Rachel Reeves says she’s ending austerity. People may not notice

Rachel Reeves has vowed to “invest in Britain’s renewal” as she set out a spending plan for the country that will cover the bulk of Labour’s five years in power.

So what? Convincing people she has made the right choices – a word the chancellor used 25 times in her speech – is core to Labour’s bid for another term. This is the first full spending review since 2015, with the party promising an end to austerity. But there is a difference between ending cuts to public services and investing enough to restore them to pre-2008 levels.

Numbers the Treasury wants people to talk about:

• £113 billion for capital investment including £39 billion for affordable and social housing, £7 billion for prisons and £2.3 billion for “crumbling classrooms”. These can be delivered largely thanks to Reeves’s change in fiscal rules announced last year, which redefined borrowing for investment as distinct from day-to-day spending;
• A 3 per cent real terms increase worth £29 billion on NHS spending for every year of the spending review, more than the 2.8 per cent real terms increase that was expected and taking the service to what Reeves described as “record” levels;
• An £11 billion rise on defence and even more on energy security – including £14.2 billion on Sizewell C and £2.5 billion to kickstart the UK’s small modular reactor programme.

Numbers the Treasury doesn’t want people to talk about:

• 1.2 per cent, the average day-to-day real terms increase in total spend, which implies an average 1.3 per cent cut for departments not getting the boosts afforded to health, education and defence.
• Any figures pertaining to the departments that lose out. Over the course of the next three years, spending will be cut at the Home Office (-1.7 per cent), Housing, Communities and Local Government (-1.4), Culture and Sport (-1.2), Business and Trade (-1.8) Transport (-5), Defra (-2.7), the Foreign Office (-6.9) and the Treasury itself (-1.7).

Or, as Paul Johnson from the Institute for Fiscal Studies said, the bumper spend on health “does mean virtually nothing on average for current spending elsewhere”.

Bleeding stumps. In the weeks ahead of the spending review, it was clear this was a fraught process. Both Angela Rayner, the deputy prime minister and housing secretary, and Ed Miliband, the energy secretary, stormed out of meetings with Treasury minister Darren Jones.

Yvette Cooper, the home secretary, warned the government would not meet its manifesto promises on crime with rumours swirling that she was on resignation watch. Cooper forced a smile as Reeves confirmed a £280 million boost to border security command. Given the sums being given to other departments, this is small beer for one of Labour’s thorniest challenges.

Although some departments agreed their budgets early, others ran to the wire: the review was reportedly finalised the evening before Reeves delivered it.

Spread thin. In the end, the ‘bleeding stumps’ strategy – where ministers plead on the basis of unpalatable cuts they would be forced to make – appears to have resulted in wins they can point to. Reeves’s approach means you minimise the risk of angering ministers, stakeholders and members of the public. But it also increases the chance that cash will be spread too thinly to make substantive change, which is the single most important facet of Labour’s mandate.

Austerity, interrupted. The real test will be when, or whether, people will see improvements in the state of public services. Until that changes, regardless of what the government says, the long shadow of austerity remains. Schools, hospitals, prisons and nuclear reactors are not quick to build.

What’s more… While children’s campaigners welcomed the spend on social housing and expanding free school meals, the failure to address the two-child benefit cap loomed large. Alison Garnham from the Child Poverty Action group said that “national renewal doesn’t start with record child poverty”. Nor does an election victory in 2029.

Photographs by Chris J. Ratcliffe/Bloomberg via Getty Images, House of Commons via Getty Images