Spending Review: £39 billion for housing

Chancellor Rachel Reeves has unveiled her spending review, promising £39 billion for social and affordable housing, an extension to free school meals and the £3 bus fare cap, and a 3 per cent spending increase for the NHS a year, after inflation.

This is the first multi-year spending review since 2021 and will set the day-to-day budgets of government departments over the next three years.

The review included £10 bn for Homes England to help build hundreds of thousands of homes. £39 billion has been promised for social housing in England between 2026 and 2036, which is an average of £3.9bn a year over the period compared to the current £2.3bn.

CPRE chief executive Roger Mortlock said: "More cash for an Affordable Housing Programme is welcome and could make a real difference if it's directed towards the escalating rural housing crisis.

"The way "affordable" housing is defined, as 80% of market value, keeps many new homes out of reach for ordinary people, especially in the countryside. 

"CPRE is calling on the government to redefine "affordable" housing in line with average local incomes."

Northern Housing Consortium Chief Executive Tracy Harrison said: “This announcement of a ten-year £39bn Affordable Homes Programme is a significant milestone for the social housing sector in the North – the combination of a long-term rent settlement and greater investment in affordable housing will help our members deliver for the communities they serve. We’ve consistently highlighted the importance of long-term funding over ten years to enable our members to ramp up delivery.
 
“We’re also pleased the Government recognises that ‘one size fits all’ solutions don’t work for the North. Its commitment to continuing devolution and changes to Green Book funding rules should make a real difference. Our research has consistently found that centralised funding models and narrow value-for-money criteria have been a barrier to delivering the solutions Northern communities need.
 
“We hope the new Affordable Homes Programme will offer continued flexibility to replace existing homes that don’t meet the needs of communities. However, that alone will not address the North’s regeneration crisis with over 126,000 social housing homes reaching the end of their life, and more than quarter of private rented homes in the North not meeting Decent Homes Standards. To make sure everyone has access to good quality home a dedicated funding stream to support housing-led neighbourhood regeneration is urgently needed."

In transport, the £3 bus fare cap will be extended until at least March 2027. There is also £15.6 bn for transport projects in English city regions outside London. Reeves also announced that the Liverpool-Manchester “Northern Powerhouse Rail” scheme will go ahead.

In Education, the core schools budget in England will go up by 0.4 per cent in real terms on average over the next three years and the chancellor also announced £2.3 billion a year to fix crumbling classrooms. Furthermore, free school meals will be extended to around 500,000 more children whose parents are receiving benefits. There is also an extra £615m this year to partially fund a 4% pay rise for teachers in England. Schools are expected to fund a quarter of the rise through "improved productivity".

Reeves announced that the government will be increasing real-terms, day-to-day spending by 3 per cent per year for the NHS for every year of this Spending Review. This means an extra £29bn per year for the day-to-day running of the health service, up to to £226bn by 2029.

It was also revealed that the NHS technology budget will increase by almost 50 per cent with £10bn of investment to "bring our analogue health system into the digital age.”

Elsewhere in technology, Reeves announced R&D funding of £22bn per year by the end of the Spending Review period.

She also announced £2bn for the government's AI Action Plan.

The Home Office day-to-day budget will go down by 1.7% in real terms over the next three years, while the "spending power" of police forces will go up by an average 2.3% per year in real terms by 2029. Annual funding for the Border Security Command, will increase by up to £280m by 2029.

The Ministry of Defence day-to-day budget will go up 0.7 per cent in real terms and defence spending will rise from 2.3 per cent to 2.5 per cent of overall economic output by 2027.

In response to the review, Jonathan Carr-West, Chief Executive, Local Government Information Unit (LGIU), said: “This was a ‘missions’ driven Spending Review - with eye-catching sums for projects aimed at delivering growth, clean energy and a 3 per cent rise in spending on the NHS. Angela Rayner has clearly persuaded the Chancellor to put the affordable homes agenda front and centre of today’s statement, with that promise of £39bn. 
 
"It was a Spending Review full of hard choices for the government in the face of tough financial circumstances, a position all of us in local government are used to. These decisions will have major implications for local government and local communities across the country for years to come. 
 
"The Chancellor’s Spending Review also reinforced this government’s commitment to devolving power to regions across England, commits the government to major investments in housing and infrastructure, and pledges new funds to support regional and local growth across England and the devolved nations. This should be welcomed. 
 
"While today was never going to answer every unanswered question that local government has, it does outline when we might expect at least a few answers. Reorganisation, changes to the allocation of funding settlements, devolution, SEND reform, and, eventually, social care funding reform, all of these were promised in the Spending Review. They are all crucial to putting local government back on a sustainable footing - but they have all been promised before.
 
"Optimal delivery of every single one of the government’s missions needs robust and financially stable local government. And once again, the government’s plans for how that will be achieved are left dangling just out of reach.”

Cllr Louise Gittins, Chair of the Local Government Association, which represents councils, said: “It is positive that the Spending Review delivers on some key LGA asks. Funding announced for children’s services and SEND support will help more children get the right support and avoid reaching crisis point. We are also pleased at increased investment in the Affordable Homes Programme and the commitment to a 10-year rent settlement, which will support councils to invest in maintaining existing homes and ramping up vital new build programmes. Extra investment in places to support regeneration, transport and infrastructure is good news for residents and communities in these places.

“We will analyse the detail to assess the full impact on councils and communities. A recommitment to multi-year local government funding settlements is essential for financial planning while efficiency and innovation continues across local government. However, all councils will remain under severe financial pressure. Many will continue to have to increase council tax bills to try and protect services but still need to make further cutbacks. While government faced tough choices, future funding for adult social care is good news but a lack of significant extra government money needed to meet immediate pressures is worrying. 

“We expect government to provide urgent clarity on how it plans to address high needs deficits, which are projected to rise to £5 billion next year, as part of its forthcoming SEND reforms. Over half of councils have warned they will become insolvent next year when the statutory override flexibility ends and we continue to urge government to write off these deficits. 

“Public service reform and investment in prevention - especially in social care and SEND - can reduce costs and demand, and councils want to partner with government on this agenda. Council financial pressures are also exacerbated by an outdated funding system, so we look forward to the consultation on reform and a roadmap to a sustainable, long-term financial model for local government.”