Are YOU about to be hit? The winners and losers in Rachel Reeves' spending review as impossible choice looms

Rachael Henry, head of advocacy at the Institute for Public Policy Research, said: "The spending review will set the trajectory for the rest of this parliament. And there will be winners and losers. There’ll be really difficult trade-offs."

Reeves is preparing to unveil the Government’s day-to-day spending plans up to 2028–29, along with investment commitments through to 2029–30. But there is still uncertainty over which departments will be protected and where cuts may fall.

This is Reeves's first major test as Chancellor, and she faces it with little fiscal breathing room. Government borrowing rose to £20.2billion in April - £1billion more than the same time last year - driven by higher pension and benefit payments and mounting debt interest.

Although the economy showed modest growth earlier this year, Reeves is constrained by her self-imposed fiscal rules, which require all day-to-day spending to be funded by tax revenue and for debt to fall as a share of GDP by 2029–30.

The current forecast leaves just £9.9billion in surplus, the third-smallest on record, offering minimal headroom to absorb economic shocks or unexpected spending.

Balancing the books under fiscal pressure

Reeves has pledged to meet strict fiscal rules, ruling out major new borrowing. But the Organisation for Economic Co-operation and Development (OECD) has warned that "momentum is weakening" and urged the UK to "step up" its efforts to reduce debt.

The Institute for Fiscal Studies (IFS) has said trade-offs are inevitable: "Achieving stated objectives in some areas will likely require real-terms cuts elsewhere."

Deutsche Bank takes a more positive view, with senior economist Sanjay Raja noting more "resilience than expected" in the UK economy and stronger-than-average growth forecasts through 2027. Still, Reeves faces tough choices to fund her priorities.

Potential winners

Housing

Deputy Prime Minister Angela Rayner is dissatisfied with current housing funds. She is asking for more money for the Affordable Homes Programme, local councils, and homelessness support. The treasury has provided £2billion as a starting amount, but further funding talks have led to tensions. This is despite housing being considered a key capital investment priority.

Flooding

Environment Secretary Steve Reed is asking for significant investment in flood defences. The autumn budget showed a £600 million shortfall for flood and farming schemes. Post-Brexit farming support will drop after 2026, with most of the funding going to a small number of farms. Labour's £5billion commitment covers only the period up to 2026

Net Zero

Energy Secretary Ed Miliband has successfully secured funding for insulation schemes, which are central to the Government's net zero strategy.

The Chancellor has pledged £3.4billion over three years for energy efficiency and fuel poverty schemes, meaning other green programmes may face cuts.

Health

Health Secretary Wes Streeting will receive a major funding increase to support the NHS 10-year plan. The plan aims to move care into communities, improve technology use, and prioritise prevention. However, upcoming doctor strikes and unresolved drug pricing issues could create further challenges.

Schools

Teachers will receive a four per cent pay rise next year. While £615million will be provided to cover part of the cost, schools will need to fund the remaining £400million themselves. The Department for Education is expected to find savings, including from reduced energy costs and cutting public funding for level 7 apprenticeships.

What has already been announced?

While the Government has committed to increasing both day-to-day and investment spending, the rise is expected to be modest.

Reeves has already changed the way debt is measured, freeing up over £100billion for investment in infrastructure, research and development, and major capital projects.

• Winter Fuel Payments will go to around three-quarters of pensioners this year, after Reeves reversed plans to restrict them. The change will cost around £1.25 billion in England and Wales.
• Defence spending will rise from 2.3 per cent to 2.5 per cent of GDP by 2027, equating to an extra £5 billion a year, funded in part by cuts to the overseas aid budget. Ministers have signalled a longer-term goal of three per cent by 2034.
• The NHS is expected to receive a £30 billion boost over three years, according to reports.
• Free school meals will be expanded to 500,000 children in households on Universal Credit, regardless of income. Day-to-day education spending will increase by £4.5 billion a year by 2028–29.
• Transport investment of £15.6 billion will fund upgrades to trams, buses and trains in Greater Manchester, the Midlands, and Tyne-and-Wear — part of a shift away from London-focused infrastructure spending.
• Science and technology will receive £86 billion by the end of the parliament, targeting breakthroughs in medical treatments and energy storage.
• A new nuclear power station at Sizewell C could be announced, alongside plans for small modular reactors (SMRs) across England and Wales - part of the Government’s long-term energy strategy.

Possible tax rises Reeves could consider to plug the gap

It is unlikely any tax rises will be at the spending review as tax changes need a new law, which can only happen in a Budget. However, there's already talk that any extra spending could lead to higher taxes later on, unless the economy grows enough to bring in more money for the Treasury.

Sarah Coles, head of personal finance at Hargreaves Lansdown, has outlined what might be on the table.

Dividend tax

Further changes to dividend tax could be considered, though this would hit investors hard. "Investors have already seen horrible cuts in the dividend allowance and higher rates introduced, so it would be adding insult to injury," Coles said. "It would be counter-intuitive to make dividend investing less rewarding, given that the government is keen to encourage investment in the UK."

Inheritance tax

Tweaks to inheritance tax rules may also be on the table, especially the rule that allows gifts to escape tax if the giver survives seven years. "The Government could, for example, tweak the rule, which means that gifts of any size can be given to anyone, and as long as you live for another seven years, it’s out of your estate," Coles said. "However, it will have seen the potential backlash from touching the UK’s most hated tax."

Freezing income tax thresholds

An easier option may be to freeze tax thresholds further. This would raise money gradually through fiscal drag, although it would not help immediately.

Coles explained, "One easier option might be to freeze income tax thresholds until 2030, on the grounds it’s not a tax rise. The problem is that this will raise money in future years – beyond 2028 – so it won’t help in balancing the books in the interim."