Rachel Reeves must invest billions to prioritise economic growth in Britain and not just “balance the books” in the spending review, Sir Tony Blair’s think tank has warned.
The choices made next week by the chancellor will show how “bold” the government is willing to be to deliver growth, the Tony Blair Institute said.
Both Sir Keir Starmer and Ms Reeves have said that making the country better off is their number one aim in government.
But earlier this week Ms Reeves was warned by experts that she will have to increase taxes and cut public spending amid rising prices and the impact of Donald Trump’s trade war.
On Wednesday, Ms Reeves reasserted her manifesto pledge not to raise taxes, insisting the spending review is "fully costed and fully funded" and she would not need to find new money.
But the Resolution Foundation joined critics from within government to warn that Ms Reeves may have no choice but to trim public services as pressure grows to fund defence, the NHS and policies such as more free school meals for the poorest children.
The Tony Blair Institute warned that while Ms Reeves would have to make “tough choices” they would have to be the correct ones, as it called for investment in a range of areas including innovative ‘green’ technologies, greater use of AI and a new NHS body focused on preventative medicine.
An analysis by the organisation warned: “The upcoming spending review will show how bold the government is willing to be to deliver its growth mission.”
TBI executive director for policy Sam Sharps said: “Next week’s spending review cannot just be an exercise in balancing the books. While tough choices will be necessary, making the right ones will be essential.
“The UK cannot afford to keep throwing more money at outdated delivery models. We need a smarter, more integrated and more responsive digital state.
“Artificial Intelligence offers a powerful opportunity to free up staff time, improve service quality, and reduce long-term costs across public services. But real gains will only come with serious investment in infrastructure, capability, and coordination.
“TBI estimates that investing £4 billion per year across the public sector could yield £11 billion in net annual savings by the end of this Parliament - rising to £40 billion by 2040.”
He added: “Even in tough times there is scope to do a lot. Applied in the right way, government spending can provide the tools to build a stronger economy, better public services and a healthier, more productive country.”
On Wednesday, the chancellor will unveil the results of her line by line spending review, setting out the budgets of government departments until the end of the decade.
It will include day-to-day departmental spending for the next three years and investment spending for the next four.
