The article  was first published on OMFIF on  June23th  2025.    

Andrea Correa is Senior Economist, Economic and Monetary Policy Institute, OMFIF.

Not just more money, but better use of it

At first glance, the UK’s June 2025 spending review signalled a shift from ‘spending’ to ‘investment’. This change hinted at a more long-term vision for government expenditure.

However, a closer look reveals that while the language has changed, the substance is broadly the same. The review falls short of redefining the purpose, scope and strategic delivery of public investment. There is an urgent need to move beyond inputs and embrace a mindset of generating enduring public value through strategic investment.

The illusion of investment

The spending review presents a surface-level narrative of ‘choosing to invest’, especially in infrastructure. The decision to loosen fiscal rules for capital expenditure has enabled some planning for infrastructure, suggesting a window for more forward-looking investment. Yet this flexibility has not translated into a meaningful signal to investors about long-term fiscal sustainability or coherent planning beyond the immediate political cycle. Instead of laying the foundation for sustained, high-quality investment, the review’s proposals are concentrated within the next two years, aligned with the electoral timetable.

Moreover, key sectors such as health and social care have seen increases of 2.8% in day-to-day spending without any corresponding growth in capital investment. This underscores the continued focus on inputs (allocations, cuts, redistributions) rather than on outcomes and systemic transformation.

A further example is the recently announced 10-year Infrastructure Strategy comprising £725bn of government funding, which aims to deliver stability, investment and national renewal. While the scale and ambition of the plan are noteworthy, it remains largely focused on inputs and delivery pipelines, rather than clearly articulating the public value and long-term societal outcomes these investments are meant to achieve. Infrastructure, care systems and green transitions require not just more money but better use of it. Without that strategic clarity, we are at risk of mislabelling short-term expenditures as long-term investments.

Public investment should be understood as a commitment to deliver long-term value and better economic and societal outcomes, which in turn should bolster fiscal positions. A forthcoming OMFIF podcast featuring Mark MacDonald, global public finance management leader at EY, and Udaibir Das, visiting professor at the National Council of Applied Economic Research, highlights how the conversation around investment must refocus on why, what and how we spend public money. It is not enough to create larger budgets or loosen fiscal rules, we must define clear, measurable public value outcomes and design investment strategies to achieve them.

This reorientation demands a fundamental mindset shift: from seeing public investment as an accounting challenge to recognising it as a long-term institutional reality. Public investment should not be at the mercy of political cycles or reduced to administrative frameworks. Rather, it should aim to create enduring benefits: economic resilience, sustainability, social equity and citizen trust.

Building institutional capacity

One of the biggest barriers to meaningful public investment is institutional: fragmented frameworks, short-term budgeting and unclear mandates. While government agencies spend significant time on the administrative and technical aspects of budgeting, as the podcast points out, there is insufficient focus on whether these structures are delivering results. This calls for a cultural shift in how the public sector conceives its investment role, adopting an investor mindset that links money spent today to public value delivered tomorrow.

Institutional reform should include the development of more participatory and transparent budgeting processes, giving citizens a stake in defining investment priorities. It also means fostering closer collaboration between the public and private sectors, especially when tapping capital markets. Public investment is not solely the state’s responsibility; it is a shared endeavour that can benefit from private sector innovation and long-term risk appetite.

Capital markets are increasingly attentive to sustainability and social outcomes. Government credibility in the eyes of investors depends not only on fiscal prudence but also on clear, long-term strategies that reflect stable, inclusive and forward-looking policy environments. If the UK wants to unlock private investment in major public initiatives it needs to demonstrate a coherent public investment plan that transcends electoral cycles.

The failure to align investment planning with long-term public value is not just a technocratic problem, it is a political economy issue. Short-term political incentives discourage sustained investment in projects that may only see returns beyond a government’s term. This creates a bias towards spending, prioritising what is visible and immediate, rather than transformative and strategic. Addressing this requires political will and institutional mechanisms that embed long-term thinking into fiscal policy.

Redefining success in public finance

If public investment is to be understood as a social contract, then success must be measured not by how much is spent, but by how lives are improved. This requires new metrics and frameworks for evaluating public investment, not just in terms of gross domestic product impact or fiscal balance, but through indicators of well-being, equity and sustainability.

The use of tools such as participatory budgeting can help governments prioritise what matters most to communities. Citizens should not be passive recipients of public services, but active co-creators of public value. This strengthens democratic legitimacy and ensures that investment decisions reflect genuine societal needs.

We are at a pivotal moment. The UK’s fiscal future cannot rest on superficial shifts in language or marginal tweaks to expenditure frameworks. The 2025 spending review should be seen as a wake-up call. To meet the challenges of the next decade we need a paradigm shift: from spending to strategic public investment, from short-term allocations to long-term outcomes and from political decisions to participatory governance.