Chancellor Rachel Reeves has pledged £3.25 billion to public service reform in her spring statement, placing artificial intelligence (AI) and cutting-edge technology at the heart of government efforts to boost productivity, modernise operations, and support long-term economic growth.
The investment comes amid a challenging economic backdrop, with the Office for Budget Responsibility recently halving its GDP growth forecast from 2 per cent to around 1 per cent for the year. Reeves has made clear that technology, particularly AI, will be pivotal in making public services more efficient while maintaining high standards.
The funding will focus on harnessing AI to cut the cost of running public services by improving productivity across government departments, including within the Ministry of Defence (MoD), which is also receiving significant backing to drive technological transformation. A minimum of 10 per cent of the MoD’s budget will now be allocated to emerging tech, including drones and AI-enabled systems — a move the government hopes will strengthen national security while boosting demand for skilled engineers and creating new opportunities for UK tech firms and startups.
Prime Minister Keir Starmer underlined the central role of AI in the government’s reform agenda, saying: “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.”
Bank of England Governor Andrew Bailey has also pointed to AI’s transformative potential, likening its impact to previous industrial revolutions. He suggested that AI could help lift long-term growth and productivity, offering a solution to the UK’s ongoing economic stagnation.
A key part of the strategy is to ensure that innovation reaches the frontline. The government wants to accelerate the deployment of advanced technologies across public services, while also ensuring that SMEs and startups can access defence and public sector contracts — a move aimed at supporting both economic resilience and job creation.
Business leaders and technology experts have broadly welcomed the investment, but stressed the importance of strong ethical frameworks, data governance, and AI skills development to ensure the reforms are sustainable and inclusive.
John Lucey, VP EMEA North for digital intelligence firm Cellebrite, said AI can help the public sector save time and money by automating repetitive tasks like reporting and analysis. However, he cautioned that any public safety applications must involve human oversight and governance: “Especially when connected to public safety, AI always needs human verification. People must govern AI’s use cases, using it as an assistant to speed up otherwise menial and manual tasks.”
Blake Richmond, COO of transport tech firm Resonate, welcomed the focus on smarter infrastructure: “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 and optimising flows across a connected transport system.”
Sachin Agrawal, UK Managing Director of Zoho, highlighted AI’s potential for strategic advantage: “It’s encouraging to see the UK Government planning to drive efficiency through AI. However, it’s vital to ensure ethical governance remains a priority. Clear frameworks must promote transparency, fairness, and human oversight while equipping the workforce with the skills to navigate an AI-driven future.”
Agrawal added that AI proficiency must become accessible to all, with education and upskilling initiatives helping to prevent widening social and economic divides. “Developing comprehensive training frameworks to ensure workers at all levels, technical and non-technical, understand AI’s capabilities, risks, and ethical implications will be crucial.”
Tristan Wilkinson, Chief for Public Sector at AND Digital, reinforced the need for AI skills development across the workforce: “AI has the potential to revolutionise industries and public services, but to fully capitalise on these advancements, the UK must prioritise investment in AI skills. Without a workforce equipped to build, manage and ethically deploy AI, businesses and government departments risk falling behind.”
He called for education and training programmes that focus not just on technical disciplines like coding and data science, but also on AI literacy for non-technical roles: “A strategic investment in AI skills will help boost productivity, foster innovation, and ensure that AI enhances job opportunities rather than displacing workers.”
As the UK grapples with fiscal tightening and economic uncertainty, this shift towards AI-driven reform signals a bold bet on technology as a lever for long-term growth, productivity and public sector transformation.
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UK commits £3.25bn to public services and AI in spring statement to drive growth and productivity