UK Chancellor Rachel Reeves has pledged to invest £3.25bn in a “transformation fund” that aims to bring down the cost of running the government by investing in technology tools such as AI. Speaking in front of the House of Commons today, Reeves revealed her Spring Statement pledging investments to modernise government tech and the British […]
UK Chancellor Rachel Reeves has pledged to invest £3.25bn in a “transformation fund” that aims to bring down the cost of running the government by investing in technology tools such as AI.
Speaking in front of the House of Commons today, Reeves revealed her Spring Statement pledging investments to modernise government tech and the British armed forces, while promising to cut budgets for welfare and across the civil services.
Reeves, who became Chancellor last summer, unveiled a plan to cut the cost of the British Civil Service – which runs most governmental department – by 15%, in order to save £2.2 billion by the end of the decade. This would be achieved thanks to the new “transformation fund” which aims to make public services more efficient.
The first allocation from the fund was revealed to be investment in AI tools to “modernise” the state, technology for the probation service and investment to support children into foster care to reduce future cost pressures.
“We are making our state leaner and more agile”, she announced. “This investment will deliver a further £3.5bn in day-to-day savings by 2029/30.”
The move was widely welcomes by industry figures, who also called for a significant investment in training and skills to support the rollout of AI systems.
Rob Sinclair, CEO of investigative tech firm Altia, said: “We’re pleased to see the Chancellor’s efforts to improve the efficiency of Government departments, particularly her ambition to inspire the pioneering of AI technologies which will support this.
“With public services under immense pressure, ongoing investment in skills and technology is needed and without this, there is a real risk that investigations could take longer, fewer cases could be pursued, and criminals could exploit gaps in enforcement.
“As the Chancellor commits to reducing the workload on public services, I anticipate that more police forces and security organisations will turn to technology to alleviate budget pressures. Solutions that improve efficiency, automate administrative tasks, and enhance intelligence-sharing will be crucial. Digital transformation in policing is no longer a luxury—it is a necessity.”
Damian Stirrett, group vice president & general manager UK & Ireland at ServiceNow, added: “The Chancellor’s Spring Statement has set a bold vision for the power of emerging technology and particularly AI to drive productivity across UK public services and contribute to growth in the wider economy. The Prime Minister is right to highlight that the UK public sector could unlock £45 billion annual savings by investing in its technology, but this will require a radical step-change in the way the Government invests in new technologies.
“The announcement today of a new £3.25bn Transformation Fund is a significant step. This is an opportunity for the chancellor to demonstrate tangible action. From reskilling programmes for workers, visible reductions in operational costs, or creating new job opportunities for the AI era, these are just some of the benefits that could be realised with the UK committed to restoring economic growth.”
Legacy IT challenge
However, industry figures argued that legacy IT infrastructure could act as a limitation to the Reeves’ plans. A Public Accounts Committee report, published today, warned that “out of date tech and poor-quality data put public sector adoption at risk as public trust jeopardised over transparency in use of algorithms.”
Etay Maor, chief security strategist at Cato Networks, warned the Labour government not to treat Ai as a “silver bullet” to solve all problems.
Maor said: “The Public Accounts Committee report underscores the need for upfront investment. That means not just buying AI tools, but upgrading underlying systems. I urge the UK Government to address the legacy IT issues head-on in order to be able to make a positive difference to the workforce and the economy.
“Crucially, investment also means training. Ignoring the security implications – both of outdated systems and untrained staff is a recipe for disaster. Think data leakage potential, and the risks of using tools without understanding their vulnerabilities. Security should be baked in from the start, not bolted on as an afterthought, as neglecting this principle can lead to significant vulnerabilities and breaches.”
“Ultimately, a piecemeal approach will cost more in the long run. We need a holistic strategy that tackles legacy tech, prioritises security, and invests in people.”
There is also concern around whether the UK is able to deliver on the Chancellor’s AI plans, given challenges around attracting the right tech talent into the country. Alexandra Mousavizadeh, co-founder and CEO of Evident, also warned that Britain’s National Grid, which supplies power across the country, is “woefully underprepared” to support the introduction of large-scale AI projects.
Mousavizadeh added: “While today’s Spring Statement made several references to pioneering AI tools, the reality is that the UK’s AI strategy has arrived five years too late, severely underfunded and woefully unserious about addressing the problems that caused Britain to fall behind in AI in the first place.
“Britain faces serious structural challenges around attracting and keeping the best talent in technology, creating a capital ecosystem to support innovation and reducing the high cost of energy. The AI talent that the UK retains still doesn’t have access to the massive amounts of risk capital available to US startups.
“Our convoluted investment landscape, one that limits access to government funding, is flanked by a waning national commitment to R&D. Few AI companies stay in the UK long enough to hit the public markets; those that do are greeted by a faltering London Stock Exchange that offers few incentives compared with other financial centres.
