Has Rachel Reeves made the right choices? Our panel responds to the spending review

The Guardian

11-06-2025

Sahil Dutta
Sahil Jai Dutta is a lecturer in political economy
By the raw numbers alone, Labour can say this is no return to austerity. The government, after all, will dole out billions for capital projects, and day-to-day NHS spending will rise. But for many, it won't feel that way.
Because the lived reality of austerity was never just about spending in the aggregate. It was about who and what we prioritised as a society. Money was stripped from the young, the sick, the poor, the arts, education and local government. Workers and regions of 'low productivity' sectors decayed, while riches were showered on the already wealthy.
In its fixation on the fantasy of high economic growth, Labour is unable to fully break from that. Instead, it has concentrated fiscal largesse on high-productivity sectors in the hope that this amounts to an industrial strategy. Investing in tech, R&D and AI will always sound impressive. But the sector is awash with cash already – what it lacks is a useful purpose and proper regulation. Likewise, whatever the geopolitical context, there is little evidence that military-industrial spending is an efficient way to boost employment and growth, or improve people's lives. More promising is the extra funding for affordable housing. Yet under-resourced councils could struggle to contain the predatory costs of private building contractors.
There was once a time when Rachel Reeves spoke about the importance of the everyday economy, but from the military to tech to construction companies, it is the commanding heights of the private sector who should be happiest today.
Kirsty Major
Kirsty Major is a deputy Opinion editor for the Guardian
Rachel Reeves's headline-grabbing pledge of £39bn for affordable and social housing is based on one big assumption: that the housing crisis is caused by a lack of supply.
By increasing the number of homes, the logic goes, prices will be pushed down, and the crisis of affordability will be solved. The funding comes in addition to changes to planning regulations aimed at boosting housebuilding across the country. By putting shovels in the ground, the chancellor hopes to solve two problems at once – putting keys in hands and boosting economic growth. A neat solution, right?
Well, it would be if Britain's housing crisis was a supply-side problem. But it is not. If you don't believe me, just ask the OBR. This spring the body predicted that these changes to planning policy could bring house prices down by only 0.8% by 2029. The average UK house price is £271,415 – this means it would drop to £269,243. It's not nothing, but it's far from something.
Demand in the UK has been artificially inflated since the 1980s by a mix of lending rules relaxation and pressure from buy-to-let landlords and foreign investors. There is no point in affordable housing – housing sold at a percentage of the market rate – if the market rate goes up. Yes, families will be able to leave emergency accommodation and have roofs over their heads, and some private renters might be able move into housing association accommodation. This is to be celebrated in the short term. But there is no point in more council housing if waiting lists keep going up because rents in the private sector continue to rise. There is no point in more houses if people can't afford to buy them.
Labour's renters' rights bill may go some way to easing some of this demand. Proposals being floated to loosen mortgage lending will not. We will have to wait and see how these policies play out in the housing market. As things stand, the new funding is a step in the right direction, but by no means the solution.
Dhananjayan Sriskandarajah
Dhananjayan Sriskandarajah is chief executive of the New Economics Foundation
Capital spending alone won't improve people's living standards. The extra investment may mean we can build more homes, renewable energy, public transport and other vital infrastructure. Despite her hopes that this will rejuvenate our economy in the years to come, we also need urgent action to improve people's lives today.
There was lots of talk of security – 17 mentions in the speech, no less – but I fear with the diversion of funds to defence spending, the chancellor is overlooking household economic security as a lever for growth. Unless we also boost day-to-day spending in key departments, living standards will continue to decline. Indeed, keeping the two-child benefit cap and slashing support for disabled people is making millions of people feel less secure. Investing in social infrastructure will improve lives almost immediately and have just as great long-term effects.
On days like this, it is clear that the government has fallen victim to 'Treasury brain', clouded by outdated and arbitrary fiscal rules that it has set itself. Instead it should find better ways to assess safe borrowing levels, and tax wealth in line with other forms of income so we can tackle poverty, reduce inequality and protect our planet.