Reeves puts £3.25bn bet on public sector AI and tech

Further £2.2bn for next generation defence tech

The government’s Spring statement showed that Chancellor Rachel Reeves is betting big on AI driving productivity savings but also opportunity across the country.

In her Spring Statement yesterday, Chancellor Rachel Reeves made several significant technology announcements. These announcements focused primarily on digital transformation and AI and on enhancing public services and, ultimately making the public sector more productive.

Reeves announced that £3.25bn of investments has been “brought forward” to implement AI tools, improve civil service efficiency and modernise probation services. Reeves’s statement indicated that AI could and would replace some civil service jobs, aiming to cut 10,000 'back office' positions, with the aim of unlocking £2 billion in savings by 2030.

Tech entrepreneurs were cautious in their welcome for this Transformation Fund and had concerns about the deployment of AI as a replacement for skilled civil servants. Mel Morris, entrepreneur and former chairman of King, the company behind Candy Crush said:

“..tying AI, and more generally, the digital modernisation our government so desperately needs, so closely to job cuts risks discouraging its full potential. If AI adoption is framed as a tool for job losses, civil servants may be wary of using it to its full potential. Instead, AI should be positioned as an enhancement of expertise, and not simply as a replacement for it.

“AI assisted research, now referred to as deep research, has the power to revolutionise policy making, helping the UK government to analyse big datasets, overhaul workflow, model economic impact and improve decision making. Critical at crunch times like the Spring Statement.

“If we get civil servants onboard, the next Spring Statement could be guided by AI-driven research that has already predicted the economic impact of tax changes, spending shifts, and inflation trends.”

Russ Shaw CBE, founder of Tech London Advocates noted that AI without training was unlikely to lead to the productivity savings envisaged by the Treasury.

“AI undoubtedly has critical role to play in the economy of this decade and beyond - from automating transactional tasks to digesting large amounts of complex data. However, it certainly isn’t a silver bullet or a job cutting tool, and investment its development must be matched with funding to train the workforce how to use it effectively.”

The Spring Statement also included an additional £2.2 billion to be allocated to the Ministry of Defence for AI, drones, and next-generation defence technologies in a drive to make the UK a defence industrial superpower. Reeves said:

“We will spend a minimum of 10% of the Ministry of Defence’s equipment budget on novel technologies including drones and AI enabled technology, driving forward advanced manufacturing production in places like Glasgow, in Derby and in Newport, creating demand for highly skilled engineers and scientists and delivering new business opportunities for UK tech firms and start-ups.”

A perhaps under reported element of Reeves’s speech was its emphasis on trying to distribute the potential proceeds of growth in technology and defence more widely than has been the case since the 1980’s.

The Statement reaffirmed strategic partnerships between the National Wealth Fund (NWF) and Greater Manchester, West Yorkshire, West Midlands, and Glasgow City Region.

Sam Hields, Partner at venture capital investor, OpenOcean, said:

“The Chancellor’s Spring Budget sends a more balanced signal on innovation-led growth. While backing the Oxford-Cambridge Arc as ‘Europe’s Silicon Valley’ may win headlines, the chancellor's commitment to strategic partnerships with regions like Greater Manchester, West Yorkshire, and Glasgow through the National Wealth Fund is just as critical.

“To build a globally competitive industry the government must back regional tech hubs across the country. AI and enterprise software startups are scaling up outside London and the South East, with Belfast and Manchester leading the way. Access to high-quality capital at market-standard terms will be vital to allow startups to grow where they are, rather than be sucked into London or across the Atlantic. Success stories like York-founded planning software company Anaplan, recently acquired for over $10.7 billion, show that world-class tech can be built outside traditional hubs.”