The government recently released the outcomes of the 2025 Spending Review. This sets departmental resource and investment budgets through to the end of the decade. In this article, IF researcher, Conor Nakkan, explains that while there were some welcome announcements, the needs and interests of younger generations continue to be largely overlooked.
Intergenerational Inequality in the UK
Over the past two decades, the divide between the old and young in the UK has widened dramatically. Across nearly every major policy area, from housing and employment to education and health, young people are falling further behind.
The Intergenerational Foundation’s new report, A Growing Divide, provides a comprehensive analysis of these structural inequalities. It also examines how public spending is distributed between age groups. The findings are stark. Since 2004-05, total government spending per pensioner has increased by 55% in real terms, compared to just 20% per child. As a result, the gap in total spending on children and pensioners has widened by 170% – from £4,700 in 2004–05 to £12,600 in 2023–24.
These trends ultimately reflect political choices. Successive governments have consistently prioritised spending that disproportionately benefits older cohorts, while underinvesting in the young. This is the backdrop against which the 2025 Spending Review should be analysed.
2025 Spending Review at a glance
At the outset, it is important to note that the 2025 Spending Review only covers government spending that can be reasonably planned in advance. This is referred to as “Departmental Expenditure Limits” (DEL), which makes up around 40% of total government spending. The remaining 60% falls under “Annually Managed Expenditure” (AME), which is more volatile and demand-driven. This spending covers areas such as welfare payments, public pensions, and debt interest.
Within DEL, spending is further split into day-to-day spending, which includes things like staff salaries, and investment spending, which covers spending on physical and financial assets.
The Review confirmed that day-to-day spending will rise from £517.5 billion in 2025–26 to £583.9 billion in 2028–29. Investment spending will increase from £131.3 billion to £151.9 billion by 2029–30. These allocations reflect average annual real-terms’ increases of 1.2% and 1.8%, respectively.
It is worth noting that despite Chancellor Rachel Reeves’ claims that these figures reflect the government’s ambitious commitment to deliver national “renewal,” they are relatively modest by historical standards.
Welcome investments in social housing and transport
Some of the most promising announcements from the Spending Review are those related to housing and transport. The government has pledged £39 billion over 10 years for a new Affordable Homes Programme. Other housing investments include a further £4.8 billion in housing finance to support private housebuilding, and £1 billion for the remediation of social housing.
Given the scale of the housing crisis in the UK, and the extent to which this crisis disproportionately impacts younger and lower-income households, such investments are both welcome and necessary. Combined with recent planning reforms, these measures represent the most serious attempt to tackle housing supply in years.
However, as IF has previously argued, measures to increase housing supply only address part of the overall problem. Much of the UK’s existing and well-located housing stock is under-occupied by older individuals. This means that policies that incentivise downsizing and improve how the existing housing stock is allocated are also essential.
The Review also allocates £15.6 billion of investment to the Transport for City Regions (TCR) programme. This long-term, devolved funding is aimed at improving transport infrastructure across England’s major city regions. This funding could help expand access to jobs, education, and training – particularly for younger people who rely heavily on public transport.
Education and skills
The Spending Review increases the core schools budget by £4.7 billion in cash terms by 2028–29, compared to 2025-26. This equates to an average real growth of 1.1% per pupil per year. The government also reaffirmed plans to rebuild or refurbish over 500 schools.
More significant, however, is the pledge to invest an additional £1.2 billion annually in apprenticeships and adult training by 2028–29. As Reeves noted in her speech, this funding aims to support over one million young people into work or training. This is a welcome step. For too long, vocational and technical pathways have been undervalued in comparison to academic routes. A sustained investment in apprenticeships could help create more diverse and accessible routes into stable employment.
The picture for higher education is more mixed. While universities will benefit from increased R&D spending – with overall research funding rising to £22.6 billion by 2029-30 – there is no new funding specifically for university teaching or core operations. More importantly, there is no reversal of recent student loan changes, and no action on rising student debt or the erosion of maintenance support. With living costs rising and real-terms student support shrinking, many students are struggling to meet basic expenses. The fundamental issues facing students remain unaddressed.
More funding for the NHS, but who benefits?
The Review confirms a significant increase in NHS funding, with day-to-day health spending set to reach £226 billion by 2028–29. This includes an additional £29 billion in real terms over the period and £2.3 billion additional capital funding for NHS technology and infrastructure.
While this funding uplift may ease pressures and improve efficiency, it does not address the deep inequalities in how health resources are distributed. As IF research shows, health spending is already heavily weighted toward older age groups. Between 2004–05 and 2023–24, government health spending per child increased by just 3% in real terms — from £1,510 to £1,559. Over the same period, health spending per pensioner rose by 73%, from £4,336 to £7,522. The result: a 110% widening of the per-person health spending gap.
Perhaps most concerning is the neglect of mental health services, which receive little attention despite soaring demand among young people. In December 2024, 486,500 children and young people were in contact with mental health services, compared to 96,800 in April 2016. This represents a 400% increase in just eight years.
Youth services
The government has also committed to publishing a new National Youth Strategy in Autumn 2025. Ahead of that, it has pledged a capital programme to build and upgrade youth centres, supported by £132.5 million from dormant assets between 2024 and 2028. This funding aims to support disadvantaged young people to access music, sport, and drama through improvements to libraries and cultural facilities.
While this investment is long overdue, it does little to address the broader structural pressures facing young people today. Youth services have seen deep cuts since 2010, and even with this new funding, overall provision remains far below historic levels.
What must change?
In some ways, the 2025 Spending Review marks a step in the right direction. It provides much-needed investment in housing, transport, schools, and skills. But set against the scale of the challenges facing younger generations, it fails to meaningfully close the growing generational divide.
In part, this failure reflects the lack of robust mechanisms within central government to understand how public spending is distributed across age groups. As IF has recommended, one way to fix this would be to conduct intergenerational impact assessments of major spending decisions. These would help to evaluate how policies affect different age groups over time as well as ensure that short-term choices do not come at the long-term expense of younger and future generations.
Another approach would be to require the government to publish a statutory Intergenerational Report that examines the long-term sustainability of current spending patterns and their impact on different generations. Such a report could provide the transparency needed to hold governments accountable for their choices and force politicians to confront the consequences of age-biased spending decisions.
Until such mechanisms are in place, Britain’s generational divide will likely continue to widen, leaving young people to bear the cost of political choices that consistently favour the old over the young.
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Image © UK Parliament / Maria Unger