Blog- 13th June, 2025, Capsticks, Corporate Partner

Spending Review 2025: what it means for Mayoral Combined Authorities and the Local Government sector

Following the announcement by Rachel Reeves in the Spring Statement 2025 to increase capital spending by £ 2 billion per year to drive economic growth, the Government laid out its spending plans at the 2025 Spending Review on 11 June, where it announced the following:

Transport and Infrastructure for Mayoral Combined Authorities

£ 15 billion of funding has been announced for transport. Mayoral Combined Authorities in the North, the Midlands and the South West of England are expected to benefit from the largest ever investment in buses, trams and local train infrastructure in their areas.

The government believes that this funding will allow local authorities to prioritise and implement transport projects and empower local leaders to invest in transport projects that will make a difference to their local area.

Funding is expected to be allocated over five years (2027/2028 – 2031/2032) to the Combined Authority and Mayors to provide for projects such as:

• West Midlands - £2.4bn metro extension connecting Birmingham City Centre to the new sports quarter
• Greater Manchester - £2.5bn in major infrastructure projects to create new homes, jobs and transform the Metrolink tram network with new tram stops in Bury, Manchester and Oldham, as well as an extension to Stockport. The funding is also expected to facilitate the purchase of 1000 new electric buses and a fully zero-emission public transport network.
• West of England - £800m for rail infrastructure improvements, supporting the Combined Authority’s goal to increase services between Brabazon and the City Centre. £200m is expected to be set aside for transit development between Bristol, Bath, South Gloucestershire and North Somerset.
• East Midlands - £2.0bn for a new mass transit system connecting Derby and Nottingham.
• West Yorkshire - £2.1bn to start building the West Yorkshire Mass Transit programme by 2028, and build new bus stations in Bradford and Wakefield
• South Yorkshire - £1.5bn to renew the tram network as well as bus services across Sheffield, Doncaster and Rotherham by 2027
• Liverpool City Region - £1.6bn for faster connections to Liverpool John Lennon Airport, Everton stadium and Anfield, and a new bus fleet in St Helens and the Wirral next year
• North East - £1.8bn to extend the Newcastle to Sunderland Metro via Washington
• Tees Valley - £1bn for Tees Valley, including a £60m platform extension programme for Middlesbrough station

Rail

£ 3.6 billion will be provided for the TransPennine Route Upgrade between York, Leeds and Manchester. A further £ 2.5 billion for the East West Rail and funding for a Midlands Rail Hub.

It was confirmed that the Liverpool-Manchester “Northern Powerhouse Rail” scheme will be going ahead, with further details to follow in the Infrastructure Strategy.

Housing

£ 39 billion will be allocated over a 10-year period for a new Affordable Housing Programme,  with an additional £ 10 billion being provided for financial investments to be delivered through Homes England to meet the Government’s target of 1.5 million new homes.

In addition, the Government will be providing £100million, including from the Transformation Fund, for early interventions to prevent homelessness, and £950million of capital investment for a fourth round of the Local Authority Housing Fund to support local authorities to increase the supply of good quality temporary accommodation and drive down the use of costly bed and breakfasts and hotels.

Forming Local Government

As well as confirming their commitment to reorganisation and devolution, the Spending Review also notes the Government will take action to return local government to a sustainable financial position, including by providing an additional £3.4 billion of grant funding per year by 2028-29, as part of an overall average real terms increase in local authority core spending power.

Local Amenities

£350 million has been announced for facilities such as parks, libraries and swimming pools in a series of towns

Schools, education and Children’s social care

Other departments are also expecting to receive investment, including the core school budget which will increase by £4.5 billion a year, with investment of £2.3 billion to fix classrooms and £ 2.4 billion to continue with the Government’s programme to rebuild 500 schools.

Government is also committed to delivering children’s social care reform and the Spending Review also commits to £555million from the Transformation Fund to help more children stay with their families, ensuring families have timely support and fixing the broken care market together with £560million to refurbish and expand children’s homes and foster care placements.

The government’s intended approach to SEND reform will be set out in a Schools white paper in the autumn.

Warm Homes Plan

The government confirmed their commitment to a £13.2 billion fund to fix draughty homes and install heat pumps and solar panels as set out in their manifesto. 

Asylum and border security

The government wants to end the use of hotels to house asylum seekers and has committed further funding for this during its term.

Energy investments

£30 billion will be committed for nuclear power’s future with a £14 billion investment for Sizewell C, producing energy to power six million homes and to support 10,000 jobs.

Defence and police

Defence spending will increase to 2.6% of GDP by 2027, and this will include a contribution to intelligence agencies. Whilst police spending is set to increase by 2.3% per year, with a commitment to put 13,000 additional police officers, PCSOs and special constables.

NHS

The Government is providing a £29billion real terms increase in the annual NHS day-to-day spending, equivalent to a 3% increase.

 

As local authorities continue to manage the delivery of day-to-day services against the backdrop of Local Government Reorganisation and Devolution, our expert team will continue to monitor the situation and provide updates.

 

Tiffany Cloynes, Rebecca Gilbert and Megan Tam