Spending review: Experts debate whether cuts are a return to austerity

Rachel Reeves usually avoids any mention of the word "austerity" in connection with her fiscal policies, but on Wednesday, the chancellor decided to tackle the argument head on.

- Kiran Stacey

"In this spending review, total departmental budgets will grow by 2.3% a year in real terms," she told MPs as she announced the next stage of her spending review.

"Compare that to the Conservatives' choice of austerity... Austerity was a destructive choice for both the fabric of our society and our economy, choking off investment and demand and creating a lost decade for growth, wages and living standards."

She argues that her decision to lift departmental budgets by 2.3% on average over this parliament shows this cannot be compared to the coalition period, when spending fell by 2.9% on average. Some departments are faring well. The Department of Health and Social Care will receive 2.8% more on average over the course of the parliament, from £189bn in 2023-24 to £246bn by 2028-29.

But focusing only on this week's announcement, which covers the three years from 2026-27, the settlement looks much tighter, with departmental budgets rising only 1.5% on average. And taking out certain big-ticket items of government spending, the situation looks tougher still.