The government will create a £3.25bn transformation fund to drive public service reform and efficiencies, with £150m of this pot to be spent on civil service voluntary exit schemes.
Announcing the plans in today’s Spring Statement, the chancellor, Rachel Reeves, said this “work to make government leaner, more productive and more efficient will help deliver a further £3.5bn of day-to-day savings by 2029-30”.
The government has made £250m available from the transformation fund in 2025-26, plus £2bn in 2026-27and £1bn in 2027-28.
Reeves said the £150m going towards government employee exit schemes in 2025-26 will pay for “voluntary exit schemes to reduce the size of the civil service”.
The Spring Statement documents say this will help to deliver the government’s plan to reduce administration costs by 15% by the end of the decade, which Reeves has previously said should reduce the civil service headcount by around 10,000.
However taking questions after her statement, Reeves re-iterated that the government does not have an official headcount reduction target.
Asked by North Antrim MP Jim Allister whether the government would learn from a 2015 voluntary exit scheme which cost the Northern Ireland Executive £700m but after which “hundreds of civil servants” were re-employed as agency workers, she said it was to avoid this sort of effect that the government had not set a number on the reduction in size of the civil service, instead focusing on admin budgets.
“What we don't want to see is the number of civil servants fall and the number of agency workers and consultancies increase,” she said “So absolutely this government will learn from failed efforts both of the UK government under the Conservatives,and other administrations in the past.”
A further £42m of the 2025-26 pot will be spent on three AI projects – described as “pioneering DSIT-led Frontier AI Exemplars”.
“These exemplars will test and deploy AI applications to make government operations more efficient and effective, and improve outcomes for citizens by reducing unnecessary bureaucracy,” the Spring Statement says.
The remaining funds for the next financial year will go on:
- Investing £8m in new technology so probation officers can focus on reducing reoffending, rather than filling out forms.
- Reforming the children’s social care system by providing an extra £25m for the fostering system, including funding the recruitment of a further 400 new fostering households, providing children with stability and addressing cost pressures on local government.
The Spring Statement says these first allocations from the Transformation Fund will “invest in vital public services and accelerate the modernisation of the state” by supporting the “fundamental reform of public services, seizing the opportunities of digital technology and artificial intelligence, and transforing frontline delivery to release savings for taxpayers over the long-term”.
Reeves set out in her speech that overall day-to-day spending will be cut by £6.1bn by 2029-20, meaning it will grow by an average of 1.2% a year above inflation, instead of the 1.3% average set out in the Autumn Budget.
The chancellor also announced that she is increasing capital spending by an average of £2bn a year compared to the Autumn Statement.