Britain is turning into a National Health State, as lower-income families gain most from Spending Review 12 June 2025 The British state is slowly turning into a National Health State, with half of all public-service spending set to allocated to health and social care by the end of the decade, according to the Resolution Foundation’s overnight analysis of Spending Review 2025. Key findings from the overnight analysis, which show that the other big winners from Spending Review 2025 are lower-income families and the defence industry, include: An NHS state… Yesterday’s NHS-dominated settlement continues a pattern of recent Spending Reviews, which has led to a major reshaping of the state. By the end of the decade (2028-29), the health service will account for half (49 per cent) of all day-to-day public service spending controlled by Westminster – up from a third (34 per cent) in 2009-10. …and shrunken public services elsewhere. While real, per-person funding for health has increased by 36 per cent between 2009-10 and 2028-29, it has fallen by 16 per cent for Justice, 31 per cent for Work and Pensions, and 50 per cent for Housing, Communities and Local Government over the same period. Defence dominates infrastructure plans while total non-defence investment sees cuts. The £9.7 billion a year increase in capital spending between 2025-26 and 2029-30 includes an increase of £5.9 billion of financial transactions (primarily loans), with around two-fifths of the Warm Homes Plan now being funded by loans rather grants. Once these financial transactions are stripped out, the £7.4 billion a year increase in defence contrasts sharply with the £3.6 billion cut to real investment across all other departments. The rise, fall and rise again of public service spending. Real day-to-day spending is now rising again in the 2020s (2019-20 to 2028-29) by 2.2 per cent a year, following a 0.5 per cent fall per year in the 2010s (2009-10 to 2019-20). In the decade prior to that, spending rose by 4.3 on average each year (2001-02 to 2009-10). Lower-income families get a benefits-in-kind boost. The extra funding for hospitals, schools and the police relative to plans set out by the previous Government will deliver important benefits-in-kind to families. The Foundation estimates that a middle-income household will gain £1,400 on average for extra public service provision (in 2028-29), rising to £1,7000 for the poorest fifth of families. From a summer of spending to another autumn of tax rises? The large increase in public spending has been funded in large part by the £39.7 billion of tax rises (in 2028-29) announced in the Budget last Autumn and £3.6 billion of benefit cuts (in 2028-29) announced in the Spring Statement – equivalent to £1,550 for every family in Britain. But the combination of a weaker economic outlook, an unfunded spending commitment on Winter Fuel Payments, and just £9.9 billion of headroom against the Chancellor’s fiscal rules, mean further tax rises are likely to be needed this autumn. Ruth Curtice, Chief Executive of the Resolution Foundation, said: “The Spending Review was a huge deal as the Chancellor set out details of nearly £300 billion of extra spending over the second half of the Parliament. But as the dust settles a few clear winners have emerged. “Health accounted for 90 per cent of the extra public service spending, continuing a trend that is seeing the British state morph into a National Health State, with half of public service spending set to be on health by the end of the decade. “After two rounds of painful tax rises and welfare cuts, low-to-middle income families are the other big winners from the extra spending announced relative to the previous government’s plans, with the poorest fifth of families gaining £1,700 on average from extra funding for schools, hospitals and the police. “Defence dominates the Chancellor’s future investment plans, so much so that total non-defence investment sees cuts on average for the rest of this Parliament. “The extra money in this Spending Review has already been accounted for in the last forecast. But a weaker economic outlook and the unfunded changes to winter fuel payments mean the Chancellor will likely need to look again at tax rises in the Autumn.” Notes to Editors The Resolution foundation uses a novel microdata approach to build an ‘in kind’ benefits distribution model, which estimates which public services most benefit low-to-middle income families.
