Reeves is delivering austerity for the UK, unless you're wealthy, when it's still bonanza time.
This is the transcript:
It has to be said that Spending Reviews are like New Year's resolutions. They seem like a good idea at the time. Then they are quietly forgotten. I have a very strong feeling that Rachel Reeves will hope that this is what will happen with today's spending review.
The big news here is quite simple. Reeves decided that if she changed the fiscal rules so that she could borrow more for investment, she could appear to be a big spender, whilst at the same time trying to meet her current fiscal rule that desperately attempts to make current year government spending match current year tax revenue.
To put this in context, what this means is that while she has supposedly promised around £113 billion of additional capital expenditure in the spending review. Much of it is going to take place in the dim and distant future when she will be long gone from the Treasury and probably as an MP, given Labour's current state of political fortunes.
And just to contextualise this £113 billion, the Tories had planned to spend £90 billion . What she's adding is only £23 billion. That might be called the square root of didley squat in the grand scheme of things, when the government spends well over £1,000 billion a year.
Elsewhere, the reality is that there will be cuts in real government spending. Austerity is, in other words, continuing despite what Reeves had to say.
We saw this, for example, with regard to the police, where Yvette Cooper, in her role as Home Secretary, lost her argument with the Treasury for additional funding to deliver security within the UK . Right across the board and having allowed for increases in defense spending and an inadequate allocation of additional resources to the NHS of 3% per year when it needs at least 3.6% per year to simply keep up with demand, what we will actually see in real terms is cuts in government spending of around 1.3% across all other government departments, whatever Reeves has had to say today.
There is also good reason why all the announcements about capital expenditure came out early and in advance of this spending review. They were the only good news. Everything else is something that Rachel Reeves does not really want to talk about.
And let's be clear that some of this capital expenditure also makes no sense at all. For example, one of the biggest items of expenditure will be on nuclear power stations, where supposedly at least £30 billion is to be spent, although everybody in reality knows that this will turn into a sum of well in excess of £100 billion, given the cost overruns that always occur in nuclear power budgets.
Starmer has claimed that the government has now decided that Sizewell C will be built. But as everyone in Suffolk knows, that decision was made long ago because the whole of East Suffolk has already been scarred with building works to facilitate the Sizewell C programme.
So what Stama is saying is complete nonsense. What this so-called spending review admits is that there is no prospect of finding any foreign funding for Sizewell C, which was this government's quite absurd hope. It has therefore, to fund this white elephant itself.
This power station and the others to which the government has committed will cost at least £1,500 per household in the UK, and that might at best result in power for 6 million households.
However, the actual cost of this energy is the highest that we can produce, and that is before taking into account decommissioning costs. Those at Sellafield now amount to £136 billion, and no one thinks that this is the total sum involved. And now Reeves actually wants more investment at Sellafield, which is only going to make things worse, but is part of her plan to apparently make us a nuclear superpower. So, if you want to know what leaving a debt for future generations to pay really looks like, building Sizewell C and other power stations is all that you need to do to ensure that this outcome will become a reality.
In contrast to all this emphasis upon nuclear power, there was none at all on renewable energy in this statement. There was a mention of £2.5 billion for carbon capture and storage, but that is another white elephant.
There was no commitment to renewable energy, to battery technology, or even things as basic as insulating houses and fitting proper triple glazing, although a nod perhaps to the last was included without any mention of the sums involved being made.
What is clear is that Starmer and Reeves would rather lumber generations to come with the cost of nuclear power rather than invest in renewable energy now, when that is the lowest cost of energy that we have available to us.
And let's also be clear about the significance of this £113 billion worth of investment, which is supposedly going to transform our future, which is supposedly going to transform our fortunes over the next 10 years, most of it, by simply funding projects that others are refusing to undertake.
Over the same 10-year period, the UK government will, in current prices, subsidise pensions through income tax, national insurance, and corporation tax relief by about £700 billion. The vast majority of the benefit of which will go to the top 10% or so of the UK population because they are the people who own the vast majority of UK pension wealth.
At the same time and at current prices, the UK government will spend approximately £95 billion subsidising the untaxed income of those who save in ISAs, who are, again, in the vast majority of cases, the wealthiest people in the UK because by definition they own the savings that are held in those accounts.
In other words, over the 10 year period during which the government has said it is willing to spend around £40 billion a year to buy up existing housing stocks so that it might be used as social housing, thereby providing maybe 130,000 new houses in total, which does little to solve the problem of 1.3 million people being on council house waiting lists, they are going to spend approximately 20 times that amount subsidizing the tax-free incomes and increase in wealth of those who are already amongst the wealthiest in this country.
If you want to understand where the focus of Labour's priorities are, then this contrast explains them.
This government has absolutely no vision for the future.
At the same time, and when Labour is desperate to increase its poll ratings to ensure that it can fight off Reform and others, it is planning to cut most types of government spending.
No one will see the benefits of increased defence spending in their pockets. There is none.
No one will sense the benefit of increased NHS spending because the amounts being committed are insufficient to keep up with growing demand for NHS services, as is well known, based upon past patterns of health economic performance.
And on child benefit, the big issue was ducked. There was no mention of ending the two-child benefit cap. Free breakfasts are meant to do instead.
Everywhere else, there would appear to be cuts. The government might claim otherwise, arguing over the odd decimal point of a percentage here or there, and that there are real cash increases, which is totally misleading because of inflation, but that is what the reality will feel like. Austerity is definitely Rachel Reeves' game.
Meanwhile, we know that taxes have risen.
We know that businesses are suffering because of national insurance hikes, falls in demand, and the fallout from Trump.
And we know that children are living in poverty and their parents are suffering massive stress and have no idea whether there is anyone who really cares about them. No wonder they fall for the false promises of Nigel Farage.
Economically, this spending review was a sham. It confirms decisions already taken. It is an exercise in financial shuffling. It creates little added value in the economy. It addresses no fundamental policy need. It does not tackle inequality. It does not solve the problems of most people in the UK.
There is no strategy apparent in it at all except to make the UK a defence industry superpower, which was what Rachel Reeve says she wishes to do, as if confirming the military-industrial complex has finally defeated democracy.
Rachel Rees might be presenting it to the world with her usual Rictus smile, but the reality is that she has now been to the House of Commons dispatch box on three occasions since becoming Chancellor to deliver major economic policy proposals. And every time she has done so, she has made a complete and utter mess of the job. To be blunt, not only has she not delivered; her strategies are actually making things worse.
Today's spending review falls fairly and squarely into that category. It answers no known questions.
It preserves the status quo on behalf of the wealthy middle-class elite who wish to maintain their prosperity at cost of everyone else.
This is the politics of failure.
Rachel Reeves' time in office is now, I think, decidedly limited and if she goes, so will Starmer.
There is no other way in which Labour might now get out of the mess that they are in, but the problem is they've already got rid of any other talent that they once possessed. We really are in a total mess.
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Good post, Richard. However, I fear you’re wrong to say that the days of Starmer and Reeves are numbered. This is wishful thinking, I’m afraid. Starmer (via McSweeney and his backers) has ruthlessly removed any opposition, perceived or real, by evicting them from Labour – mostly on the ludicrous accusations of antisemitism. McSweeney and a team trawled 10 years of social media to identify any post or like, however wispy, which could be levelled against members. Out they went. No appeal. Then the NEC rules were changed so no one the Keft could ever, ever run for the leadership again.
There is simply no one left to replace Starmer or Reeves. No one. Most Labour MPs are spineless creatures, largely because they were selected as candidates by NcSweeney and forced on local parties.
The only way either will be forced out is some kind of mass revolt within Labour, which won’t be permitted to happen.
In other news, Liz Kendall has refused to accept the recommendations of the Select Committee, the JRF, the Resolution Foundation, all disability charities and NGOs, all disabled people’s organisations, the BMJ, previous evidence and even 150 of her own MPs. She intends to force a vote on the welfare cuts to POP and UC, probably next week. The proposed legislation, on which she has refused to consult, will force a further 400,000 people into poverty.
She is not insane – she is malicious.
So why wasnt this analysis on the BBC? Paul Johnson was really feeble – saying the emphasis was on capital spending ‘the effects of which wouldn’t be felt for year s’. He sort of said ‘so long as it was done properly ‘ – but no discussion about whether Sizewell, SMRs nuclear subs, carbon capture – were not indeed white elephants.
And no one asked why renewables, batteries , grid etc , decentralised, community owned wind and solar were not mentioned at all.
Its little short of criminal that Miliband and co have been captured by the military industrial complex – and oil and gas companies love all this.
It seems these people are quite incapable of doing real analysis – much of which involves looking at what is not said.
Remember that Reeves and Starmer were both attendees at Davos (unelected World Economic Forum, WEF) which Starmer said he would choose over Westminster.
As of 2015, [the WEF] calls itself “the world’s leading organization for public–private partnerships” dedicated to “improving the world.”
In other words, defund public services so that private companies can run the show and profit from it.
Sources
“Davos or Westminster?” Starmer: “Davos” https://www.youtube.com/watch?v=7qI0xQSn8Y0
The Global Coup d’État: The Fourth Industrial Revolution and the Great Reset Hardcover (2025) by Jacob Nordangård
https://amzn.eu/d/cnXVKQd
We are facing a similar problem in Canada, with our “new” Prime Minister pledging to increase spending on the military to 2% by the end of 2025. He’s also increasing spending on policing and border security (bow to Trump) and on screwing immigrants (bow to Trump again). He is facilitating the Canadian provinces in removing inter-provincial trade barriers (we’ll all be rich, amen!), and promising a west-east pipeline for the dirtiest oil in the world (Alberta oil sands). Using yesterday’s solutions for today’s problems which were created by yesterday’s solutions. It must be Canada’s British heritage.
I’ve taken an interest in politics for about half a century. During all that time there hasn’t been a single chancellor who understood how economics really works and how to do the job. They are all mouth and no trousers. Sadly I don’t expect that to change.
Labour are now failing in the same way the Tories failed, by trying to implement austerity. Sadly this leaves the door open for Reform, who are increasingly likely to at least hold the balance of power at the next election despite it being years away. But voting Reform is not irrational. If the economy is going to hell in a handcart, even if Reform are likely to be bad, people will take the chance when there is no other option.
This is what the Tories, Labour, and the other parties have brought us to with their blustering and incompetence. 🙁 🙁
No surprises, then. Or not any good ones, anyway. Just the same old neoliberal drivel and the same intent to enrich the wealthy and the corporates at the expense of any benefit for the general populace or the nation.
But, I suppose Larry Fink will be happy – he’ll get his green assets and permission to lay waste our natural heritage. And Peter Thiel will get expansion of his surveillance footprint at the very low price of pretending he thinks Starmer understands information technology.
Yesterday morning I thought, “today’s mainstream news is going to be a torrent of economically-illiterate garbage”. Thank you, Richard, for detailing why I was correct.
My pleasure
But a very limited pleasure because so much of it was garbage
[…] Spending Review dominated my day yesterday, and I went out for a long walk last night to forget all about […]
Reeves did not mention climate change even once in her Commons speech launching the Spending Review. In the document itself, the word “climate” appears just twice in a long document, the phrase “climate change” only once, and then specifically related to farming.
It has been reported that the green tech sector is by far the fastest growing sector. Green tech is driven by climate change. Reeves claims she is relentlessly pursuing “growth”, yet has nothing to say about its prime industrial driver. Go figure.
It emerges in the Guardian this morning that the £2,500,000,000 allocated to Small Modular Nuclear Reactors(SMRs) was re-directed from the Great British Energy’s investment fund.Yesterday Reeves cynically created a new hybrid GBE-Nuclear, a kind of nuclear magpie in the Green Tech nest, and it made off with money earmarked for fledgling renewable energies. Instead, because private investors are too smart not to waste their money on SMRs, the taxpayer will have to stump up for the Reeves-Starmer atomic vanity project. Disgraceful is the only word for it!
Everything to agree with.
Where is the “let’s do something positive, of long term value for the UK population”.
I am left with a sense of rage at no steer’s and the accounts person’s approach of “oh look how super clever we are” and kicking the can down the road.
Everyone needs to forward this to their friends and enemies alike.
But Reeves in brazenly putting a positive spin on things is not facing up to the plunging real economy. She should be playing up the chaos caused by Trump, the impact on the EU , and calling on the same measures as in the EU : massive increase in investment and attention to competitiveness and the need for co-operation with European allies.
She should be doing more to support our good businesses compete. She should be directing the pensions funds to productive use in the UK, and she should be spending more on public services as a regulator of effective demand until private demand picks up.
Keynes was not wrong. Inflation was used as a weapon by the USA in 1971 to devalue its debts; and it is about to do it again. Keynes was blamed but it was Bretton woods that secured stability.
Its time to rewrite History.
The Thatcherites promised economic renewal and all they gave us is inequality and austerity, and selling off public assets.
It has been reported (in The Canary) that Private Equity Firm KKR (Kohlberg Kravis Roberts) along with Stonepeak Partners, has just bought most of the NHS Estate for £1.6bn.
Additionally, Rachel Reeves received £27,000 in late May 2025, and the Labour Party £17,000 from FGS Global, a lobbying company owned by KKR.
Now hospitals which are not already subject to PFI, will have to pay rent for their premises, and hope that the government’s contract terms prevent the sale of potentially valuable real-estate.
Was that the wuole estate? I thought it was only a part of it.
Richard. I did say most, not all. I do not know the extent of the sale.
And what benefit is there to use, and the NHS, now they have to service those rents? Does that the private equity firms upkeep the estates? Like the water firms kept up our sewerage and reservoirs?
Richard. I said ‘most’ not ‘all’, although I probably should have said “some’. I do not know the full extent of the sale, but I believe it is scandalous nevertheless.
Here’s the link:
https://www.thecanary.co/uk/analysis/2025/04/11/nhs-private-equity-sale/
Noted
[…] specialist Richard Murphy points out the increase in spending is much, much smaller than claimed while warning of spending […]
If we’re worried about our ever increasing public sector interest payments and the escalating costs of new borrowing then we should stop borrowing money just to cancel it out of existence. Even better: also remove public sector debts now actually owned by the Bank from the totals of public sector debts (and tier the interest payable on commercial bank reserves at the central bank). Basically, stop QT: https://gezwinstanley.wordpress.com/2024/10/28/infrequently-asked-questions-about-quantitative-tightening-that-you-were-never-even-meant-to-ask/
Agreed
As I have been arguing for a very long time now