of negotiations between the Treasury and ministers such as Angela Rayner, who is responsible for housing and councils, and Yvette Cooper, the home secretary. During a media round on Sunday, Peter Kyle, the science secretary, did not rule out real-terms cuts to the police and housing.

While the squeeze will technically be less severe than the austerity over which George Osborne presided from 2010, the danger for Labour is that it will feel like austerity 2.0 for many voters. Labour backbenchers are well aware of this and, after the party’s poor results in last month’s local elections in England, have pushed ministers into a U-turn on Ms Reeves’s disastrous decision to means-test the pensioners’ winter fuel allowance and extracted a promise from Sir Keir Starmer of more measures to combat child poverty, possibly by easing the two-child limit on benefits.

There could also be a tweak to the £5bn of cuts to disability and sickness benefits hurriedly announced in March.

The government must prioritise the fight against child poverty; without intervention by ministers, it would rise significantly over the five-year parliament, which would be an indictment of Labour. Ms Reeves must find a way to make good her promise in her article for The Independent last week to ensure “every young person can fulfil their potential”.

Admittedly, that will not be easy, given all the conflicting pressures on her to spend more. Although Wednesday’s statement will not be a Budget, Ms Reeves should do more than rattle off a list of spending commitments without making clear where the money will come from. There is already a risk of doing so on defence. The strategic defence review unveiled last week is based on the government’s ambition to raise defence spending to 3 per cent of GDP in the next parliament but it has not yet allocated the funds to go beyond a rise from 2.3 per cent to 2.5 per cent by 2027. The UK will come under pressure to commit to 3.5 per cent at a Nato summit later this month.

Ms Reeves should also provide clarity on which pensioners will receive winter fuel payments in the coming winter. The about-turn has been slow and messy, to the consternation of Labour MPs.

In responding to such pressures, the chancellor and prime minister have cited the economy’s 0.7 per cent growth in the first quarter of this year but there is no guarantee that will be maintained. They should not lose sight of the need to balance higher spending with genuine public sector reform. There will be a limit to how much can be achieved through “efficiency savings”.

The suspicion is that, in spending more on defence, winter fuel payments and child poverty, Sir Keir and Ms Reeves are willing the ends without providing the means. They should level with the public about how their sums will add up.

For now, they may be tempted to adopt a Micawberish approach in the hope that the fiscal picture improves by Ms Reeves’s second Budget in the autumn. Again, that is far from certain: more holes might be blown in her headroom against her rules by an uncertain global economic outlook in the age of Trump 2.0 and the Office for Budget Responsibility downgrading its optimistic forecasts for productivity growth. Unless she changed her rules to allow more borrowing, the chancellor would then have to implement tax rises or spending cuts or a combination of both.

When things might get even worse, the chancellor needs more than a strategy of hoping for the best.

Old Trafford, M60 upgrades and new railway lines: The big Greater Manchester projects Rachel Reeves could fund this week

Here are the big projects in Greater Manchester which local leaders will be hoping to get some funding for in the Spending Review

Rachel Reeves speaking in Rochdale last week (Image: Jason Roberts/Manchester Evening News )

The wait is nearly over. For months, local leaders in Greater Manchester have been lobbying the government to back various projects.

Now Rachel Reeves is set to reveal how the government is planning to spend taxpayers’ money between now and the next general election. Among the schemes the Chancellor could put money towards in the Spending Review is the regeneration of Old Trafford.

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Andy Burnham is also looking for a commitment from the government to build a new railway line between Manchester and Liverpool.

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The Greater Manchester mayor is hoping that the 10-year infrastructure strategy, which is set to be published later in the week, will ‘recognise’ the need for better connectivity with the Midlands following the cancellation of the northern leg of HS2 in October 2023.

The Spending Review, which will be unveiled on Wednesday (June 11), could also have implications for Manchester council’s plans to move Strangeways prison and revamp the area, a new civil service hub in Ancoats and the 15,000-home Victoria North development.

Here are the big projects in Greater Manchester which local leaders will be hoping to get some funding for in the Spending Review.

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Old Trafford

Manchester United’s plans for a new 100,000 seat stadium and wider generation of Old Trafford (Image: Foster + Partners )

Earlier this year, Ms Reeves announced the government would back the regeneration of Old Trafford where a new stadium is planned.

But ministers did not say how exactly they would be supporting the major project other than to rule out funding the stadium itself.

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Manchester United unveiled their plans for a new 100,000-seat stadium and more than 17,000 new homes around it back in March.

Speaking at a property conference at the French Riviera at the time, Mr Burnham set out exactly how the government could help.

The Labour mayor said he wants £300m to relocate a freight terminal behind the current stadium, creating more space on the site.

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However, since March, the mayor has been much quieter about the project, focusing instead on other schemes he wants support for.

New railways

Greater Manchester mayor Andy Burnham was in London to present his plans last month (Image: PA )

Mr Burnham has spent much of the last few months talking about his plans for a new railway line between Manchester and Liverpool.

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Last month, the Manchester Evening News joined forces with the Liverpool ECHO to back the plans for a new line which promises to slash journey times to around half-an-hour with express trains running from a new underground station at Piccadilly every 10 minutes.

It is unclear whether Ms Reeves will directly refer to the major infrastructure project when she unveils her three-year spending plans, but the M.E.N. understands that hundreds of millions of pounds have been set aside for ‘development and preparatory building work’.

What Mr Burnham is hoping for is a commitment to the scheme in the government’s 10-year infrastructure strategy – which is expected to be published on Thursday (June 12) – that would mean the new railway line could be up and running by the 2030s.

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The Greater Manchester mayor is also hoping that this document ‘recognises’ the need to replace the ill-fated northern leg of HS2.

It comes almost a year after he unveiled alternative plans for a new, cheaper line between Greater Manchester and the Midlands.

M60 upgrades

Atom Valley is one of the big projects Greater Manchester wants the government to back (Image: Rochdale Development Agency )

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Setting out his asks ahead of the Spending Review earlier this year, Mr Burnham spoke of a 10-year investment pipeline of specific projects worth between £10bn to 15bn which he said would ‘advance new industry and spread prosperity to growth locations’.

While most of the funding for these projects are expected to come from the private sector, not the Treasury’s coffers, there is one scheme in particular that Mr Burnham mentioned that would require some government support in the form of motorway upgrades.

Atom Valley, which the mayor described as ‘one of the UK’s most significant development sites’, promises to create more than 20,000 jobs on the Bury, Oldham and Rochdale border. But before the development can go ahead, major upgrades are needed on the M60.

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Local leaders across Greater Manchester will also be hoping that lots of money has been allocated for housing developments.

Among the projects that could benefit is the 15,000-home Victoria North project in north Manchester which is already under way with the government recently announcing funding to develop plans for a new tram stop at Sandhills near Collyhurst as part of the project.

Developers will also be watching out for any news on the Housing Investment Loans Fund which closed in March after lending out around £1bn in the last decade, including controversial loans to skyscraper tycoon Renaker that are subject to an ongoing legal case.

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Strangeways

HMP Manchester at Strangeways (Image: Sean Hansford | Manchester Evening News )

It’s no secret that Manchester council wants to shut Strangeways prison as part of its plans to redevelop the area near the city centre.

The only problem is, prisons across the country are so overcrowded that inmates are being released early. Closing one is a tough sell.

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Nevertheless, the council has made its case to the government ahead of the spending review – and it’s already had some good news.

Last month, justice secretary Shabana Mahmood announced that she has secured £4.7bn of funding to build three new prisons.

If any of these prisons are built in or near Greater Manchester, there’d be a stronger case to shut Strangeways later down the line.

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So while the council isn’t expecting a commitment to closing the infamous prison from the Chancellor this week, local authority leaders will be hoping for more funding to build new prisons – or expand existing ones – which could help them make their case.

Live Well

Job Centres could be renamed in the Live Well programme (Image: Getty Images )

Among the many initiatives Mr Burnham has asked the government to back is the ‘Live Well’ programme of employment support.

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The mayor has long called for Job Centres to be changed to ‘Live Well centres’ as part of a strategy to get people back into work.

Some £10m has already been allocated to kick-start the scheme with Mr Burnham hoping for more government support this week.

Speaking about the initiative earlier this year, Mr Burnham described it as a ‘movement for community-led health and wellbeing’.

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He said: “It is not so much about new money but re-routing some of the billions the country already spends on employment support, and putting it through the community and voluntary sector, rather than large corporates, and achieving a multiplier effect as result of that.”

In the same speech at the Institute for Government, Mr Burnham said he wants more public money to be spent on ‘prevention’ and revealed that he has suggested to the government that Greater Manchester is designated as the UK’s Prevention Demonstrator.

More civil servants

How the new offices set for the old Central Retail Park will look (Image: AtkinsRealis for Government Property Agency )

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One thing we already know will be announced in the Spending Review is that more civil servants will be based outside of London.

What we don’t know yet is where they will be based. Greater Manchester has seen a huge influx of in government jobs in recent years – and that trend is set to continue with the development of the Manchester Digital Campus at the old Central Retail Park in Ancoats.

Manchester council, which bought Central Retail Park for £37m in 2017, has been working with the Government Property Agency on the plans to bring civil servants working in digital and AI-related jobs together in a new building at the site off Great Ancoats Street.

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The new hub, which the M.E.N. understands is unlikely to open before 2028, is expected to accommodate 7,000 civil servants.

Last month, the government announced that the number of London-based jobs will be reduced by 12,000 by 2030 as roles are relocated to 13 towns and cities across the UK – but details of which jobs will move where are set to be revealed this week.

Reeves’s spending priorities leave little wiggle room

3 hours ago Share Save Chris Mason Political editor Share Save

Getty Images

The words Spending Review may not instantly quicken the heart rate of many, but what we hear from the Chancellor Rachel Reeves will have an impact on what your life is like in the UK in the coming years. It could be one of the defining moments between now and the next general election, as the government divvies up spending for the health service, defence, schools, the police, prisons, courts and much else. After plenty of words about the government’s priorities, we will get a sense of the numbers. And yes, a sense of the winners and losers. We can expect ministers to claim that much of what it has done in its first year in office has been about “fixing the foundations”. That is code for the tricky stuff: think those big and in many places unpopular tax rises, such as the increase in employers’ national insurance contributions.

There is also a keen awareness that rarely has a new government suffered such a big whack to its popularity so fast. Yes a whopping majority, but just 34% of the vote last summer, and they have gone a long way backwards since. Little wonder we can expect the chancellor to claim “this government is renewing Britain” but also acknowledge “I know too many people in too many parts of the country are yet to feel it”. Baked into what we can expect to hear is an emphasis from Reeves of the importance of stability. As an illustration of that, the chancellor recently returned from a meeting of G7 finance ministers in Canada, where she, not yet a year in office, was the second longest serving attendee around the table. It is a volatile world. As the Institute for Fiscal Studies (IFS) and others have pointed out, the key decision above all others that we await in the Spending Review is how much money is allocated to the health service. The NHS makes up such a big chunk of day-to-day government spending – about 40% – that how well or otherwise it does shapes everything else. This has long been the case, particularly because it is often also gets a proportionately more generous settlement than others. And, on top of that, what has changed more recently as well the government’s desire to spend more on defence too and to do so in an era of low growth.

‘A song to sing’

Reeves to set out spending plans up to next election

4 hours ago Share Save Joshua Nevett Political reporter Share Save

PA

Rachel Reeves is preparing to unveil her highly anticipated spending review, setting out how much money the NHS, schools, police and other public services will get over the next few years. The chancellor will emphasise plans to “invest in Britain’s renewal” by spending an extra £113bn on infrastructure, such as energy and transport projects in her speech on Wednesday. But some government departments are likely to face real-terms cuts, as the chancellor prioritises health and defence budgets. The review will take the Labour government up to the next general election, likely in 2029, with day-to-day spending to be outlined for the next three years and investment budgets for the next four.

Ministers have been in tense negotiations with the chancellor over the funding settlements for their departments. Home Secretary Yvette Cooper was the last to agree a deal on Monday, after police chiefs called for more money, while Housing Secretary Angela Rayner reached an agreement on Sunday. Rayner’s department is expected to receive £39bn for a programme to boost social and affordable housing over the next 10 years. A government source said this investment would help ministers hit their target of building 1.5 million new homes by 2030. The chancellor will also commit to extending the £3 bus fare cap in England until March 2027. In a speech last week, Reeves suggested she had turned down requests for cash from ministers and argued a squeeze on funding was a “product of economic reality”. The government’s spending plans have been impacted by sluggish economic growth, higher government borrowing costs and global instability. In her autumn budget last year, the chancellor announced tax rises worth £40bn to fund the NHS and other public services. She is expected to say on Wednesday that her spending plans “are possible only because of the stability I have introduced and the choices I took in the Autumn”. But the Institute for Fiscal Studies (IFS) think tank has warned tough choices are “unavoidable”, with some departments facing spending cuts, when rising costs are accounted for.

Deciding how much money to give the NHS was “one of the most consequential decisions of the spending review,” the IFS said. The Department of Health and Social Care’s (DHSC) day-to-day budget is planned to be £202bn in 2025–26, or 39% of total day-to-day departmental spending. The IFS warned that a big increase in NHS funding would mean either real-terms cuts for other departments or further tax rises to come in the budget this autumn.

UK chancellor Rachel Reeves faces her biggest test with the government’s departmental spending plans for the three years from next April until the general election. With nearly £600 billion a year to spend, her decisions will impact on every aspect of public life and shape the political weather for years to come.

She believes the key to reviving Labour’s fortunes as its poll ratings tumble lies in boosting economic growth.

So the government has promised that its policies will increase the UK’s anaemic growth rate and enhance productivity. Reeves is looking to capital spending on big projects that will boost the economy, such as the £14.2 billion government investment in a new nuclear power plant at Sizewell in Suffolk.

Last year she revised the government’s fiscal rules to give herself the space to borrow an extra £113 billion over three years to transform Britain’s ageing infrastructure. She has already made it clear that she wants to boost transport investment outside of London, as well as invest in research and development, including green energy.

But there are challenges ahead. In the first place, the effect of infrastructure investment takes a long time to feed through. This is partly because of the lag between planning the projects and when they come on-stream.

It will take time before the full effect will be felt on productivity, which has been growing more slowly than expected. The Office for Budget Responsibility (OBR) suggested in March that the latest government plans for planning reform might increase productivity by just 0.2% in the longer term.

There are also some real trade-offs as to where the increased capital investment will go – and which sectors will benefit most. The chancellor has emphasised her commitment to putting more money into projects outside London and south-east England that have had less public investment in the past.

But London and the south-east is where productivity is highest and where further investment might have a bigger effect on economic growth.

It appears that there may be less funding for social housing, which may threaten the government’s ambitious target of building 1.5 million homes over the parliament. There may also be less available to repair schools and hospitals.

And the plans to boost defence spending on expensive military equipment – such as frigates and fighter planes – will also count as capital spending. As such, it could further reduce the amount available for infrastructure investment.

The departmental trade-offs

Despite the relative abundance of cash for infrastructure, the tighter fiscal rules on day-to-day spending mean that many departments are facing a squeeze on their budgets. The government plans to allow total day-to-day departmental spending on average to rise by just 1.2% per year in real terms during the next three years. This probably spells a real-terms cut for some “unprotected” departments.