Government Spending Review Announcement

Last week, the Chancellor delivered a statement to the House of Commons outlining the scale of public spending pressures she says are facing the Government.

As part of the statement, the Chancellor announced the launch of the next Spending Review. This will take place in two stages and will first consist of setting departmental budgets for 2025-26 alongside the Budget on 30^th October, followed by a comprehensive multi-year Spending Review to conclude in Spring 2025. Taking time to consider a multi-year spending review is welcome, as it will allow the Government to clarify its missions and priorities and ensure its spending plans align with them. The Chancellor also announced changes to the spending review framework, with the Treasury committing to hold a multi-year spending review every two years.

The upcoming Spending Review will take place in a difficult economic context. An audit of public spending undertaken by HM Treasury showed “the forecast overspend on departmental spending is expected to be £21.9 billion above the [expenditure] set by the Treasury at Spring Budget 2024”. As a result, the Government has announced a series of cost-saving measures, which has included shelving R&D investment projects that did not have funding allocated from existing budgets. This includes £1.3bn of funding for AI and compute projects that were announced by the previous Conservative Government. We are looking into how these decisions are affecting our members and the wider sector, and it will form part of our ongoing engagement with the new Government.

As the Government faces difficult decisions, it is now more important than ever to highlight the vital contribution of R&D and innovation to economic growth. CaSE is focusing on several pieces of work that will input into both stages of the next Spending Review to highlight the importance of R&D to economic growth and the Government’s growth mission. This includes a collaboration with the British Academy to provide an up-to-date and robust analysis of the economic returns of R&D, which will form a key piece of evidence for the Autumn budget in October. We will also be convening our members to discuss long-term funding cycles for key R&D institutions and how they should work in practice.

Alongside this, we are conducting a longer-term piece of work that will feed into the multi-year Spending Review in Spring. We will be convening our university, business and charity members and other stakeholders to highlight the importance of R&D to the Government’s priorities, including local growth plans, improving public services and the role of skills.