The chancellor of the exchequer has significantly upped spending on digital and technology initiatives in the current Spending Review period, with the NHS receiving a 50% tech funding increase
The NHS has emerged as a big winner from the government’s Spending Review through to 2027 with approximately £10bn allocated to technology and digital transformation amid a wider £29bn funding boost across the health service.
In a speech delivered to Parliament today, chancellor of the exchequer Rachel Reeves said that the funding represented a 50% increase in the NHS’ technology budget.
“We are investing £10bn to bring our analogue health system into the digital age, including through the NHS app so patients can manage their prescriptions, get their test results and book appointments all in one place,” she told the House.
Amid various announcements covering Britain’s energy infrastructure, public transport upgrades, school refurbishment and much more, Reeves allocated significant tranches of cash to technological initiatives in the service of building stronger digital foundations, tackling cyber and technical resilience risks, modernising public service delivery, and overhauling wider government productivity and efficiency.
The government had already set out plans to spend approximately £86bn on the science and technology sector during the current Parliament, and to this end, an additional £1.2bn is to be provided across the Spending Review period to “drive forward cross-cutting digital priorities”. This is underpinned by a £3.25bn Transformation Fund.
Among other things, Reeves confirmed that research and development (R&D) funding will rise to £22bn per year by the end of the spending review.
“We are backing our innovators, backing our researchers and backing our entrepreneurs,” said the chancellor. “And because home-grown AI has the potential to solve diverse and daunting challenges, as well as the opportunity for good jobs and investment here in Britain, I am announcing £2bn to back this government’s AI Action Plan, overseen by my right honourable friend the secretary of state for science and technology [Peter Kyle].”
This increase includes £500m for the R&D Missions Accelerator Programme, £1bn to scale the Advanced Research and Invention Agency (ARIA), £750m for a research supercomputer at Edinburgh University, and an unspecified amount to support UK Research and Innovation (UKRI), association to Horizon Europe and its successor, and work to attract more of the world’s top scientists and technologists to the UK.
Additionally, out of an £11bn increase in defence spending during the spending review period to fund the goals of the recent Strategic Defence Review, Reeves announced a £600m uplift for the UK’s security and intelligence agencies, a settlement that covers the work of both the National Cyber Security Centre (NCSC) and the National Protective Security Authority (NPSA).
Not to leave out the network infrastructure that underpins a modern tech-focused society, the Spending Review also funds Building Digital UK (BDUK) with £1.9bn to fund gigabit broadband services to 99% of UK premises by 2032 – with a particular focus in the current period on Scotland and Wales – and more work on the Shared Rural Network to extend 4G mobile coverage.
AI and NHS spend welcomed
Reacting to the Spending Review, the UK’s technology sector welcomed initiatives supporting AI and the NHS. James Clark, data protection, AI and digital regulation partner at law firm Spencer West LLP, said Reeves had finally put “some firepower” behind the AI Action Plan announced in January 2025.
“While initiatives like the landmark Global AI Summit started by the UK in 2023 show commitment to global cooperation on AI, this announcement – which is very much about a sovereign, UK-first approach to AI – shows that this country is in something of a global arms race with other nations to ‘own’ key tracts of the AI economy,” said Clark. “This doesn’t just mean the acknowledged world leaders, the US and China, but also ‘second-tier’ nations that are also investing big in AI, like France.”
However, he continued, there were still challenges to be overcome, such as enabling innovators to access the capital needed to scale their work, developing secure and environmentally sustainable datacentres to accommodate AI’s seemingly insatiable appetite for compute power, and a lack of funding to support development in private sector AI investment.
Flann Horgan, head of healthcare sector at NTT Data UK & Ireland, said the government clearly recognised a digital NHS cannot be constructed on analogue infrastructure.
“AI will be key to this, but it won’t be an easy feat to scale across the NHS without tackling siloed data and outdated systems. At The Royal Marsden, we’ve seen this at work: AI tools being deployed to help radiologists diagnose and monitor cancer progression with greater accuracy and speed,” said Horgan
“This can be delivered, within real-world NHS constraints – when the right technical and clinical foundations were in place. Without these, AI risks becoming just another layer of complexity rather than a tool that genuinely improves care.”
Acknowledging that the wider £86bn funding pledge clearly means technology has come out of the Spending Review looking in good shape, what mattered now was how the money is used, said Mark Boost, CEO of Civo, a cloud services provider.
“Local Innovation Partnership funds show promise. They could prove useful in ensuring local leaders share the national government’s enthusiasm for British tech, and make real progress in nurturing regional tech expertise across the country,” said Boost.
“However, this mustn’t detract from DSIT’s big-picture work. Smaller, local clusters of innovation should go hand in hand with a national digital strategy that prioritises security, sovereignty and fair competition among British firms. Investing in resilient AI infrastructure must be a priority – otherwise, local innovators will remain beholden to big tech.”
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