Will AI save the UK government £45bn a year?

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Sir Keir Starmer declared this week that the digitisation of government services could achieve up to £45bn in savings and productivity benefits annually across the public sector.

The UK prime minister arrived at that total following a review this year that was commissioned by technology secretary Peter Kyle and conducted by officials in his department alongside consultancy firm Bain & Company.

Their report, published in January, estimated that greater use of digital technology and artificial intelligence could save 4-7 per cent of public sector expenditure in total, making it “the most powerful lever available” to drive reform across the state. Crucially, however, it did not offer a detailed breakdown.

Where will the savings come from?

Officials in the Department for Science, Innovation and Technology told the Financial Times that £36bn — or 80 per cent — of the estimated efficiencies would derive from simplifying and automating delivery across the public sector.

This would involve the widespread use of AI to perform administrative tasks, such as transcribing meetings, sorting and analysing state consultation responses, summarising policies and conducting legal and parliamentary research. The government’s AI incubator is currently developing “Humphrey”, a package of tools to cover each of these areas named after the mandarin from TV series Yes, Minister.

These tools have the potential to save billions of pounds a year from the money currently spent on contractors. For instance, staff costs for the analysis of government consultation responses alone total £80mn a year.

Where do the other savings come from?

A further £4bn in predicted savings will result from “migrating service processing to cheaper online channels”, officials forecast. This includes shifting from expensive modes of government communication, such as postal correspondence and text messages, to emails.

Whitehall is also launching a beta version of its gov.uk app this summer, which aims to offer Britons a single point of online access for all their interactions with the state — ranging from applying for benefits and paying tax bills to receiving MoT reminders. This will offer the government a cheap way of communicating with citizens.

An extra £6bn could be saved by reducing fraud and error with digital compliance solutions, officials said. Digitisation is expected to improve data management across HM Revenue & Customs and beyond, improving the ability of algorithms to spot benefit fraud and tax evasion.

How credible is the government’s calculation?

Some experts are sceptical. Nick Davies, programme director at the Institute for Government think-tank, said he understood how digital technology could boost productivity, but warned that Starmer’s suggestion of significant “cashable” savings may be misleading.

While “transactional” services such as the issuance of passports and driving licences, and other back-office functions, can be automated, it is difficult to replicate in person-centred services such as healthcare that require frontline staff, he said.

Davies predicted that achieving genuine savings of such a “huge scale” would require the state to stop providing some services rather than simply automate them.

Joe Hill, policy director at the Reform think-tank, said it was “clear that more savings can be made through areas like fraud”, but warned that neither the Treasury nor the Office for Budget Responsibility should build these savings into their models on the basis of “general commitments to digitise and automate across the public sector”.

Chi Onwurah, Labour chair of the Commons science, innovation and technology committee, said the total appeared “credible, in theory” but would require co-ordination between ministers, the civil service, systems and suppliers. “Past promise of public sector technological transformation has too often not been realised,” she warned — citing lessons to be learned from the creation of universal credit and digital health records, which her committee is examining.