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On 11th June 2025, the UK government announced details of their 2025 Spending Review. Linked to their “Plan for Change”, this review was billed as a critical point for the government to set out how they would meet their missions, whilst also keeping within their fiscal limits.

What is a spending review? 

Spending reviews are a process by which the government sets out public spending plans for its departments. Spending reviews were first introduced in 1998 as part of a package of reforms to the UK macroeconomic framework introduced by New Labour. 

For the Treasury, they provide increased stability to the public finances, enabling it to consider the competing pressures on the government finances in the round, at one moment in time.

In this Spending Review the Chancellor set out how budgets for all government departments for the years from 2026/27 to 2028/29, and investment spending plans for a further year (from 2026/27 to 2029/30) would be allocated. The headline announcements included:

• A £39 billion investment over the next decade to fund affordable housing
• A 3 per cent budget increase each year for three years for the NHS - an increase of £29 billion by 2028
• All children with a parent claiming universal credit would now be eligible for free school meals
• £15.6 billion of transport spending in England’s city regions 

In this article, we’ll explore what these spending decisions mean for Gloucestershire’s VCSE organisations and their communities.

NHS  

• £29 billion real terms increase to the day-to-day NHS budget over the next three years
• Up to £10 billion earmarked for new technology, including changes to the NHS app such as implementing single patient records
• A £100m investment in community health partnerships for adults with complex needs
• Development of a social impact investment vehicle to support mission delivery and tackle complex social problems. An announcement about the vehicle will be made over the summer

The Spending Review generally aligned with the priorities included in the NHS 10-Year Plan, which focuses on three big shifts:

• Hospitals to community
• Analogue to digital
• Sickness to prevention

For the VCSE sector, a focus on prevention should lessen demand for some services over the long-term, but there was little in the Spending Review for organisations currently under pressure. Shifts to digital services will provide welcome cost savings for NHS departments, but with 6-8% of Gloucestershire’s adult population effectively “offline”, it’s likely that VCSE organisations will need to step-up to combat digital exclusion.

The announcement of an expanded mental-health support offer for schools and a £100 million investment in community health partnerships for adults with complex needs will help in reaching vulnerable individuals before problems escalate and we await further information about how these plans will be rolled-out locally.

With ICBs needing to implement a 50% reduction in operating costs, it’s questionable whether they will retain adequate capacity to implement these digital, community and prevention-focused initiatives, and the requirement for VCSE organisations to deliver ever better value will present challenges.

Local Government 

• Additional £3.4 billion in grant funding per year by 2028/29 
• 3.1% increase in core spending power across the Spending Review period  
• Action to return local government to a sustainable financial position

Over the past decade, reductions in Local Authority funding have limited the amount councils have been able to invest in VCSE sector services. Whilst the 3.1% real terms increase across the spending review will not reverse the impact of austerity, it marks a positive shift in national policy direction. 

Medium and large organisations have a greater reliance on government income, with 25% and 27% of their total revenue respectively coming from government grants or contracts.  Predominantly, delivery organisations employ significantly more staff than small and micro-organisations and as such have been disproportionately affected by recent increases in the National Living Wage and lowering of the National Insurance threshold. The 3.1% increase in spending power gives councils some scope to reinvest in VCSE sector services to uplift contracts, which is vital to protect frontline services. 

The government’s commitment to English Devolution was set out in their white paper in December 2024. With an ambition to integrate services around individuals, a shift in focus towards prevention, and a commitment to devolve power to local areas, the document echoes what has been said by the VCSE sector for a long time - the best solutions for communities come from communities. For VCSE organisations working within Gloucestershire districts, we hope that in time these commitments will open up new opportunities for co-production, partnership working and innovation. 

However, delivering on these ambitions will require more than just structural reform it needs long-term investment, equitable partnership and a shift in commissioning culture. The procurement targets in the National Procurement Policy Statement referenced in the Spending Review are a welcome step towards recognising the value of smaller, local organisations. Rob Fountain, Head of Strategic Partnerships, comments:

“It’s great to see this and an acknowledgement that VCSE organisations are crucial providers of a range of public sector delivery. The fact is that public money should not be spent with VCSE organisations because they are non-profit, but because they are so closely rooted in their local communities. Public services need to respond to the way individuals and neighbourhoods are, and it is locally based organisations, often smaller and less able to naturally ‘compete’ in procurement processes that are best placed to know, understand and have the trust of local citizens. So the government’s position on this is positive, but let’s be clear that this is not charity, it’s about smaller and hyper local organisations having a unique position in meeting public needs.” 

As the government sets out its vision for change, the VCSE sector must remain part of that conversation, challenging, contributing and collaborating to ensure that policy translates into real change not just for the sector but the communities of Gloucestershire.

Children and Families  

• Expansion of free school meals to all families on Universal Credit for September 2026
• Plans to deliver breakfast clubs to every primary-aged child in England announced
• An additional £1.6 billion per year by 20238/29 to expand government-funded childcare schemes for working parents 

Approximately 7,000 families will benefit from the expansion of free school meals in Gloucestershire. Since the cost-of-living crisis began, demand for food banks has risen exponentially, and, with families making up the majority of users. It is thus hoped this increase in provision will help ease the current pressure foodbanks are under.

However, the benefits extend far beyond the immediate financial relief for families. Joanna Scott, Programme Director at Feeding Gloucestershire, explains: “The food we eat as children has a huge impact on our wellbeing. Sadly, far too many children are missing out on nutritious food, with knock-on effects for their health both now and in the future. Free school meals are a vital part of a nutritional safety net for children, which don’t just help to address poverty, but help to make children healthier, happier, and more successful in the long run.” This perspective is echoed by organisations like The Great Plate, which see nutritious school meals as essential to building a fairer food system.  

 “At the Great Plate, we believe every child deserves access to fresh, nourishing food every day, without stigma. School meals should be something all children can rely on, not only to fill them up but to support their wellbeing, development, and dignity. Our approach centres on flavour, variety, and whole ingredients, and we see the impact of that care in children’s growing confidence around food. Expanding free school meals to all children on Universal Credit is a vital step toward a fairer, more inclusive food system."   

It’s important to note that, although all families in receipt of Universal Credit will be eligible for free school meals, families will need to apply to receive the benefit. VCSE sector organisations can provide vital support in sharing this message with eligible service users: https://www.gloucestershire.gov.uk/education-and-learning/free-school-meals/apply-for-free-school-meals/

Asylum Hotels  

• Real terms asylum spending is set to decrease by an average of 1.75% per year between 2025 and 2029
• £200m of transformation funding to accelerate the transformation of the asylum system and end the use of asylum hotels 

Asylum hotels were introduced in 2022 as a short-term response to the growing numbers of people seeking asylum and delays in the processing system. The Home Office has consistently maintained that use of the hotels was intended to be temporary. The Spending Review stipulates a clear timeline: by 2029 the use of asylum hotels will end as part of a wider package of asylum system reform. 

While the commitment to end hotel use is welcomed, there are concerns about how the transition will be delivered. In Gloucestershire, around 200 people are currently housed in two asylum hotels. Gloucestershire Action for Refugees and Asylum Seekers (GARAS) supports the move away from hotels. 

“Dispersed accommodation is far better for individuals. It allows people to settle in communities, access appropriate support, and begin to rebuild their lives with dignity,” says Adele Owen, Director of GARAS. However, she notes that implementation will not be without challenge. “There is currently a shortage of suitable housing in Gloucestershire, particularly for those granted leave to remain. The rural nature of much of the county adds another layer of complexity in ensuring access to services and integration.”  

There is speculation that the government may turn to the increased use of hostels as an interim solution. While GARAS recognises the potential of hostels as a more community-oriented model, Adele adds, “We are open to their use in principle, but we are nervous about how secure and appropriate they will be for vulnerable individuals. Any accommodation model must prioritise safety and dignity.”  

While the ambition to reduce reliance on emergency hotel accommodation is widely supported, its successful delivery will depend on the development and adequate funding of alternative models and support structures. 

Young People  

• Capital Investment programme to build youth centres, improve and equip existing facilities 
• Funding for activities young people want to take part in 
• £132.5m of dormant assets unlocked to provide music, sport and drama opportunities for disadvantaged young people 
• £1.2b a year by the end of the spending review to support young people into training 

Youth services are vital; they not only support young people in developing confidence and life skills but also act as a launchpad for broader development opportunities. The importance of high-quality centre-based youth provision cannot be overstated. For every £1 invested in youth work, there is a return of between £3.20 and £6.40 in public sector savings in areas such as health, education, employment, and reduction in crime. 

The Department for Culture, Media and Sport (DCMS) will publish a new National Youth Strategy this autumn. Ahead of that, the Spending Review recognised the value and impact of youth work. Across Gloucestershire, youth services have experienced a year-on-year increase in demand. In addition, providers are also reporting a rise in the complexity of need. Young Gloucestershire alone has recorded a 53% increase in demand for its services since 2021, with particularly sharp rises in cases related to mental ill health, wellbeing and adverse childhood experiences. 

As a result, expenditure has outstripped income by 12% over the past two years. With over 100 youth-focused organisations, employing approximately 300 full-time equivalent staff, recent increases in National Living Wage and National Insurance contributions will place further strain on budgets in the coming financial year. National funding commitments must be coupled with targeted investment and equitable commissioning so the VCSE sector can continue to meet the rising needs of Gloucestershire’s young people.  

Warm regards
Matt Lennard (CEO)