Reeves to Champion £113bn Capital Investment in Spending Review

Rachel Reeves is set to prioritise £113bn in fresh capital investment as the centrepiece of the upcoming spending review, insisting that such large-scale funding for housing, transport, and energy would not have occurred without a Labour government.

The funds, made available through revised fiscal rules and allocated across the next parliamentary term, will form the core of the government's economic message in two weeks. This move comes amid growing pressure on Labour to present a more compelling economic vision in response to public frustration.

Despite concerns over government borrowing— which hit £20.2bn in April— the chancellor will defend the substantial investment.

Last week, Prime Minister Keir Starmer confirmed a reversal of the unpopular winter fuel cuts, and the government is also expected to take stronger action on child poverty, with Starmer reportedly leaning toward scrapping the two-child benefit cap.

Reeves told The Guardian that the spending review would demonstrate to both the public and financial markets that strategic borrowing will drive economic growth, create jobs, and encourage private sector investment.

“We’re building homes and vital infrastructure, from transport to energy,” she said. “It’s important that public funds support job creation, apprenticeships, and strengthen domestic supply chains.”

“In June’s spending review, we’re committing to invest £113bn more in capital projects than the plans we inherited. I want to ensure every pound benefits the UK economy and supports employment.”

Reeves will aim to use detailed announcements on how the £113bn will be allocated to quell unrest over the expected cuts to everyday departmental budgets, with some departments instructed to plan for reductions of up to 7% over the next four years.

Sectors likely to benefit include health and defence, while funding has already been pledged for prison construction by justice secretary Shabana Mahmood. Other major projects anticipated to get the green light include the Sizewell C nuclear power station.

The £113bn fund will also support East West Rail, major investment in housebuilding to meet Labour’s goal of 1.5 million new homes, protection of research and development funding, school reconstruction, and the initial phase of hospital building.

Ministers are expected to spend the week following the review promoting the infrastructure package, briefing MPs on the local impact of new projects.

Treasury insiders said Reeves recognises the importance of clearly outlining how the investment will be used to reassure both Parliament and the public.

A source close to the process said: “A key part of our case in the spending review is that the £113bn investment is only possible because of the decisions Rachel Reeves made. It was a deliberate political choice. That funding simply wouldn’t exist without a Labour government, and we plan to make that point repeatedly. Both the Conservatives and Reform opposed the changes to the fiscal rules, so they effectively oppose this level of investment.”

Labour MPs from across the party have recently increased pressure on the Treasury, calling for measures to soften the impact of disability benefit cuts and expressing frustration over the reversal on winter fuel support.

Several MPs, including former cabinet minister Louise Haigh, have demanded a new economic approach in response to Reform UK’s strong performance in the local elections. Chris Curtis, chair of the Labour Growth Group, warned that the economy was caught in a “doom loop” and that without bold intervention, Nigel Farage could be on a path to becoming prime minister.

Another source added: “This is real money—not vague promises or the kinds of pledges the Tories never delivered on. It’s tangible investment in Britain’s future, and that will be a central theme of the spending review.

“Yes, there are tough choices to be made in any spending review. But Reeves has taken a clear stance to prioritise long-term investment that will truly impact communities. These will be Labour homes, delivered by a Labour government. This funding is entirely down to Labour—no other party would have made it happen. We rewrote the rules, and that unlocked £113bn that wasn’t there before.”