UK GDP report to show if economy kept growing in April – business live

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Britain is slowly turning into a “National Health State”, as lower-income families gain most from Wednesday’s spending review.

That’s the conclusion of the Resolution Foundation, the think tank, which has been busy analysing Rachel Reeves’s announcement yesterday.

An NHS state... Yesterday’s NHS-dominated settlement continues a pattern of recent Spending Reviews, which has led to a major reshaping of the state. By the end of the decade (2028-29), the health service will account for half (49 per cent) of all day-to-day public service spending controlled by Westminster – up from a third (34 per cent) in 2009-10.

…and shrunken public services elsewhere. While real, per-person funding for health has increased by 36 per cent between 2009-10 and 2028-29, it has fallen by 16 per cent for Justice, 31 per cent for Work and Pensions, and 50 per cent for Housing, Communities and Local Government over the same period.

Defence dominates infrastructure plans while total non-defence investment sees cuts. The £9.7 billion a year increase in capital spending between 2025-26 and 2029-30 includes an increase of £5.9 billion of financial transactions (primarily loans), with around two-fifths of the Warm Homes Plan now being funded by loans rather grants. Once these financial transactions are stripped out, the £7.4 billion a year increase in defence contrasts sharply with the £3.6 billion cut to real investment across all other departments.

The rise, fall and rise again of public service spending. Real day-to-day spending is now rising again in the 2020s (2019-20 to 2028-29) by 2.2 per cent a year, following a 0.5 per cent fall per year in the 2010s (2009-10 to 2019-20). In the decade prior to that, spending rose by 4.3 on average each year (2001-02 to 2009-10).

Lower-income families get a benefits-in-kind boost. The extra funding for hospitals, schools and the police relative to plans set out by the previous Government will deliver important benefits-in-kind to families. The Foundation estimates that a middle-income household will gain £1,400 on average for extra public service provision (in 2028-29), rising to £1,7000 for the poorest fifth of families.

From a summer of spending to another autumn of tax rises? The large increase in public spending has been funded in large part by the £39.7 billion of tax rises (in 2028-29) announced in the Budget last Autumn and £3.6 billion of benefit cuts (in 2028-29) announced in the Spring Statement – equivalent to £1,550 for every family in Britain. But the combination of a weaker economic outlook, an unfunded spending commitment on Winter Fuel Payments, and just £9.9 billion of headroom against the Chancellor’s fiscal rules, mean further tax rises are likely to be needed this autumn.