Britain commits £9 billion to Microsoft whilst facing £40 billion budget hole
Public sector locks in nearly £2 billion annually for single vendor as government prepares further tax rises
Rachel Reeves pleads poverty whilst signing cheques to Microsoft.
The Chancellor who imposed £40 billion in tax rises last October - the largest since 1993 - has simultaneously committed Britain's public sector to spending £9 billion on Microsoft products over five years. The Strategic Partnership Arrangement 2024, quietly negotiated last autumn, locks in £1.9 billion annually through 2029.
The timing is extraordinary. As economists warn of a further £41.2 billion fiscal gap by 2029-30, requiring potentially painful cuts or tax increases, the government binds itself to paying a single American vendor nearly £2 billion every year. Without parliamentary debate. Without public consultation. Without rigorous assessment of alternatives that have saved other governments millions.
Every pound committed to Microsoft licensing cannot fund NHS equipment, repair school buildings, or avoid burdening working families. Yet this five-year arrangement sailed through procurement processes whilst ministers agonised over winter fuel payments worth £1.4 billion annually.
A twenty-year habit
Britain's Microsoft dependency runs deep. Since 2002, a succession of "strategic partnerships" has locked government ever deeper into corporate dependency. The latest arrangement continues this pattern with familiar rhetoric about "enhanced value" and "digital transformation" - words that obscure a fundamental lack of alternatives assessment.
Roger Gonourie, Chief Commercial Officer at the Crown Commercial Service, negotiated SPA24 to replace the expiring Digital Transformation Arrangement. Cabinet Office minister Georgia Gould confirmed that £1.9 billion was spent through Microsoft agreements in 2024-25 - combining spending under both the old arrangement and SPA24, which began only in November 2024.
The momentum appears unstoppable. Despite the fiscal emergency, no one questions whether this spending serves taxpayer interests. The scale of historical spending remains largely opaque, with different procurement routes making comprehensive tracking difficult.
The procurement structure itself obscures costs. Public bodies must buy through approved resellers rather than directly from Microsoft, creating layers of intermediaries whilst maintaining the fiction of competitive tendering. The Crown Commercial Service admits tracking spending outside the formal agreement would be "difficult" - code for: actual dependency exceeds official figures.
Europe chooses differently
Across the Channel, governments are proving alternatives exist. Real alternatives. With real savings.
France runs LibreOffice on nearly 500,000 government computers. Energy, defence, agriculture, education - all managing perfectly well without Microsoft's premium pricing. Germany's Schleswig-Holstein is moving 30,000 computers from Windows to Linux by 2026, forecasting "tens of millions of euros" in savings.
The numbers tell the story. Toulouse saved €1 million in three years by switching to LibreOffice. Software licences had cost €1.8 million every three years; migration cost €800,000. Net result: €1 million for public services instead of corporate profits.
Spain's Valencia region: 120,000 computers migrated to LibreOffice. Italy's Defence Ministry: transitioning 100,000 machines. Denmark's Digitalisation Ministry: switching entirely to Linux and LibreOffice by autumn 2025.
These aren't fringe experiments. They're systematic programmes delivering digital sovereignty alongside cost reduction. While Britain deepens vendor dependency, Europe demonstrates that governments can control their digital destiny whilst saving taxpayer money.
The £9 billion question
How do you commit £9 billion without anyone noticing? Quite easily, it turns out.
The annual Microsoft bill represents more than a third of what Britain spends on new school buildings. Government capital funding for school construction fell to £5.5 billion in 2025, down from £6.2 billion the previous year, whilst Microsoft licensing continues untroubled. The priorities are clear.
SPA24 covers the full Microsoft ecosystem: Office 365, Azure cloud services, business applications, and the new Copilot AI tool. Schools, hospitals, councils, fire services - all locked into the same vendor dependency. Roger Gonourie called this "maximum commercial value for our customers."
But maximum value compared to what? Enhanced value requires comparing alternatives. No evidence suggests the Crown Commercial Service seriously evaluated the open source options saving millions across Europe.
A five-year commitment worth more than Britain's overseas aid budget was agreed by civil servants. No parliamentary debate. No public consultation. MPs discovered the arrangement only through written questions months after implementation. Democratic oversight? Not in government IT procurement.
The price of inertia
The human cost runs deeper than spreadsheets suggest. With Britain facing its largest tax rises in three decades and a further £41.2 billion hole looming, every unnecessary pound matters.
Consider the alternatives. Conservative estimates suggest Britain could save 30-50% of current Microsoft spending through open source migration - £600 million to £1 billion annually. Such savings could transform public services or reduce tax burdens during a genuine crisis.
The opportunity cost calculations are sobering:
- £1.9 billion represents more than a third of Britain's entire school building budget
- Could employ approximately 60,000 additional teachers or nurses at average salaries
- Represents two-thirds of current annual military aid to Ukraine (£3 billion)
- Could fund the entire annual budget for local council services across multiple areas
Instead, this money flows to Redmond whilst ministers warn of painful choices ahead. The National Institute of Economic and Social Research suggests meeting fiscal targets may require raising basic-rate income tax by five percentage points. Yet no one questions whether £1.9 billion annually represents value for taxpayers.
A different path
The way forward exists. European governments prove migration to open source works whilst generating substantial savings. Even the Cabinet Office's Government Digital Service demonstrated platform migration capability by adopting Google Workspace between 2010-2015.
But this isn't really about technology. It's about priorities during emergencies. Whilst ministers debate winter fuel payments worth £1.4 billion annually, a £1.9 billion annual commitment receives minimal scrutiny. The contrast reveals how Britain actually makes spending decisions.
European governments chose digital sovereignty and fiscal responsibility. They saved money whilst reducing foreign dependency. Britain chose vendor lock-in whilst demanding taxpayer sacrifice.
The fiscal crisis demands hard choices about efficiency and priorities. Continuing to fund Microsoft billions whilst pleading poverty represents institutional failure to serve public interests. In an emergency, that choice defines government more clearly than any manifesto promise.
Public money should serve public purposes, not corporate dependency. The question is whether political leadership will challenge institutional inertia or continue business as usual whilst demanding sacrifice from everyone else.