UK government explores expanded autumn Budget with spending review

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UK autumn Budget and review

Highlights

Treasury officials are considering merging the autumn Budget with a wider spending review, creating a one-off fiscal statement covering tax and departmental budgets.
Burnham faces time constraints for a full review, as 2029-30 allocations must accommodate £15 billion higher defence spending and a pre-election period ending August 2029.
The OBR warns unprotected departments could see real-terms spending declines of 4.4% in 2029-30 and 2030-31, while health spending is assumed to rise 2.6% annually after 2028-29.

Autumn fiscal plan under discussion

As reported by Financial Times, Treasury officials are considering whether to combine the next Budget with a broader spending review after preliminary Whitehall talks with Burnham’s team. The proposal would create a one-off fiscal statement covering both tax decisions and departmental budgets, but people briefed on the discussions say it remains only an option.

Burnham is due to become Labour leader on Friday and is set to become prime minister on July 20. His spokesperson declines to comment on the idea, while allies say the main constraint is the limited time available to complete a full review of departmental settlements within three months.

Burnham is holding talks with senior Whitehall officials alongside his chief of staff James Purnell and Louise Haigh, who is tipped for a senior role in the new administration. One Treasury veteran says merging tax and spending decisions would be sensible, but describes completing the process on that timetable as ambitious.

Spending pressures shape the political choices

Accelerating the spending review would force Burnham to decide quickly between departments at a point when existing settlements are already tight. Rachel Reeves set a single-year departmental settlement for 2025-26 in her first Budget in 2024, then followed with a fuller review covering day-to-day spending until 2028-29, while capital spending plans run to 2029-30.

Burnham’s first review is expected to determine allocations for 2029-30, a politically important year because it covers the final possible months of the current parliament before an election that must be called by August 2029. A major issue is how to accommodate Sir Keir Starmer’s decision to raise defence spending by about 15 billion pounds.

The Office for Budget Responsibility says in March that current spending envelopes imply especially tight settlements for departments not shielded by specific Labour promises. Unprotected areas such as justice and home affairs, which account for roughly a quarter of day-to-day departmental spending, face real-terms declines of 4.4% in the final two years of the OBR forecast, covering 2029-30 and 2030-31.

At the same time, Labour is pledging higher defence spending to meet Nato targets, and the OBR assumes health spending continues rising by 2.6% a year in real terms after 2028-29. James Smith, chief economist at the Resolution Foundation, says Burnham is likely to need at least a mini spending review this autumn to show how added commitments such as the Defence Investment Plan and public sector pay settlements are funded.

In our earlier article on Rachel Reeves’ final-week Treasury agenda, we outlined how she tried to position herself for a senior role in Andy Burnham’s incoming government while unveiling plans to boost SME finance and adjust post-crisis bank ringfencing rules. The piece also noted her alignment with Burnham’s decentralisation priorities, including support for fiscal devolution and moving more decision-making and officials beyond London.

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