Chancellor Rachel Reeves confirmed over the weekend that tomorrow’s (26 March) UK government’s Spring Statement, will outline spending cuts to reduce state inefficiency and government running costs by 15% by the end of the decade.
Reeves confirmed that the cuts would be made in back office and administrative roles that could be, instead, augmented by technology.
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Indeed, on 13 March, UK Prime Minister Keir Starmer outlined plans to reshape the British state using technology, specifically AI, at the heart of this plan. Starmer said that “AI was a golden opportunity” that would create public sector efficiency savings of around £45bn.
The Prime Minister’s plan includes sending specialist teams into every government department with a clear mandate from the top to make the state more innovative and efficient using technology.
But can AI be the silver bullet for state apparatus inefficiency and failing public services that policy makers are touting it to be? Or are political leaders grasping at useful rhetoric to address flagging economic growth, dissatisfied and struggling citizens, a grim macro-economic outlook and geopolitical uncertainty?
GlobalData public sector practice principal analyst, Gavin Sneddon, said there is no doubt that that AI can significantly increase the productivity of government departments. For example, Sneddon noted that AI-based tools such as Redbox and Consult, customised by the Incubator for Artificial Intelligence (now part of the new wider ranging Government Digital Service), enable civil servants to summarise policy recommendations and consultation responses far more rapidly.
“However, while frontier research continues to push the boundaries of what AI can hypothetically achieve, there remains a great deal of uncertainty concerning how much of this will ultimately flow through into deployable solutions which deliver return on investment in specific use cases.
“So, while we know there are already some benefits, the extent of future improvements, while potentially significant, is still very much an unknown quantity at this point,” said Sneddon.
The government has begun to change its approach to the development and delivery of technology solutions and there has been a welcome agility to some of its more recent policy approaches, including the AI Opportunities Action Plan.
On 13 January, Prime Minister Starmer announced the AI Opportunities Action Plan to accelerate the country’s AI development with a number of initiatives including freezones, investment incentives and plans for increased deployment in the running of the state.
Sneddon identifies a sense of genuine dynamism and expertise in the new government digital team which has not been commonly seen and felt in Whitehall.
“With its “Scan, Pilot, Scale” approach, the plan provides a genuinely useful high-level methodology that can be used to deliver digital change more effectively. There is also a recognition that new cost models are needed which require less upfront capital and more ongoing revenue expenditure,” said Sneddon.
Government IT’s investment gap
However, while massive amounts of upfront capital may no longer be necessary for technological innovation, investment of various kinds is still necessary to realise benefits downstream.
“Staff still need to be paid to map out and understand the pain points where technology can be effectively applied. Users still need to be trained on how to make the most of new approaches. In-house expertise needs to be recruited and nurtured or potentially expensive external consultants need to be employed. Technological solutions still need to be paid for.
“These things all cost money. The tree of reform still needs to be watered with initial resources. It is not obvious at this point how the Government intends to deliver this,” said Sneddon.
Sneddon highlighted the concern that in its need to realise AI benefits the Government will neglect the fundamentals of digital transformation and resort to magical thinking.
“The new Labour government condemned the previous Government’s Rwanda deportation scheme as a “gimmick” and quickly abandoned it. It must take care now to ensure that its plans for a digital overhaul of the machinery of Government do not meet the same fate,” said Sneddon.
The government’s digital reform planning includes dismantling NHS England, the body charged with administering and budgeting for the UK’s health service.
Dr. Katie Baker, UK & Ireland director at AI medical scribe startup Tandem Health said: “AI isn’t a silver bullet, but it’s the best tool we’ve got to fundamentally shift how healthcare operates under pressure.
“You can’t solve today’s NHS challenges with yesterday’s systems. If we’re serious about freeing up frontline staff, we need to stop throwing people at a paperwork problem and start redesigning the workflow itself.”
Public sector IT implementation remains a challenge
Looking past the planning phase, implementation of public sector digital infrastructure cannot be underestimated. CEO of UK finech Payhawk, Pedro Batista, said that the company’s own research found that, contrary to the narrative that AI will primarily drive cost savings through workforce reduction, at least half of the company CFOs it surveyed anticipate team growth, with technology enabling teams to focus on higher-value strategic work.
“For government efficiency, these findings suggest that AI’s value lies not in replacing public servants but in augmenting their capabilities. The technology could help address the 15% Civil Service running cost reduction target by automating routine processes and improving decision-making, but the human element remains essential,” adds Batista.
In the private sector, Payhawk’s industry surveys found that technology investments can drive 14% revenue increase in five years. “If similar improvements could be realised across the economy through strategic AI adoption, the impact could be substantial,” said Batista.
