But don’t breathe too easily. The Chancellor’s Spending Review, to be delivered at 12:30pm on Wednesday after PM’s Questions, will set the tone for what’s coming next.
Tax rises may not be announced this week, but they’re almost certainly on the way as Reeves struggles to balance the books and PM Keir Starmer panics over the threat from Nigel Farage’s Reform party.
This is her chance to reassert control over a financial and political agenda that ran away from her with days of the election. Possibly, her last chance.
Talking down the economy, axing the winter fuel payment, hiking taxes, taking freebies, killing growth and running out of fiscal headroom have destroyed her reputation. Tomorrow, she needs a win. So what can we expect?
The big reveal will be how much each government department gets to spend between now and the end of the decade.
The review covers both day-to-day “resource” spending on every day government costs such as salaries, administration, NHS medicines and so on, and longer-term “capital” investment in infrastructure.
Reeves is prioritising three areas: health, security and the economy. That translates to more money for the NHS, police, schools, transport and defence.
Reports suggest the NHS will get a £30billion boost over three years, while education spending rises £4.5billion annually by 2028-29.
There’s also a plan to extend free school meals to 500,000 more children on Universal Credit, helping lower income families.
The Home Office may secure extra police funding, while defence spending is set to climb from 2.3% to 2.5% of GDP by 2027, to help face down Vladimir Putin’s Russia. This will be funded in part by cutting the overseas aid budget.
Reeves has already made a humiliating U-turn on cutting winter fuel payments for pensioners. She’ll now spend £1.25billion to ensure nine million pensioners with incomes below £35,000 get the money this winter.
Elsewhere, she’s earmarked £15.6billion for transport upgrades in Greater Manchester, the Midlands and the North East, to combat critics who say the government is too London-focused.
Science and tech will also benefit, with £86billion pledged to boost innovation, including research into drug treatments and battery tech.
There’s even talk of a taxpayer-backed nuclear power station at Sizewell C in Suffolk, plus mini-reactors elsewhere.
Some departments face real-terms cuts to make the sums add up. “Not every department will get what it wants,” Reeves has warned.
What she won’t do is explain how she plans to pay for it all. That part is coming in the autumn Budget – and it’s likely to sting.
She’s still pledging to stick by her strict fiscal rules. These state the government will only borrow to invest, and debt will fall as a share of national income by 2029-30.
Her headroom to meet that target is a mere £9.9billion, the third smallest surplus on record, and shrinking fast.
Borrowing is already sky-high. In April, the government borrowed £20.2billion as spending on pensions, pay and debt interest surged.
And while the UK economy grew 0.7% in the first quarter, that was largely due to businesses stocking up before Donald Trump’s trade tariffs landed.
It could slow dramatically in the second quarter.
That’s a disaster. Without stronger growth, Reeves will be forced to either raise taxes or cut public spending.
Neither will be popular, but Labour members would rather see tax hikes than spending cuts. Reeves has promised not to increase income tax, national insurance or VAT, but tax experts say there is still plenty she could do.
Tomorrow’s Spending Review may sound generous. But the bill is coming – and you’ll likely be the one paying it.
Here’s a list of what taxes Rachel Reeves may hike to claw back her spending in this year’s autumn Budget.