Changes To Departmental Spending At The Upcoming Budget

20th November 2025

An Institute for Fiscal Studies (IFS) article published on 19 November 2025e explains that Chancellor Rachel Reeves faces higher borrowing forecasts ahead of the November 2025 Budget. This may force her to consider cuts to departmental spending or tax rises.

Options include trimming unallocated day-to-day spending in 2029-30 or reopening recently agreed departmental budgets, but both approaches carry risks to credibility, public service performance, and the Spending Review process

Key Points from the Article
Fiscal context: Borrowing forecasts have risen, meaning Reeves must adjust spending or raise taxes to meet fiscal rules.

Departmental spending plans:

Day-to-day spending is planned at £520 billion this year.

Investment spending is planned at £130 billion.

Growth is front-loaded, with faster increases early in the parliament and slower growth later.

Cutting unallocated spending (2029-30):

Easiest option since departmental allocations aren't yet set.

Savings range from £2.8 billion (halving growth) to £16.2 billion (flat in cash terms).

Risk: lacks credibility, as past governments often topped up spending later.

Cutting allocated budgets (2025-29):

More transparent and credible but undermines the certainty promised in June's Spending Review.

Savings could reach £26.3 billion if day-to-day spending is held flat in real terms.

Investment cuts save money but don't help meet the borrowing rule (since investment is excluded).

Credibility challenge:

Bond markets and the OBR may doubt unspecified future cuts.

OBR now forecasts overspends as well as underspends, reducing the apparent savings.

Public service impact:

Current plans already rely on historically high productivity gains.

Significant cuts would require scaling back ambitions for service improvements.

Local Services at Risk
Healthcare: NHS Scotland funding is tied to UK departmental spending. Cuts could mean tighter budgets for rural hospitals and GP practices, already stretched in Caithness and Sutherland.

Transport: Investment in roads, ferries, and rail links may be squeezed. For communities reliant on single lifeline routes, delays in upgrades or maintenance could hit hard.

Education: Schools in small towns may face staffing or resource pressures if budgets are trimmed.

Community support: Programmes for rural resilience, small business grants, and local councils could see reduced allocations.

Conclusion
The Chancellor has two main paths:

Unspecified cuts in 2029-30 - politically easier but risks being seen as unrealistic.

Reopening departmental budgets now - more credible but politically costly and damaging to the Spending Review process.

Either way, substantial cuts would likely reduce public service performance and test the government's fiscal credibility.

Authors of the report
Bee Boileau Max Warner Ben Zaranko

The above is a summary of the IFS article
Read the full article HERE