Labour’s attempt to use AI to power budget cuts is damaging. Here’s why
The UK government is beginning to introduce AI tools for deep research, framing the technology as a tool to reduce costs and improve efficiency.
Yet, tying AI to Reeves’ budget cuts risks discouraging its full potential.
AI as a solution to budget cuts
The UK government wants to slash more than £2bn annually from its budget within the next 10 years, and government departments are expected to cut their administrative costs by 15 percent.
AI has been placed as a pivotal tool to achieve this, with leading figures arguing that automation can free up human resources.
Prime Minister Keir Starmer told BBC Radio Live on Monday that AI and technology could be vital in improving public sector operations.
But, while AI offers efficiency gains, questions remain over whether the public sector is ready to integrate the technology effectively, or if the government’s approach risks undermining trust and adoption.
AI as a cost-saving tool
Experts have argued that using AI could be pivotal in delivering public sector efficiency.
For example, Dr Katie Baker, director of UK and Ireland at Tandem Health, said: “Cutting £2bn from administrative budgets isn’t just a fiscal challenge – it’s a systems challenge. You can’t keep expecting public sector staff to do more with less, unless you change how the work gets done. That’s where technology has to step in.”
Industries are already adopting AI tools that automate time-consuming admin, giving hours back to overstretched staff.
Baker added: “In healthcare, AI-powered medical scribes are reducing the burden on doctors, speeding up note taking and improving accuracy.”
For policymakers, the potential benefits of AI are compelling.
Reducing back-office costs could allow more funding to be directed toward essential services.
No zero-based review of government spending has been conducted since 2007, a review which Reeves sees as crucial to ensure effective spending.
She reiterated: “I’m determined to bring back the growth that is the prize on offer, alongside the stability and reform needed to deliver it”.
Relying on tech comes with challenges
A new report from the public accounts committee (PAC) warned that the government faces major challenges in scaling up its AI adoption.
Yet, the biggest hurdle lies in the UK’s digital infrastructure. Secure, high-quality data is necessary for AI to function at its best.
But, many government systems remain outdated and incompatible with modern AI tools.
The report also raised concerns about transparency, as slow progress in revealing how data is used has historically raised public trust issues.
By early 2025, only a few records had been published on the UK government transparency website for algorithm-based decision-making.
The PAC has warned that failing to address these concerns could erode public confidence and have the opposite effect on AI by slowing its adoption further.
Further, a severe shortage of digital skills in government has caused concerns.
Around 50 per cent of civil service tech roles went unfilled last year, with nearly 70 per cent of sectors reporting difficulty in hiring people with AI skills.
Sir Geoffrey Clifton Brown MP, chair of the PAC, said: “Those familiar with our past scrutiny of government’s sclerotic digital architecture will know that any promises of sudden transformation are for the birds.”
He called for AI and tech specialists to be integrated at higher government levels to ensure effective policy implementation.
Framing AI as a job cutter could backfire
Mel Morris, chief executive or Corpora.ai, warned that AI should enhance expertise, rather than merely reduce headcount.
He said: “AI-assisted research has the power to revolutionise policy making.” However, “tying AI to job cuts risks discouraging its full potential. If civil servants see AI as a threat to their roles, they’ll be hesitant to use it effectively.”
He added that the key challenge for the government will be ensuring that AI adoption is done responsibly, meaning investing in digital infrastructure and building trust with the public and civil servants alike.