UK Spending Review 2025: What It Means for AIA Members and the Accountancy Profession

The UK Government’s Spending Review, presented by Chancellor of the Exchequer Rachel Reeves to Parliament on 11 June 2025, outlined a series of key spending announcements on domestic energy, infrastructure, and defence spending, which were heavily reliant on savings in the cost of government. 

The Spending Review set both three-year operating and four-year capital budgets, allowing government departments to improve planning, aimed at increasing efficiency in investment. Of particular interest to AIA members, HMRC has been assigned funding to hire approximately 8,000 additional staff, representing an increase of 600 following the Spring Statement announced in March 2025. New staff recruited are earmarked to focus on compliance and debt management, however, which will do little to alleviate concerns raised by AIA members interacting with HMRC to handle clients’ affairs.  

Key highlights include: 

• Economic Outlook: The OBR forecasts growth of 1.0% in 2025, rising to 1.9% in 2026, with departmental spending increasing by 1.2% annually in real terms. 

• Efficiency & Reform: 15% cut in administrative budgets aims to save £2.2 billion annually and protect frontline services. 

• Digital Transformation: £3.25 billion Transformation Fund to support AI integration and digital reform, including investment in HMRC systems. 

• Skills & Employment: £625 million allocated to construction skills and a broader £1 billion annual investment in workforce development to support training providers, apprenticeships, and technical education. 

• Welfare & Compliance: Reforms to Universal Credit and PIP, alongside anti-fraud measures. 

• Capital Investment & Industrial Strategy: A £13 billion boost to capital spending and a new 10-year Industrial Strategy. 

Public Sector Spending Outlook 

• The NHS is projected to receive a £29bn real terms increase in its annual day-to-day spending from 2023-24 to 2028-29, equivalent to a 3% average annual real terms growth rate over the Spending Review period. 

• Defence spending will increase to 2.6% of GDP from 2027, with an aim to increase it to 3% in the next parliament.  

• The Department of Health and Social Care’s annual capital budgets will increase by £2.3bn in real terms from 2023-24 to 2029-30 for NHS investment in areas such as technology and primary care. 

• An additional £3.4bn of grant funding will be available for local government in 2028‑29 (compared to 2024‑25), with the Schools budget projected to increase by £2bn in real terms over the course of the Spending Review period. 

• Devolved governments will receive an additional £4.8bn per year on average between 2026-27 and 2029-30:  

• Scottish Government projected to receive £2.4bn resource and £510m capital funding on average per year 

• Welsh Government projected to receive £1.4bn resource and £200m capital funding on average per year 

• Northern Ireland Executive projected to receive £1bn resource and £220m capital funding on average per year 

The government has also announced plans to invest  

• £15.6bn in total by 2031‑32 through a new Transport for City Regions (TCR); 

• £39bn for a new 10‑year Affordable Homes Programme; 

• £14.2bn for Sizewell C over the Spending Review period, and 

• £22.6bn per year for research and development by 2029‑30, to support the government’s modern Industrial Strategy. 

• Bring forward £3.3bn capital spending into 2026‑27 from later years; total capital spending over the period remains at the level set out at Spring Statement 2025. 

• Make available a further £9.6bn for financial transactions such as loans and equity to support growth through organisations such as the British Business Bank. 

The spending increases highlighted above are paired with plans for state reform, including plans to embrace digital and AI to reduce administrative burden and increase efficiency across all public services. Additionally, HMRC has indicated that it will eliminate most correspondence sent via post, with limited exceptions such as letters that generate revenue. This would reduce the number of letters HMRC sends out by 75%, saving £50m a year by 2028-29. AIA will continue to provide members with insights, guidance, and resources to navigate the evolving policy landscape and will scrutinise HMRC’s digital transformation roadmap carefully. 

David Potts, AIA Director of Policy & Regulation, said, “Although the Spending Review introduced several initiatives aimed at boosting investment, fundamental challenges in the UK’s public finances and broader economy remain. The Chancellor must take further action to stimulate growth, unlock productivity, and tackle these enduring issues head on.” 

“Although the Spending Review introduced several initiatives aimed at boosting investment, fundamental challenges in the UK’s public finances and broader economy remain. The Chancellor must take further action to stimulate growth, unlock productivity, and tackle these enduring issues head on.” 
David Potts, AIA Director of Policy & Regulation