"The Spending Review confirmed a generous allocation to day-to-day health spending, set to increase by 2.8% over the next three years. While health gets the lion’s share of the additional spending compared to other departments, this Spending Review would imply the slowest pace of increases since the plans set in 2015. With overall day-to-day spending rising at a slower pace of 1.2% per year until 2028/29, the Home Office and Transport among others are now facing real terms cuts to overall spending.
“The Spending Review also requires departments to achieve 11% productivity increases across all departments between 2025/26 and 2028/29, with a further 5% improvement by 2029/30, which may be difficult to attain. While a greater focus on digital technologies and AI offers one potential way forward, initial investments may be difficult to implement.
“Increases in investment budgets, set to grow by 1.8% over the next four years, have to a large part been committed to higher defence spending, rising by 7.3% between 2025/26 and 2029/30.
“Aside from health and defence, another big winner is transport, which sees a greater focus on local infrastructure outside of the South East of England. While this may improve the productivity of England’s larger cities, these investments are specifically designed to target underperforming areas, potentially limiting the wider impact on economic growth.
“The announcement also confirmed a pre-announced boost to housing investment over the next 10 years, which sees an almost doubling in the funding allocated to affordable housing, to an average of £4bn per year from 2029/30. Alongside changes to the planning regime and the re-introduction of local housing targets, this funding will be helpful to delivering the Government’s plan of 1.5mn additional new homes by the end of the parliament.
“There is a risk that public sector revenues will be below the Chancellor’s expectations, which may require a top up of around £20bn, if GDP growth evolves in line with the latest KPMG forecast*.”
-ENDS-
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Notes to Editors:
Table 1: Summary of KPMG’s latest forecasts for the UK economy
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GDP | 1.1 | 1.2 | 1.1 |
Consumer spending | 0.6 | 1.1 | 1.4 |
Investment | 1.5 | 3.0 | 0.6 |
Unemployment rate | 4.3 | 4.4 | 4.4 |
Inflation | 2.5 | 3.4 | 2.3 |
Base interest rate | 4.75 | 3.75 | 3.25 |
About KPMG
KPMG LLP, a UK limited liability partnership, operates across the UK with approximately 17,000 partners and staff. The UK firm recorded a revenue of £2.99 billion in the year ended 30 September 2024.
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