UK Budget raises taxes by £40bn – but government departments must still make efficiency savings
UK chancellor Rachel Reeves has pledged there will be no return to austerity as she set out the first Labour budget since the party came to power – but government departments will still need to make 2% efficiency savings next year.
In her statement yesterday, Reeves said that the government had inherited a serious situation that meant she needed to act to restore public finances and rebuild public services.
“The scale and seriousness of the situation that we have inherited cannot be underestimated,” she said.
As a result, Reeves raised taxes by £40bn in the Budget. The biggest single tax rise was an increase in National Insurance contributions paid by employers from 13.8% to 15%.
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Target set to ‘drive efficiency and reduce wasteful spending’
Despite the tax rises, Reeves said that the government can’t “simply spend our way to better public services”.
She set a productivity, efficiency and savings target for all departments in the Budget, and said it would be vital to “driving efficiency and reducing wasteful spending”.
“We are setting a 2% productivity, efficiency and savings target for all departments to meet next year by using technology more effectively and joining up services across government,” she said.
The Budget document emphasises the role of the Department for Science, Innovation and Technology (DSIT) in driving forward the digital changes needed to maximise the potential of digital, data and technology. DSIT will invest £80 million “to support the transformation of corporate functions across government, to deliver more efficient, cost-effective and modern systems as part of government’s Shared Services Strategy”
New Office for Value for Money
Reeves said that the government has conducted the first phase of the Spending Review, setting departmental budgets for the remainder of this year and for 2025-26, which will mean that departmental spending, including capital spending, will grow by 1.7% in real terms.
A full Spending Review will be published in late spring next year.
The chancellor also confirmed the role the new Office for Value for Money will have in the review. The unit, which is being established in the Treasury, will advise on decisions for the multi-year Spending Review.
The office will be headed by David Goldstone and will conduct assessments of where and how to root out waste and inefficiency, undertaking value for money studies in specific high-risk areas of cross-departmental spending, and scrutinising investment proposals to ensure they offer value for money.
Goldstone will also develop recommendations for system reform as part of what the government called “a ruthless focus within government on realising benefits from every pound of public spending”.
Goldstone said he was honoured to have been appointed to this role, which will be time limited for an initial 12-month period, starting on 30 October. “I look forward to working within government over the coming year to bring renewed focus to ensuring we deliver maximum value for the public in how money is spent,” he said.
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First Budget ever delivered by a woman
In her statement, Reeves highlighted that she was the UK’s first female chancellor, making this the first Budget in UK history to be delivered by a woman.
Reeves said that she was “deeply proud” of achieving this milestone. “To girls and young women everywhere, I say: Let there be no ceiling on your ambition, your hopes and your dreams,” she said.
“And along with the pride that I feel standing here today, there is also a responsibility to pass on a fairer society and a stronger economy to the next generation of women.”
New law to improve data sharing
Ahead of the Budget, the UK government also set out plans to improve data sharing between different parts of the public sector to better join up public services and improve efficiency.
The Data Use and Access Bill will allow data to be shared more easily across public services, with the aim of freeing up as many as 1.5 million hours of police time and 140,000 NHS staff hours every year, enabling frontline workers to better serve the public.
Data sharing is a long-standing challenge in government. Global Government Forum’s Digital Leaders 2024 report, which examined how ready the UK is to realise the potential of artificial intelligence, highlighted this as one of the greatest threats to the government’s AI transformation.
The report called for action to mandate data sharing across departments to facilitate the seamless integration and functioning of AI technologies, and the government claimed that the new legislation will lead to the “secure and effective use of data for the public interest”.
In particular, the law will allow police officers to more easily access data when working on a case by, for example, removing the need for police officers to manually log every time an officer needs to look up a suspect or person of interest on the police database. The government estimates that this would free up time and save around £42.8m in taxpayers’ money every year.
The legislation will also ensure that healthcare information – like a patient’s pre-existing conditions, appointments and tests – can easily be accessed in real-time across all NHS trusts, GP surgeries and ambulance services. It will set common standards for IT suppliers to the health and care sector to enable data sharing.
Setting out the plans, technology secretary Peter Kyle said that data is the DNA of modern life and quietly drives every aspect of our society and economy.
“It has the enormous potential to make our lives better, boosting our National Health Service, cutting costs when we shop, and saving us valuable time,” he said.
“With laws that help us to use data securely and effectively, this Bill will help us boost the UK’s economy, free up vital time for our front-line workers, and relieve people from unnecessary admin so that they can get on with their lives.”
Overall, the government said unlocking the power of data across society could provide a £10bn economic boost to productivity. Streamlined rules around data sharing will, for example, simplify important tasks such as renting a flat and starting work by creating trusted ways to verify identity online.
Read more: Tech panel appointed to shape UK government’s 10-year digital vision
About Richard Johnstone
Richard Johnstone is the executive editor of Global Government Forum, where he helps to produce editorial analysis and insight for the title’s audience of public servants around the world. Before joining GGF, he spent nearly five years at UK-based title Civil Service World, latterly as acting editor, and has worked in public policy journalism throughout his career.
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