£3.25bn Transformation Fund to enhance public service efficiency

Chancellor Rachel Reeves has unveiled a comprehensive £3.25 billion 'Transformation Fund' aimed at modernising public services through technological advancements and innovative practices.

A key component of this initiative is the government's commitment to ensuring that one in ten Civil Servants will be digital professionals by 2030, reflecting a strategic emphasis on digital proficiency within the civil service.

The Transformation Fund is designed to finance projects that demonstrate potential for long-term savings and enhanced service delivery. Departments will have the opportunity to bid for funding by presenting initiatives that leverage technology and preventive measures to reduce future expenditures.

Complementing the Transformation Fund, the government has outlined a plan to reduce Civil Service administrative costs by 15% by the end of the decade, targeting annual savings of £2.2 billion by 2029-30.

Departments are initially tasked with a 10% budget reduction by 2028-29, escalating to 15% the following year. An additional £150 million is earmarked for voluntary exit schemes for government employees.

These savings are intended to be redirected towards bolstering frontline services such as education, healthcare, and law enforcement. The Cabinet Office will oversee the implementation of these measures, with departments required to demonstrate clear plans for achieving mandated cost reductions. 

Additionally, the Chancellor announced continued investment in cutting-edge technology to combat tax avoidance. Plans include increasing the number of tax fraud prosecutions by 20% annually, a move anticipated to raise an additional £1 billion.

The Treasury also outlined initiatives such as pilot programmes for collecting older debts, advancing automated debt recovery, introducing voice biometrics, using AI in customer services and compliance, and launching a customs digitalisation pilot.

Claudia Ribeiro, Partner at Deloitte Digital, welcomed the government's announcement as “a signal of intent from the government that it is serious about exploiting the opportunities offered by digital technology.” 

“No one is going to disagree that a more efficient, more productive and more user-centric public sector is a good thing,” she continued. “But while the 'what' is right, government needs to keep check on the 'how'. The public sector - along with any other - can’t focus on the dream destination without determining the route and steps to get there.” 

Ribeiro argued that investments needed to prioritise integrated projects across organisations, processes, technology, and data, supported by agile governance and a 'test and learn' approach. Initiatives should build on proven methods and existing strengths - with programmes aiming for financial self-sufficiency, viewing digital transformation as a collective public-sector benefit rather than a departmental issue.

“In practical terms, government should avoid targeting its Transformation Fund anywhere that only optimises existing silos or digitises inefficient analogue processes. And scale is critical, both scale of impact and scale of change. While £3.25 billion is a substantial investment, it needs to support change at a meaningful size,” Ribeiro added.

'AI Exemplars'

In addition to the Transformation Fund, the government has allocated £42 million for three pioneering AI Exemplars led by the Department for Science, Innovation, and Technology (DSIT). These projects are designed to test and deploy advanced AI applications within public services, aiming to enhance operational efficiency and reduce unnecessary bureaucracy.

Furthermore, £8 million is dedicated to adopting new technologies that support probation services. This investment aims to enable probation officers to focus more on reducing reoffending rates rather than being burdened with administrative tasks.

BCS Fellow and AI expert Sarah Burnett commented on the initiative, stating, “The Chancellor's ambitious £3.25 billion transformation fund, with its focus on integrating AI into government operations, presents a fantastic opportunity to modernise public services. In the private sector, companies that have successfully implemented AI report substantial benefits, such as reducing processes that previously took 30 minutes down to just five minutes with human-in-the-loop systems.”

Burnett emphasised the necessity of a robust strategy to guide this transformation, highlighting the importance of ethical development and equipping the workforce with essential digital skills to navigate the evolving landscape effectively.

Dr Bill Mitchell OBE, another BCS Fellow, welcomed the government's plan to increase the number of digital professionals within the civil service. He stated, “For the government to achieve systemic digital transformation, it's essential that AI is treated as part of the team rather than a replacement of the team.”

Industry leaders have responded positively to the announcement. Simon Godfrey, Senior Director of Strategy, External Engagement & Growth at BT, praises the initiative as a positive signal of the government's commitment to technology and investment. He underscores the need for effective governance mechanisms and balanced deployment processes to ensure value for money and pragmatic execution.

Peter Corpe, Industry Leader for the UK Public Sector at Appian, describes the fund as poised to reshape government and drive productivity in public services. He highlights AI's transformative potential but cautions that it must be paired with strong data infrastructures and human oversight, suggesting that AI should enhance, not replace, human capabilities within the Civil Service.

These strategic investments and reforms underscore the government's commitment to leveraging technology and innovation to enhance public service efficiency, reduce bureaucracy, and achieve substantial cost savings while prioritising frontline services.