UK Chancellor Announces £3.25 Billion into Public Services Calling on AI to Drive Economic Growth Amid Spring Statement

London: UK Chancellor Rachel Reeves has invested £3.25 billion into public service reforms, placing technology and AI at the centre of the government's strategy to drive economic growth, boost public sector efficiency, and maintain the country's global competitiveness.

This funding will drive down the cost of running the public sector through the use of AI by enhancing productivity and streamlining operations. Through the use of AI to modernise the state and investing in cutting-edge technology for the Ministry of Defence, these measures aim to create a more efficient and effective public sector.

The UK is committed to becoming a defence industrial superpower by allocating a minimum of 10 per cent of the defence budget to new technologies, including drones and AI-enabled systems. This investment will drive demand for highly skilled engineers and scientists while opening new business opportunities for UK tech firms and startups.

By accelerating the delivery of innovative technology to the front line, the government aims to strengthen national security while ensuring that small businesses across the UK have better access to Ministry of Defence contracts.

The announcement comes against the backdrop of economic turbulence and fiscal tightening with the Office for Budget Responsibility having recently The Office for Budget Responsibility recently halved its GDP growth forecast for the year from 2% to approximately 1%.

Prior to the announcement, Prime Minister Keir Starmer highlighted the vital role of technology and AI in enhancing public services and boosting efficiency.

Unveiling his vision for AI integration, he stated, "What we want to do is make this state more agile. We do think it should be leaner, and we think we can make better use of technology, AI, in how we provide public services."

He reiterated that AI will be key to transforming the public sector, driving efficiency and cost savings while maintaining high service standards.

Bank of England Governor Andrew Bailey has also weighed in on AI's role in economic recovery, comparing its potential impact to past technological revolutions. He stated that AI could significantly "lift growth rates and per capita national income," positioning it as a crucial tool in addressing the UK's productivity crisis and long-term economic stagnation.

The Tech Industry Reacts

John Lucey, VP EMEA North for Cellebrite, commented: "The tidal wave of AI isn't slowing down, and public sector organisations can harness its potential to streamline time-consuming tasks such as reporting and data analysis to save hours and millions in efficiency. It's important that these AI systems are built on comprehensive data management systems and data privacy protocols to ensure that AI is trained on trustworthy data and doesn't breach compliance regulations or confidentiality."

"Especially when connected to public safety, AI always needs human verification and oversight. People must be the ones to govern AI's use cases, using it as an assistant to speed up otherwise menial and manual tasks. In the case of policing, digital forensics teams can utilise AI to speed up case times through content classification, evidence prioritisation and automated device extraction to expedite verdicts. Currently, digital investigators spend an average of 58 hours per case reviewing criminal devices due to growing data complexities, but using AI tools, they can shave vital hours off and close cases quicker than ever before."

Blake Richmond, Chief Operating Officer at Resonate, commented: "Our cities and regions are essential for growth, and we're pleased to be supporting the flow of people and goods that drive access to jobs, business and new opportunities.  We welcome further investment in data technologies and AI, which are key to modernising rail industry processes. By adopting smarter, data-driven systems, creates more opportunities to develop AI to optimise these flows across an increasingly connected transport system, supporting long-term economic growth and regional development."

Sachin Agrawal, Managing Director for Zoho UK commented: "Artificial Intelligence is already having a transformative impact on businesses, enabling efficiencies in areas like data analysis, fraud detection and forecasting which deliver tangible benefits to people and organisations. It can provide a strategic advantage in terms of real-time intelligence which can drive competitive advantage, enabling a business to be more agile, flexible and adaptable to identify or respond to market opportunities. It is encouraging to see the UK Government planning to drive efficiency through AI and technology. However, it is important to ensure ethical governance remains a priority."

"To help businesses continue to navigate the new tech landscape safely and securely, the government must establish clear frameworks that promote transparency, fairness, and human oversight while equipping the workforce with the skills to navigate an AI-driven future. Collaboration between policymakers, regulators, educators and industry leaders will be essential in setting standards that balance innovation with accountability."

"This includes developing comprehensive training frameworks to ensure workers at all levels, technical and non-technical, understand AI's capabilities, risks, and ethical implications and can use it effectively. Integrating AI literacy into education systems, expanding upskilling programs, and making AI proficiency accessible to all will be crucial in preventing skill gaps that could potentially widen economic and social divides."


Tristan Wilkinson, Chief for Public Sector at AND Digital: "AI has the potential to revolutionise industries and public services, driving greater efficiency, innovation, and economic growth, but to fully capitalise on these advancements, the UK must prioritise investment in AI skills development. Without a workforce equipped to build, manage, and ethically deploy AI, businesses and government departments risk falling behind in an increasingly competitive global market."

"Education and training programs should focus not only on technical skills such as coding and data science but also on AI literacy for non-technical roles, ensuring that workers at all levels understand how to collaborate with AI-driven tools to ensure we future-proof the workforce."

"A strategic investment in AI skills will help boost productivity, foster innovation, and ensure that AI enhances job opportunities rather than displacing workers. This approach will enable the UK to remain at the forefront of the AI revolution while ensuring economic stability and long-term prosperity."