Autumn Budget 2024: what it means for public procurement

On October 30th 2024, the Chancellor of the Exchequer presented her Autumn Budget to Parliament.

Many of the Budget's announcements will impact public procurement - including increasing budgets for most Central Government Departments, a renewed focus on public sector efficiency, and new funds set aside across Justice, Health, Education and Defence.

In this blog, we break down exactly how the 2024 Autumn Budget will impact public procurement, and what this all means for suppliers operating in the public sector marketplace.

Skip ahead to read about:

• What are the key takeaways from the 2024 Autumn Budget?
  • A fresh approach to public procurement
  • Government efficiency
  • A new industrial strategy
• Which Central Government Departments are growing, and which are shrinking?
• Which Department's should suppliers target in 2025?
• What about local government?
• What are the key public investment areas outlined in the budget? 
  • Health and social care
  • Education
  • Justice
  • Defence
• Summary and conclusion: the 2024 Autumn Budget

📈 What are the key takeaways from the 2024 Autumn Budget?

Rachel Reeves’ much-anticipated 2024 Autumn Budget introduces a raft of spending and funding announcements - many of which will impact public authorities' procurement budgets.

Although the budget acknowledges a “£22 billion black hole” in government spending, it also allocates substantial new investments across critical sectors, including education, justice, defence, and healthcare - each of which is further explored in this article.

Beyond these sector-specific allocations, three additional themes stand out in the budget's approach to public spending.

✨  A fresh approach to public procurement

Reeves' budget reiterates the government's commitment to implementing the 2023 Procurement Act - which is set to go live in February 2025.

The Act represents the biggest change to public procurement legislation in at least a decade.

The Chancellor asserts that the Procurement Act will provide a simpler, more transparent procurement regime "that will deliver better value for money and reduce costs for business and the public sector."

Reeves promises that further reforms to procurement will be announced in the Government's soon-to-be-released National Procurement Policy Statement.

Access Tussell's Free Procurement Act Hub

Much like the previous government, Reeves has pledged to spend more with small and medium sized businesses (SMEs), and has promised that - starting in October 2025 - "companies bidding for government contracts over £5 million per annum will be excluded from the procurement process if they do not pay their own suppliers within an average of 45 days."

According to analysis by Tussell and the Institute for Government, Central Government procurement spending with SMEs fell from 12% to 7% between 2018 and 2023.

If the new government is serious about spending more with SMEs, they'll need to reverse a 5-year long trend in the opposite direction.

Book a call with the Tussell team to learn how we help SMEs win more work with the public sector.

💷  Government efficiency

The 2024 Autumn Budget launches the Office for Value for Money (OVfM), designed to eliminate inefficiencies across the public sector.

This office aligns with the government’s goal to boost efficiency across all departments by 2%.

Key goals include halving spending on management consultants, consolidating services across government agencies, and leveraging technology to streamline operations.

Download Tussell's 2024 Management Consultancy Snapshot

For suppliers aiming to increase business with the central government in 2025, it's essential to consider how your offerings can support this 2% efficiency target.

Solutions that enhance productivity and integrate with existing systems will likely be more attractive under the new budget priorities.

🏗️  A new industrial strategy

The Budget outlines a new industrial strategy aimed at boosting economic growth nationwide.

Central to this strategy is the creation of Great British Energy, backed by a £125 million investment in FY 2025/26 to increase the country’s clean energy supply.

Additionally, Skills England will be launched to help bridge the UK's skills gap, while £20.4 billion has been allocated to science and research funding - with a special emphasis on green technology like carbon capture and storage​.

Infrastructure investment also receives substantial support in the budget. This includes £1.6 billion for local road repairs, £500 million to initiate new affordable housing projects, and £500 million for digital infrastructure initiatives under Project Gigabit and the Shared Rural Network, which will improve connectivity in underserved areas.

Read Tussell's 2024 Department for Transport Procurement Profile

The budget also commits to expanding HS2 so that the high-speed rail line will terminate at London Euston.

Whether it's physical or digital infrastructure, there will be plenty of opportunity for suppliers to support in this new industrial strategy.

📈 Which Central Government Departments are growing, and which are shrinking?

Reeves has claimed that the 2024 Autumn Budget is "not an austerity budget", which is why Departmental Expenditure Limits (DEL) are generally set to rise.

Total DEL for FY 25/26 across all Central Government bodies is up an average of 4.3% per year when compared to total Central Government spending for FY 23/24. (Actual total Central Government spending for FY 24/25 cannot yet be calculated ).

However, budget growth is not even across all Central Government Departments.

The biggest winners by way of average annual real terms DEL growth from FY23/24 - FY25/26 are the Department of Energy Security and Net Zero (DESNZ), the Ministry of Housing, Communities and Local Government (MHCLG), and the Department for Business and Trade (DBT), respectively.

Three Department's will have a FY 25/26 expenditure limit below what they spent in FY 23/24: the Department for Transport (DfT), the Home Office, and the Cabinet Office. 

The following table shows each Central Government department ranked by budgetary growth.

(Source: Autumn Budget 2024 - Page 35)

* MHCLG (formerly DLUHC) funding is split into two pots. 'MHCLG Local Government 'funding goes directly to local authorities, whereas 'MHCLG Housing, Communities and Local Government' funding goes to the Department itself.

** The SIA regulates the private security industry in the UK.

📈 Which Departments should suppliers target in 2025?

DEL growth - whilst great for mapping trends - should not be used as the sole metric when putting together a list of target accounts.

Despite recording an average annual real terms growth of only 3.8% between FY 23/24 - FY 25/26, the Department for Health & Social Care (DHSC) will have a total budget of £214 billion in FY 25/26 - or about a third of all Central Government's budget for the upcoming financial year.

The graph below shows the planned DEL for each Central Government Department in FY 25/26 - accounting for expected DEL growth.

These total budget figures provide useful insight into future Departmental spending. However, they fall short of predicting Departmental spending in your specific niche.

Tussell's market intelligence allows you to see how much public sector bodies are really spending in your market - and with your competitors.

For example in Tussell's recent 2024 Management Consultancy Market Snapshot, we found DESNZ, HMRC and the Home Office to be the largest spenders with management consultancy suppliers. This would have been impossible to predict using only DEL figures.

Book a demo with the Tussell team to learn how you can start using hard data - rather than anecdote - when account planning for 2025.

📈 What about Local Government?

Local Government core spending power is set to increase by 3.2% in real terms between FY 24/25 and FY 25/26 - with specific new carve-outs for education and social care. 

£1.3 billion of new grant funding will be made available for Local Government, including at least £600 million for social care.

SEND (Special Educational Needs and Disabilities) funding is set to increase by £1 billion and a further £1 billion has been set aside for homelessness prevention.

Suppliers to the public sector should not overlook Local Government.

In many sectors - such as recruitment - Local Government accounts for the majority of public sector procurement spending.

Read Tussell's 2024 Recruitment Market Snapshot

Book a demo with the Tussell team to uncover which Local Government accounts are investing heavily in education, social care - or whatever sector you work in.

📈 What are the key public investment areas outlined in the budget?

🏥 Health and social care

Resource spending for the Department of Health & Social Care (DHSC) will increase by £22.6 billion from 2023-24 to 2025-26.

This funding is intended to deliver 40,000 additional weekly elective appointments, reduce NHS waiting times, and provides a two-year average real terms NHS growth rate of 4.0%.

Read Tussell's 2024 DHSC & NHS England Procurement Profile

More specific budgets have been set aside for the following health and social care priority areas:

• £1.5 billion capital funding in total for new surgical hubs, diagnostic scanners, diagnostic testers and new beds;

• £70 million for new radiotherapy machines;

• Over £1 billion to tackle reinforced autoclaved aerated concrete (RAAC) and to tackle a backlog of maintenance, repairs and upgrades across the NHS estate;

• More than £2 billion for NHS technology such as EPR, cyber, and the NHS app;

• £26 million to open new mental health crisis centres;

• £460 million of investment into addressing the risks posed by potential future health emergencies;

• £600 million of new grant funding to support local authorities with funding social care.

In addition to these funding pledges, Reeves has promised to continue NHS digitalisation, move to a model of preventative medicine, and deliver more care through Neighbourhood Health Services.

Read Tussell's 2024 Healthtech Market Snapshot to uncover how top tech companies are already starting to reform the NHS.

📚 Education

Supplementary to the increase in Department for Education funding, Reeves has pledged to increase funding for the core schools budget by £2.3 billion. (£1 billion of this will be specifically set aside for the special education system).

A further £1.8 billion will be set aside the expansion of government-funded childcare, and £30m has been pledged to role out free breakfast clubs across the country.

£300m has been set aside for further education, and £40 million will go to transforming the Apprenticeship Levy into a Growth and Skills Levy.

£2 billion has been set aside for school maintenance, and £1.4 billion has been set aside for the school rebuilding programme - that's a 65% increase on the budget set aside for FY 24/25.

⚖️ Justice

Home office and Ministry of Justice expenditure limits are set to rise in FY 25/26 as the government seeks to "repair the justice system". 

Budget has been specifically set aside for the following justice priority areas:

• £2.3 billion for prison expansion over the FY 24/25 and FY 25/26 financial years;

• At least £500 million to be invested into prisoner and probation recruitment in FY 25/26;

• £520 million for prison service maintenance in FY 24/25 and FY 25/26 combined.
  
  

🔰 Defence

The Ministry of Defence's budget is also set to increase in FY 25/26 as a part of the Government's commitment to exceed the NATO spending target of 2% of GDP.

£3 billion has been pledged to support Ukraine each year for "so long as it takes", and spending on the Single Intelligence Account (SIA) is also being increased.

📈 Summary and Conclusion: the 2024 Autumn Budget

The 2024 Autumn Budget sets out an ambitious agenda for public procurement and new funding pots across Central Government, Local Government and the NHS.

For suppliers, the investment offers a host of opportunities to do more work with the public sector.

In particular, suppliers should take note of the renewed focus on digitisation, efficiency, clean energy, research and development, defence, infrastructure, health and social care, education and justice.

By tailoring your offering to align with these key policy directives, suppliers will be able to fully benefit from the spending announcements outlines in the Autumn Budget.

For businesses hoping to win more work with the public sector in 2025, the opportunity is there.

Book a demo with the Tussell team to start using hard data in your account planning, framework strategy and public sales engine.