What Could the Budget Mean for Public Sector Suppliers?

Budget 2025: New Funding and Policies Set to Reshape Opportunities for UK Public Sector Suppliers

With the budget having now been delivered, the Labour party has taken a huge step in outlining their financial commitments, plans and policies for the forthcoming parliament and followed up on pledges outlined in their manifesto ahead of the July 4th election that saw them win over 410 seats.

As the UK’s leading organiser of public sector events, including, Counter Fraud Conference, HETT, Schools & Academies Show, DigiGov EXPO and the Modernising Criminal Justice Conference, we wanted to look at what this could mean for the public sector and in particular the public sector suppliers who our events provide a platform to connect with senior public sector stakeholders across Education, Healthcare and Technology.

Within this piece we’ll take a further look at the headline announcements outlined in the budget and then look at specific spending commitments across the Education, Health and Technology sectors. We will conclude by looking at what this could mean in practice for those suppliers looking to enter, consolidate or advance their position within the public sector market.

Headline Announcements

• Announcements made as part of this budget will, according to the Chancellor raise taxes by £40bn with investment in public services forming a key part of this governments’ economic plans 

• The single largest tax rise is employers’ national insurance contributions increasing by 1.2 percentage points to 15% from April 2025. This combined with the government reducing a secondary threshold when contributions are due from £9,100 to £5,000 will raise £25bn a year by the end of the forecast period 

• Personal tax thresholds on income tax and national insurance to increase in line with inflation from 2028-29 

• “National living wage” will increase by 6.7% to £12.21, which is equivalent to £1,400 a year for an eligible full-time worker 

• There will be a single-adult rate phased in over time to eventually equalise pay for under-21s 

Education:

The Department for Education will receive £6.7 billion of “capital investment” next year, a 19% real-terms increase on this year. The 6.7 billion can be broken down into the below: 

• £1.4 billion pledged to the school rebuilding programme representing an increase of £550 million 

• £2.1 billion to improve school maintenance, £300 million more than this year 

• The school’s budget will increase by £2.3bn with a particular focus on the hiring of teachers. This represents a 1.6% increase in per pupil funding 

• £1bn increase in funding for special educational needs. This will come from the overall £2.3 billion increase in schools spending 

• Treasury has committed an unspecified amount of funding to help schools and universities with the increase in employer national insurance contributions 

• VAT will be brought in on private school fees from January 2025 

• Independent schools will no longer receive business rates relief from April 2025. 

• There will be another £300m for higher education. More specific further details are due to be announced in due course

Healthcare:

• £22.6 billion increase in day-to-day resource spending 

• £3.1bn increase in the capital budget designed to reduce waiting times and bring NHS technology into the 21st century. This will include £1bn for repairs and upgrades, and £2 billion for new technological advancements including surgical hubs, diagnostic scanners and new beds 

• Commitment to deliver 2% productivity increase for the NHS 

• Funding for 40,000 extra elective appointments weekly to reduce wait times 

• Over £2 billion to improve NHS technology, enhance cybersecurity, and provide better patient access. 

• £600m worth of funding for social care 

Public Sector Investment, Digital Government and Technology:

• There will be a 1.5% increase in real spending for government departments, and 1.7% when including capital spending 

• There will be £1.3bn for additional grant funding for local government 

• A new fiscal rule will target debt falling as a proportion of GDP. Debt will be measured as public sector net financial liabilities, recognising benefits from investments. The rule will apply in 2029-30, and then net financial debt will fall by the third year of every forecast 

• There will be regular reports on government investments from the Office for Budget Responsibility (OBR) 

• Renewed emphasis on government tech and productivity. HMRC for example will benefit from an IT system overhaul to recoup £6.5 billion in uncollected tax owed to the UK 

• £500 million invested into Project Gigabit and the Shared Rural Network next year to support the technology and digital sectors 

• Government will invest £1bn in aerospace, £2bn in automotive to support electric vehicles, and £500m for life sciences 

• 10 year infrastructure strategy due to be released in the Spring 

• Government research and development spending will reach £20.4bn in 2025-26, including £6.1bn in sectors such as engineering, biotechnology and medical science 

In conclusion, overall, this budget should be seen as a positive budget for public sector suppliers based purely on the fact that it represents a significant investment into the public sector organisations, including schools, the NHS and local and central government, suppliers are looking to target with their latest, technologies, innovations and overarching public sector products.  

For example, if you take a look at some of the more directly relevant announcements for public sector suppliers, we can see that public sector investment will increase by over £100 billion over the next 5 years with government departments’ day-to-day spending set to grow by an average of 3.3% in real terms between 2023-24 and 2025-26.  

The NHS will receive an increase in funding of more than £22 billion with a renewed emphasis on productivity and the role of technology and the education sector will receive an increase of £4 billion and an increase in per pupil spending as well. 

Obviously, as with any government announcement we have to see how it plays out in reality and of particular note here is the potential impact of tax rises on business investment and employment but this budget should enable public sector suppliers to have more fruitful conversations with key public sector stakeholders as years of austerity and stagnant public sector investment appear to have come to an end.