Housing and infrastructure emerge as big winners as Reeves divides up £113bn in spending review

Rachel Reeves has committed to £113bn in funding for transport, housing, energy and skills over the next four years as part of the annual spending review.

Announcing the government’s spending plans for the rest of this Parliament, the chancellor confirmed £39bn for social and affordable housing and £15bn for transport improvements across the North and Midlands.

Reeves also committed to providing £14.2bn to fund the construction of the Sizewell C nuclear plant and £2.5bn for small modular reactors in what she described as “just one step” towards the government’s ambition for a “full fleet” of the mini reactors.

Transport investments included an additional £3.5bn for the TransPennine route upgrade, £2.5bn for East West Rail and a commitment to set out plans for Northern Powerhouse Rail.

Other commitments include £300m for rail investment in Wales, £240m to enhance Leeds station and more money for the Midlands Rail Hub, which is working to improve links between the West Midlands and surrounding regions.

Funding of £25.3bn has been provided across the spending review period for the delivery of HS2 from Birmingham Curzon Street to London Euston and to support the “full reset” of the programme under its new chief executive Mark Wild which will seek to “address longstanding delivery challenges”.

Transport for London has been handed the largest multi-year settlement for the capital’s transport operator in more than a decade, with £2bn for its renewals programme over the next four years. Reeves said the government was also committed to working with TfL to explore options for the delivery of the extension of the Dockland Light Railway to Thamesmead.

The school rebuilding programme will get £2.4bn a year over the period, with school maintenance investment rising with inflation to around £2.3bn by 2029-30.

Alongside the spending review, the Treasury also published the findings of its review into the Green Book, the government’s investment guidance on value for money. 

The Treasury said it would publish an updated Green Book in early 2026, introducing “place-based business cases” which bring together projects “needed to achieve the objectives of a particular place”.

The Department said the reforms would address the overemphasis on benefit-cost ratios (BCRs) in government appraisal, banning the use of arbitrary BCR thresholds as a simple means of determining if a project should be funded.

Reeves said the government wanted to “make sure no region has Treasury guidance wielded against them”.

The chancellor also announced £10bn for “financial investments”, some of which will go through Homes England, to “crowd in private investment and unlock hundreds of thousands more homes”.

It comes as the result of changes made by Reeves last autumn to enable the greater use of financial transactions by government bodies to support investments in public infrastructure.

The announcement came alongside Reeves’ confirmation of £39bn for the Affordable Homes Programme over 10 years. The chancellor said she was “proud to announce the biggest cash injection in new social and affordable homes in 50 years” and reported that “towns and cities, including Blackpool, Preston, Sheffield and Swindon, have already had plans to bring forward bids to build those homes in their communities”.

Reeves also confirmed a 10-year social housing rent settlement from 2026 at CPI+1%, with a consultation on implementing rent convergence set to follow.

New announcements on the day included £2.5bn over the spending review period for low-interest loans to social housing providers to boost development capacity, and equal access for social housing providers to the Building Safety Fund. As a result, registered providers will have access to more than £1bn of investment for remediation between 2026/27 and 2029/30.

But, despite the Treasury agreeing to significant capital investment in new housing, the chancellor has demanded cuts to day-to-day spending for the housing ministry. The resource budget for the Ministry of Housing, Communities and Local Government (MHCLG) will fall 1.4% during phase two of the spending review, which runs between 2025/26 and 2028/29 for day-to-day spending.

Documents released by the Treasury revealed that spending through the AHP would reach £4bn per year in 2029-30 and rise in line with inflation subsequently.

Other announcements included funding for research and development, which will rise to £22bn a year by the end of the spending review in 2029, while an extra £1.2bn has been earmarked for training and apprenticeships.

The latter will include £625m to train up to 60,000 skilled construction workers as announced in the spring statement.

Meanwhile, prisons will be handed £7bn during the period to build 14,000 new prison places as part of an ongoing prisons programme aiming to address a chronic shortage of adult male prison places.

Reeves also recommitted to spending £13.2bn to fund energy upgrades for homes, despite rumours that the funding might be cut.