Spending Review 2025

Mel Stride Excerpts

Wednesday 11th June 2025 Commons Chamber

[Sir Mel Stride (Central Devon) (Con)]

This spending review is not worth the paper it is written on, because the Chancellor has completely lost control. This is the “spend now, tax later” review, because the right hon. Lady knows that she will need to come back here in the autumn with yet more taxes, and a cruel summer of speculation awaits.

How can we possibly take this Chancellor seriously after the chaos of the last 12 months? We were assured at the election that Labour’s plans involved barely any additional spending or borrowing. Now the Chancellor parades her largesse, with hundreds of billions in additional spending over this Parliament. The initial profile for that spending was, of course, significantly front-loaded, but the Chancellor now expects us to believe that she will let spending rise by only 1.2% a year. There is no chance whatsoever of that happening, for the lesson of the last year has been that when the going gets tough, the right hon. Lady blinks.

She presented herself as the iron Chancellor, but what we have seen is the tinfoil Chancellor: flimsy and ready to fold in the face of the slightest pressure. She said she would not fiddle her fiscal rules; then she did. She said that she would not make any unfunded commitments; with the humiliation of the winter fuel U-turn, she just has. She looked business leaders in the eye and said no more taxes, but we all know what happened next, and we all know what is coming in the autumn. Her own Back Benchers, her Cabinet colleagues, Labour’s trade union paymasters and even the Prime Minister himself have all seen that she is weak, weak, weak. They can smell the blood. They will be back for more, and they will get it.

These spending plans are a fantasy, and is it not the truth that the Chancellor has to maintain this fiction because she has left herself no room for manoeuvre? She is constantly teetering on the edge of blowing her fiscal rules, which she has already changed to allow even more borrowing. The only way she can claim to be meeting her rules is by pretending that she can control spending over the coming years, but let us look at the record so far. Borrowing in the last financial year came out £11 billion above even the Office for Budget Responsibility’s March forecasts, and 70% higher than the plans she inherited from the Conservatives.

For someone so keen on borrowing, the Chancellor seems strangely reticent even to use the word. Indeed, Ministers bizarrely tell us that it is Labour’s fiscal rules themselves that have “generated investment”. The reality is a little more straightforward: they have loosened the fiscal rules so they can borrow more. They borrow and borrow and borrow, allowing the national debt to continue to rise higher every single year while Ministers pretend that it is not. There will be an eye-watering £200 billion of additional borrowing in this Parliament compared with the plans set out in the last Conservative Budget, with £80 billion more to be spent on debt interest alone. In fact, if the Chancellor had retained our fiscal rules—[Laughter.] Labour Members may laugh, but if she had retained our fiscal rules, as she said she would before the election, the OBR has confirmed that she would be breaking them right now.

Our country is now vulnerable to even the smallest changes in the bond markets. Should we face a sudden external shock, we have no fiscal firepower left with which to respond, all thanks to the right hon. Lady’s choices. So can I ask the Chancellor: will she be open about what she has done? Will she admit that she has made a conscious choice to borrow more and to accept higher debts? Does she accept that this means interest rates and mortgages will be higher than they would otherwise have been, as the OBR itself has said? Given that she continues to claim that she has brought stability to the public finances, can I ask her what on earth her definition of “stability” is?

The Chancellor must be delighted that she does not have to face a new OBR forecast today, because if she did, she would have to set out how she would fund her humiliating U-turn on winter fuel payments, having already blown the savings on buying off her trade union paymasters last year. She said this week that there was still

“work to do to ensure the sums always add up”.

From the person in charge of the nation’s finances, that is hardly reassuring. You do not need to have worked at the Bank of England for a decade to know that that pitiful utterance is unlikely to soothe the markets.

So can the Chancellor confirm categorically that there will be no additional borrowing to pay for this chaotic reversal? And if that is the case, can she explain how on earth it can be paid for without raising taxes? Can she explain why, last summer, apparently to avoid a run on the pound, this measure was so urgent that pensioners had to be left in the cold over the last winter? What exactly has changed? Because it certainly has not been made possible by an improvement in the economy or the public finances, which the Institute for Fiscal Studies said this week are both in a worse state now than when Labour came into office.

If we had an OBR forecast, we might also get some answers on how the Government intend to find £3.5 billion to abolish the two-child benefit cap, which we are led to believe is imminent—another addition to the ballooning welfare bill; another expensive surrender to the Labour left. And we would certainly get the OBR’s assessment of the economic outlook following the tariffs—changes that the right hon. Lady knew full well were coming. Meanwhile, her deluge of taxes and regulations has left business confidence at record lows, costing people their livelihoods. Only yesterday we saw the latest evidence of that. Figures for last month show that the number of people on payrolls fell by more than 100,000, after already falling by 55,000 in April. Unemployment is up by more than 10% since Labour came to office.

The right hon. Lady may trumpet extra spending today, but is it not the simple truth that she has trashed the economy and left no contingency in the face of a highly volatile global outlook? Is it not the reality that the Chancellor knows she will have to come back in the autumn with more tax rises to fund these plans? Or can she assure us right now that this is not the case—yes or no? We know that the Deputy Prime Minister has helpfully provided her with an entire brochure of tax rises that she will no doubt be perusing over the summer—the Corbynist catalogue. Can the Chancellor confirm that, as promised, the income tax thresholds will not be frozen at the Budget, a move she herself said would hurt working people?

What about the uncertainties in the departmental spending plan that the Chancellor has set out today? Can she assure us that these plans will not be topped up and that no backroom deals have been cut with disgruntled Cabinet Ministers? Can she assure us that the capital allocations announced today will actually be spent on capital and will not be diverted in-year, as she has done in the past, to day-to-day budgets to play more games with her fiscal rules?

The Chancellor has had to impose a settlement on the Home Secretary because this spending review will not deliver for our hard-working police officers across the country. Instead, the Home Office budget gets squandered on asylum costs because this Government simply do not have a plan on illegal migration. As the Defence Secretary has admitted, the Government have “lost control” of our borders. Small boat crossings are up by 42% on the same point last year.

On energy, at a time when businesses up and down the country are struggling with high energy costs, the Chancellor has chosen today to fund the Energy Secretary’s vanity projects such as GB Energy. And although we welcome the announcements on expanding nuclear capacity, the scale of ambition is a downgrade on the commitments made previously by the Conservatives.

Labour barely mentioned farming in its manifesto, and now we know why. It is not enough to have hit the farmers of our country with a family farm tax; today, what we see in black and white is a choice to make further cuts to the vital grants on which many farmers rely. This is a huge betrayal of our farming communities, and something that many Labour MPs in rural areas will have to go back to their constituencies later this week to explain.

On defence, we will always welcome any additional investment in our armed forces and capabilities, though I note nothing was said about when 3% will be achieved. All we heard was that intelligence services spending was to be included in defence spending to flatter the numbers. We left Labour a fully funded plan that they dithered over for a year, but now what we get is the Chancellor’s own black hole on defence spending and the lack of a timeline on when we will achieve 3%. Instead, we get a £30 billion bill for the Chagos surrender—money that should have gone to our brave armed forces rather than, as is being reported, funding lower taxation in Mauritius. The first tax cuts for which this Chancellor has been responsible are in Mauritius.

We would have made different choices. We would not have killed growth with huge tax rises and new regulations. We would not have talked down our economy and the great businesses up and down our country. We would be focusing on efficiency and productivity in the public sector, not handing out pay rises with no strings attached. We would be getting a grip on welfare. Labour cancelled our plans for fundamental reform to health and disability benefits that would have seen 450,000 fewer people on long-term sickness benefits—that is a disgrace. Instead of proper reforms to PIP, the Government’s own plans are a rushed cost-cutting exercise—so rushed they even had to change them after they were announced. Their own Back Benches are in full revolt. Yet again, the Government talk tough, but there is no substance.

The right hon. Lady has no grip. She has no clue. The markets and the public see a Chancellor completely out of her depth. Having blown her headroom and more from her Budget in the autumn, she was forced into an emergency Budget in March to scrabble around to try to repair the damage. Today she comes before us again with yet another fantastical tale that she knows will have completely fallen apart come the autumn. We are not left with stronger foundations, as she would have us believe, but rather another dose of that hallmark for which her actions have made her so renowned: uncertainty and failure.

So there the right hon. Lady sits, powerless to resist her disillusioned MPs and her panicking Prime Minister, like a cork on the tide, the drumbeat for U-turns pounding in her ears. Yet her tone today suggests that all is well; the sunlit uplands await. What a hopeless conceit—a masterclass in delusion. Inflation is up, unemployment is up, growth is marked down, business and households are hurting, investors are fleeing in their droves, the bond market vigilantes circle—and here we have the Chancellor who refuses to listen, not only tinfoil, but tin-eared, too.

Let me be clear: it is working people and businesses who will pay the price come the autumn, with yet more taxes to pay for her weakness and her failures. We cannot afford this spending review, and for many, the growing conclusion is that we cannot afford this Chancellor.

[Rachel Reeves]

I will address the shadow Chancellor’s specific points in a moment, but I want to start by acknowledging the progress he has made. After all, it has been quite a week for him. Last Thursday, he gave a speech saying that it will “take time” for his party to win back trust on the economy. Today he showed us how far he and his party have to go to achieve that. I want to give him some credit for last week’s analysis. He said that

“the Conservative Party was seen to have failed”,

and he is right. He said that the last Conservative Government

“put at risk the very stability which Conservatives had always said must be carefully protected”,

and I agree with him. [Interruption.]