What’s at stake in the spending review?

Posted: June 3, 2025 | Author: julesbirch | Filed under: Affordable housing, Decarbonisation, Help to Buy, Homelessness, Housebuilding, Housing benefit, Rents | Tags: spending review |Leave a comment

Originally written as a column for Inside Housing.

With a week to go until the most consequential spending review for ten years, the Treasury is facing desperate last-ditch lobbying from departments that have yet to agree their settlement.

Last week’s public intervention by chief constables warning that the government will fail to meet its pledges on crime unless they get more cash is sign enough of that.

So too the leaked memo from deputy prime minister Angela Rayner setting out options for higher taxes that was inevitably followed by more leaks about her spending priorities.

As of this week, the Ministry for Housing, Communities and Local Government (MHCLG) was said to be one of the departments yet to agree a settlement, alongside the Home Office, with the Department for Energy Security and Net Zero just finalising one..

By contrast with previous spending reviews, housing starts with the advantage of having a politically powerful secretary of state in charge – and Angela Rayner has repeatedly promised ‘the biggest boost to social and affordable housing in a generation’.

But the ‘biggest boost’ can mean many different things, some of them genuine, some of them not remotely up to the challenge of the moment.

She’s also saddled with a manifesto pledge that most people regard as unfulfillable: 1.5 million new homes by the end of this parliament. 

There’s a strong argument that she will not come close without a significantly increased AHP but others are making the case for ‘free’ alternatives to boost private housebuilding and development by for-profit housing associations. 

The Home Builders Federation (HBF) is lobbying for the return of the Help to Buy equity loan scheme, arguing that this is the first time in decades that there is no government programme to assist first-time buyers.

If that sounds like a lot to swallow, a report that argues that only 10.4 per cent of  20-44 year olds who do not already own their home can afford to buy.

However, that argument is double-edged, since it also strongly suggests that the new homes target cannot be met by the market alone and supports the argument put forward by the housing sector that investment in affordable homes is key .

We know there is more money for capital investment: after chancellor Rachel Reeves tweaked her fiscal rules, she says an extra £113 billion is available. But there are many competing demands on that: defence has joined health as a key priority, with new funding for military homes announced over the weekend, and regional investment in energy and transport projects is also being talked up.    

This as England’s largest housing associations warned that ‘by the end of the parliament affordable housing completions will have fallen to the lowest levels since the second world war without urgent and specific interventions for London’.

But new homes are just part of the housing story: what about existing ones?

Campaigners feared that the Warm Homes Fund run by DENZ could be targeted for cuts, this after Ed Miliband’s previous pledges on funding for decarbonisation had already been scaled back. That would increase the squeeze on social landlord finances alongside escalating costs for building safety and repairs and maintenance. However, more recent reports suggest it could now be safe.

London Councils warned last month that boroughs will be forced to cut their investment in council housing and that five will completely exhaust their Housing Revenue Account reserves by 2027/28.

It is just one of the organisations pressing for the proposed five-year rent settlement to be extended to ten years and the return of rent convergence and the revisiting of the 2012 self-financing settlement that was rendered unsustainable by the rent cuts introduced to cut the housing  benefit bill.

At the same time, ombudsman Richard Blakeway has highlighted soaring tenant complaints about repairs and maintenance and called for a more ambitious Decent Home Standards and the return of a national tenant body. 

And all this is before we consider what looks like an inevitable squeeze on day-to-day spending next week. 

That would be very bad news for local authorities grappling with the soaring costs of social care and homelessness, unless an increased AHP starts to cut their bills for temporary accommodation.

And for all the u-turns recently signalled by Keir Starmer the wider social security budget will be an inevitable focus for the Treasury.

The abolition of the two-child limit might be the quickest way to cut child poverty but the gains for some children in the poorest families could be wiped out unless the benefit cap is also scrapped.  

There is no suggestion of any change to previously announced cuts in disability benefits that will see several hundred thousand claimants lose thousands of pounds a year each. 

That could trigger further losses if it affects exemptions from the benefit cap, shared accommodation rate and non-dependent deductions plus a further increase in homelessness. 

And what about local housing allowance (LHA) rates? They are already frozen until next April in a year in which private rents are rising three times faster than general inflation but another freeze might look like an easy win from a Treasury perspective.

The Treasury should be looking at tax as well as spending when it comes to housing, with reform of stamp duty and property tax offering a way to boost the housing market and raise revenue, but this will probably stay in the box marked ‘too difficult’. 

The first Labour spending review after 1997 introduced deep cuts in spending on new homes alongside funding for the original Decent Homes programme.

The first Conservative-led spending review after 2010 flirted with complete abolition of the Affordable Homes Programme before settling for cuts of more than 60 per cent and the virtual end of funding for social rent.

As Labour prepares for the first spending review since its victory in 2024, it is facing calls for action on housing across multiple fronts and the stakes are even higher. 

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