Spending Review 2025 – implications for charities

Nearly a year after their General Election victory, the Labour government has finalised its spending plans for the rest of the Parliament.

The 2025 Spending Review, announced by the Chancellor Rachel Reeves today, sets out government department budgets up to 2029/30.

This review provides the blueprint for how the government will operate in the years ahead, as well as what local governments and the devolved governments will have available. It will affect many statutory services that charity beneficiaries rely on or that charities have close interactions with.

There are so many areas of public services and society needing support right now where the charity sector is an indispensable part of the picture. Health, education, housing, social care, poverty, employment and economic development to name just a few. The decisions announced today will have big implications not just for people and communities, but for the ability of charities to keep serving what can seem like ever-increasing unmet needs.

Politics over policy?

It’s become customary for governments to trail positive headline-making announcements in the run up to these big ‘fiscal events’. Following the party’s poor performance in May’s local elections, the Labour government was perhaps even more keen to do so this time.

Over the past week they announced a change to the level at which pensioners can get winter fuel allowance, partly reversing one of the government’s earliest (and possibly most politically damaging) decisions, and announcements about free school meals. These will have been welcomed by many in our sector. But what would the trade-offs be?

The government’s oft-stated top priority is ‘economic growth’, so perhaps unsurprisingly the Chancellor’s speech and the Spending Review document was heavy on announcements about infrastructure and capital investment, for example in school buildings and local transport.

Nobody can accurately predict the future, including Chancellors and economic forecasters. But this statement provides a stronger indication of the direction of travel than we’ve had in many years – because we arguably haven’t had a proper Spending Review like this since the days of the Coalition Government.

Here are some highlights that will be of interest to charities:

Social housing and homelessness

With housing availability and costs a clear problem across so much of the country, the Chancellor made several substantive announcements which charities working in these areas will want to delve into, which are laid out in Section 3.31 of the Spending Review document on page 27. Some were also trailed in the run-up to the Chancellor’s speech:

£39 billion for a new Affordable Homes Programme (Note that is over a 10-year period, so it extends well beyond the Spending Review timeframe and the next General Election. The document says that it will reach £4bn per year by 2029/30);
£100 million, including from the Transformation Fund, for early interventions to prevent homelessness;
£950 million of capital investment for local authorities in England to increase the supply of good quality temporary accommodation and drive down the use of costly bed and breakfasts and hotels.

Health and social care

The health budget understandably continues to have a huge influence over the government’s entire fiscal planning, and this Spending Review was no exception. Even if charities aren’t directly funded by, for example, NHS trusts or Integrated Care Boards, many will have relationships with them and beneficiaries in common, and will want to take note of a number of the announcements.

On the other hand, the dog that didn’t really bark (or very loudly) in this Spending Review was social care, perhaps because Baroness Louise Casey is leading (yet another) review which has yet to report. The Spending Review document says that spending on health and social care will increase by 2.8% over the period, including:

A £29 billion real terms increase (£53 billion cash uplift) in annual NHS day-to-day spending from to 2028-29;
An increase of over £4 billion of funding available for adult social care in 2028-29 compared to 2025-26;
£555 million plus £560m in capital spending over the Spending Review period to reform the children’s social care system and support the refurbishment and expansion of the children’s homes estate.

Welfare and poverty

There was a mixed picture on this – the government so far seems to be pressing ahead on controversial reforms to disability and unemployment benefits it announced in the Spring Statement just a few months ago. The word ‘disability’ appears only once in the document, and there was also no movement on scrapping the two-child benefit limit as many anti-poverty charities have been campaigning for. However, some announcements may still prove helpful. ‘Box 4B’ on page 40 of the Spending Review document includes the following:

Increasing the means tested threshold for Winter Fuel Allowance to £35,000 from 2025-26 (already announced, and partly reversing the decision last year to means test this benefit which was previously available to all pensioners);
£13.2bn through the Warm Homes Plan to boost household energy efficiency and low carbon heating;
£410m per year by 2028/29 to support free school meals for children in England whose families are in receipt of Universal Credit;
750 schools will receive funding to deliver a free breakfast club in the most deprived parts of the country;
£1bn per year for a long-term ‘Crisis and Resilience Fund’ to replace the Household Support Fund for the length of the Spending Review period. (note this fund previously supported local councils to help local residents who are in need of basic essentials and its future was uncertain, so a reboot with more funding is good news).

Announcements that affect charities or civil society generally

There were few announcements specifically related to the charity sector or civil society policy. Among the recommendations in DSC’s response to the Spending Review consultation earlier this year, we asked for increases to the Charity Commission budget and to put local government on a sustainable financial footing. DSC and other members of the Civil Society Group have also been calling for the government to do more to boost philanthropy.

The Spending Review document provides some positive news in this respect:

Charity Commission – table 5.29 on page 107 of the document shows the Commission’s budget settlement for the next four financial years, with an average increase of around £5m per year for the period 2026/27 to 2028/29 compared to current levels. This looks like a genuine win for sector campaigners!
Local government – table 5.17 on page 78 of the document illustrates ‘resource DEL’ for local government, or the money for local government’s year-to-year revenue spending rather than capital spending. This indicates a substantial rise to £15-16bn during the coming years. However, this area is complex and the ongoing reorganisation of local government in England will also have an impact.
Social impact investment vehicle – the document confirms that government is developing a social impact investment vehicle to “support mission delivery and tackle complex social problems” by “bringing together socially motivated investors, philanthropy, civil society and other impact investment experts”. A further announcement will happen over the summer.

Conclusion

The Spending Review document is over 100 pages, and the above points are just a summary of parts which are likely to be of most interest to charities. As ever, various analysts will do more sifting and calculating over the coming days to get a sense of the broader implications, as well as uncovering important details which have flown under the radar. We’ll add further analysis and updates below as they become available.