Following a 45-minute announcement, 136 pages and a year in Government – we finally have the 2025 Spending Review. Antonia Jennings, CEO at Centre for London, looks at what it means for the capital.

After much noise from many commentators across the political spectrum, we’re seeing a split picture for the capital. London was noticeably absent in the Chancellor’s speech, with the exception of the pre-agreed Heathrow Airport expansion, and a small undetailed nod to the Transport for London (TFL) grant.

At points, the Chancellor veered into the disappointing anti-London rhetoric, pitting the capital and South East against the rest of the country. The economic headwinds affecting our country mean we currently need the whole country to succeed, and that must extend to the capital and its nine million residents.

Regardless of which voters you are targeting, pitting the capital against the rest of the country is not good policymaking, especially given the current Government’s headline focus on addressing growth.

London is the engine of our country’s growth, producing £1 in every £4 to the Treasury despite having only 15% of the population. Our stagnant productivity levels suggest our contribution could be far greater still. Investment into the capital – particularly in transport infrastructure – could reboot our economy, placing money into the pocket of the Treasury for public services across the country, and generating desperately needed funds for improving living standards. For the whole country to succeed, London has to succeed.

Yet, some of the Spending Review allows room for cautious optimism. Among the anti-London discourse, some of the policy change could – if delivered justly – have potential positive impacts on the capital. Broadly, these changes sit across three camps: housing, local government finances and transport.

Housing

Most notable was the £39bn provided to the Affordable Homes Programme (AHP) over a 10-year period – almost double the provision within the previous spending review. This grant is set to get spades in the ground and start building the much-needed affordable homes across the country.

In the 2021-2026 Spending Review, London was allocated roughly a third of the AHP. The reality is, London is the epicentre of the UK housing crisis – with 366,000 households on the social housing waiting list, higher than the population of Leeds. For this increase to relieve pressure on our social housing sector, London needs to be prioritised when the AHP funding is allocated.

Sitting alongside this capital investment in housebuilding are a few other key measures. As requested by registered providers, the Government has provided a 10-year social housing rent settlement in line with inflation +1%. This sets the limits on how much rent social housing landlords can charge. By extending the timeline from five to 10 years, and tying it to inflation, it allows for long-term budgeting, investment and strategic planning for providers such as the G15 group of housing associations in London.

For emergency provisions, the Government have set aside £950m to invest in temporary accommodation. Many Londoners are currently living in cramped conditions without access to a kitchen in hotels and B&Bs. On average, we now see one child in every London classroom living in temporary accommodation, a disgrace for the richest city in Europe. This fund, if we see allocation to the capital, would allow local boroughs to improve their supply of temporary accommodation – so that families who are stuck waiting for a home have a decent standard of living.

The devil here, for London, will be in the detail. We need to see substantial allocation of all funds related to the housing crisis to the capital, from AHP to improving supply of temporary accommodation.

Local Government Finances

In London, and across the UK, our local authorities are teetering on the edge of bankruptcy. With adult social care, SEND provision and temporary accommodation costs skyrocketing, we’ve seen almost a quarter of London boroughs require emergency funding packages this year.

Often, when we talk about Government budgets, we hear of ‘winners’ and ‘losers’. At a surface level, local authorities could be seen as one of the ‘winners’ of this Spending Review. After defence and health, local authority budgets saw some of the largest growth in comparison to 2024/25 – with an average annual real terms increase in overall local authority core spending of 3.1% over the spending review period.

Over a decade of austerity has squeezed budgets on all sides. This worsens the capital’s health and wealth on many metrics to some of the highest levels in the country – a third of the capital’s children in poverty, where I live Tower Hamlets that rises to 48%. This of course subsequently increases demand and need for availability on the council services themselves. This is a national picture as council budgets across the country fell 40% in real terms between 2010 and 2020, but a picture that has extremities in London. Sixteen of London’s 33 Councils are close to bankruptcy.

In more positive news for the capital, Rachel Reeves also confirmed that we would receive an integrated financial settlement in the year 2026/27. Moving away from a fragmented system where budgets are set and controlled by national government, this provides a single funding pot which can be managed by the Mayor and the Greater London Authority. It’s the first step towards fiscal devolution, but it’s the tip of the iceberg when it comes to the various devolved fiscal levers that the capital could benefit from.

Transport

In amongst a list of public transport infrastructure investments across the country, London was left off the list for capital investment into a new major infrastructure project.

This is not for want of trying – the DLR extension, the Bakerloo Line extension and Crossrail 2 have all been in the pipeline for decades, with strong business cases and various funding proposals developed. If London is to meet the Government’s housebuilding targets and end our stagnating productivity, we’ll need new transport routes in the capital.

The DLR extension is the only infrastructure project to get a look in at the Spending Review, the Chancellor stating they’ll ‘explore options.’. There are a number of ways in which London could self-fund new infrastructure projects. If the Government unlocked the fiscal levers, the capital could borrow against future growth or utilise land value capture to pay for our own infrastructure. We have this proven as a model through the recent success of the Elizabeth Line, the first Crossrail project, which was 75% funded by the capital. There should not be a barrier to replicating this model.

Outside of the major infrastructure conversation, we did see a long-term settlement for TfL of £2.2bn over four years. Again, the consistent long-term nature of these settlements provides stability for our public services, and private investors allowing TfL to plan into the future. Much of the £2.2bn will go to update our current services, from carriages to signalling systems, to ensure our public transport functions smoothly. TfL have confirmed that the funding will be used for essential upgrades, such as replacing the Bakerloo line trains (the oldest passenger trains in use in the UK). But, again in the context of austerity, this public transport investment provides little room for growth and is simply playing catch up after a decade of underfunding.

So – what’s the key takeaway for the capital? There’s a lot of noise circling around this spending review, but the reality is, at this point, we have to wait and see as a lot is resting on exact allocations for our most populous region – a region too often used to play politics. While the rhetoric around London was disappointing, we urge the Government to not let this translate into poor policy decisions – in this case, that means we need funding allocated to the capital according to context and need. The nine million London residents deserve to not be ignored.