June 2025’s Spending Review is the Labour Government’s first in over 15 years. It presented a significant strategic shift from incremental budgeting to a mission-led, zero-based funding approach. The commitments made through the SR reflect our national priorities (health, house building, national, energy, security, and digital transformation). However, it also reflects the increasing global threats and how we must prepare to respond (addressed through an increase in the defence budget envelope).
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The Spending Review sets out how the Government plans to deliver “Britain’s renewal: its security, health and economy”, and is their path to delivering the Plan for Change.
The budget sets out the direction of these changes through a series of policy announcements by the Prime Minister and other Government Ministers, indicating what the government will be spend and invest to the end of Parliament.
The full announcement means that we can now explore the implications for the organisational health of public sector, private sector, and third-sector organisations across the UK.
The SR sets out how the government will invest in key national priorities, including:
The Spending Review shifts toward mission-led planning and welcomes the clustering of financing. However, historically, the UK has struggled to deliver large, cross-cutting programmes at pace and scale. With billions committed to capital spending programmes, our ability to execute plans effectively must improve if we are to see real benefits.
To do that, the government should look to:
Ambition must be matched with excellence in delivery. Last year, we shared how a Strategy Management Office could be the answer to delivering the Government’s 5 Missions. Talk to us about how an SMO could help your organisation successfully execute large-scale transformation.
Whilst many departments saw real-term increases in funding, others such as the Home Office, Foreign Office and DEFRA will work within a smaller envelope. They still have significant priorities to deliver but must now “do more with less.” In the past, this meant working harder with fewer people, fewer tools, and tighter budgets – but in this Government, there needs to be a real shift of that mindset.
This government must create what permanent secretary to the UK Treasury and head of the Government Finance Function Cat Little called the “Productive and Agile State.” To do this we need to create the permission to stop legacy programmes that aren’t delivering benefits, test innovative approaches, and reward leaders who take smart risks in the pursuit of outcomes.
Creativity and innovation are born from the constraints of not having enough, and departments feeling the pinch can leverage that.
That means:
Simple cost-out from departments and ALBs will not drive the progress or outcomes that departments with lower budgets are still required to deliver. Doing more with less is about unleashing ideas, technologies, and talent that the organisation already has in new ways. It is about scaling home-grown innovations across public sector boundaries and leveraging the wider public sector ecosystem in ways that force multiply beyond reduced budgets, to the benefit of all. There are examples of where the public sector has done this in the past and present…we must do more of this in the future.
If departments can combine cost control with scalable innovation, they will create a platform to drive true efficiency and productivity.
The investments in housing and improved transport connectivity represent a deliberate attempt to rebalance growth across all regions of the UK. Beyond the “Northern Powerhouse”, investments in regional train links (such as the East-West Rail project that will connect Oxford to Cambridge) as well as for the Devolved Authorities provide an opportunity for talent redistribution across the whole country, building on hybrid and remote working first embraced during the pandemic.
For government departments and businesses, this represents an opportunity to:
Investing in regional talent development and co-locating delivery teams, digital specialists, and policy functions in regional hubs could enable faster decision-making, support place-based innovation, and improve citizen outcomes. The government has set out a challenge for the Civil Service to improve productivity and efficiency and make real-world savings of 5% by 2030 – new regional offices could act as the engine rooms for this creativity, productivity, and modernisation agenda.
To unlock these benefits, organisations must focus on embedding a clear vision, shared purpose, and common ways of working, especially as roles become more geographically dispersed. Regional hubs bring greater understanding and local connectivity but need to remain connected to prevent further silos forming. It becomes even more critical that everyone understands what they are working towards and how to ensure alignment across teams and clear-eyed delivery of the Government’s missions for the whole UK.
The Spending Review has provided much needed clarity on how the government will invest and spend over the next 5 years – but this is just the beginning. The fundamental shifts outlined by the Chancellor, and the expectations placed on all departments to be more agile, more modern, and more efficient whilst delivering better outcomes, will present challenges for departments in how they reform a legacy delivery system. Siloes must be broken, inefficiency must be rooted out, and strategies and plans must be delivered on time and to budget.
Departments that have received multi-billion-pound settlements and investments must be ready and able to show results and build confidence from the government and the taxpayer that money is being invested wisely.
AI is a huge part of our future, but it isn’t a magic wand – it must be targeted at the areas where it can drive the most value and unleash the skills and capacity of the Civil Service to focus on solving the complex problems that our citizens face in their everyday lives. Listen to our podcast, Applications of Generative AI in the Public Sector.
Creating regional clusters of talent and innovation will support national growth, but the government must ensure that the investments they are making in housebuilding and improving transport connections are delivered on time, so citizens have the confidence to move from urban centres such as London into these new and vibrant “places”.
If we can successfully deliver the right combination of strategy execution, creativity, and talent redistribution, National Renewal is possible.
As always, we’re here to support your journey. If you’re navigating the changes that the Spending Review has had on your department, or on your organisation, we’d love to discuss how we can help. Get in touch or check out our work in the Public Sector space.
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