What does the Spring Budget mean for Public Procurement?
Introduction
The Chancellor, Jeremy Hunt, presented his Spring Budget to Parliament on the 6th of March 2024, outlining his economic priorities for the year ahead.
The Spring Budget will have a knock-on implication for businesses and individuals across the UK. This includes a significant impact on public procurement and suppliers operating in the public sector marketplace.
Two central facets of the Spring Budget include:
A fall in public sector spending power
Boost to public sector productivity
A Fall in Public Sector Spending Power
The decision to level-off departmental spending, combined with inflationary pressure, is set to curb spending power across government.
Over the coming years, departments will see real-term cuts as shown by total per capita spending cuts of 8% compared to the 2021 Spending Review agenda.
As it currently stands, only the Department for Science Innovation and Technology (DSIT) will have a budget outperforming inflation. [1]
In turn, the public procurement marketplace will likely see a contraction in spend and increased use of frameworks to reduce costs.
Boost to Public Sector Productivity
Despite spending constraints, the Chancellor has indicated that government intend to alleviate the impact of spending constraints via uplifting public sector productivity. He stated that “public sector productivity is 5.9% below pre-pandemic levels. The Spring Budget has set aside significant budget in both the NHS and Central Government departments to claw that productivity back”.[2]
Research and development into Artificial Intelligence (AI) is a key tool intended to boost public sector productivity. For example, the size of the government’s AI incubator team will double, £17 million will be allocated for digital transformation in the Department of Work and Pensions (DWP), and £34 million will be used to implement AI to tackle fraud. [3]
Infrastructure and Transport
Infrastructure investment was also emphasised in the Spring Budget. The Chancellor reaffirmed the government’s commitment to invest at least £600 billion in UK infrastructure by 2029. [4]
Central to this is the redistribution of funding from the cancelled leg of HS2 into Network North and an upgrade to the National Grid in conjunction with OFGEM.
Conclusion
Notwithstanding budgetary pressures, there is significant opportunity for suppliers to help the government boost productivity and modernise the public sector.
That said, the outcome of a General Election later this year may augment any decisions announced in the Spring Budget, and government will continue to utilise private sector experts to drive efficiencies.
With technology and data-driven insights as a cornerstone of what we do, Deecon are well-placed to continue supporting the public sector to deliver impactful change.
Words by Connor Ovenstone
Edited by Anna Pringle
