Mr Healey said he is launching a new British data centre covenant, with strict tests data centres must meet to invest in local communities, create local jobs and protect local water supplies.

In return, he said, critical data centres will get the grid connections they need and, where necessary, will be allowed to build on-site generation while they wait.

Chancellor of the Exchequer John Healey delivering his Budget in the House of Commons, London. Picture date: Wednesday October 28, 2026. (Image: House of Commons/UK Parliament)

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The Chancellor said: “Nowhere is the necessary role for the state clearer than in artificial intelligence, to forge a British way to seize opportunities and guard against the risks that is based on security, we’re all we’re already world leaders in AI safety and security, which today’s budget backs with an extra half a billion pounds, and it is based on sovereignty, with our first of its kind sovereign AI unit protecting UK interests by channelling government investment into strategic British AI firms, backed today with another 140 million pounds.

“And to ensure our most sensitive data stays under British control, and setting out a new deal for data centres in the UK.

“When the NHS uses AI to treat patients, we want that data here. When our armed forces use AI to keep us safe, we want that data here.

“So here’s the deal: I’m today launching a new British data centre covenant with strict tests that data centres must meet to invest in local communities, create local jobs, and protect local water supplies.

“In return, critical data centres will get the grid connections they need, and where necessary, be allowed to build on-site generation while they wait.

“Built on sovereignty and security, I want to ensure that the British people can benefit from the huge potential upsides of AI with the new AI Challenge Prize to find innovative uses for AI in public services and a union learning plan to back workers. This is how Britain leads on AI: secure, safe, and working for the British people.”

While Westminster largely controls AI policy, national infrastructure and energy regulation, planning, environmental controls and water management associated with new data centre developments remain devolved responsibilities in Scotland.

A healthcare regulation lawyer has warned that “emphasis needs to be on rigour as much as speed” when implementing AI in the NHS.

David Hill, partner at Browne Jacobson, said: “Commissioning an independent review into the opportunities AI presents for NHS productivity is a sensible first step, but the emphasis needs to be on rigour as much as speed.

“There are established, evidence-based use cases – diagnostic imaging, ambient voice technology – where deployment at scale is achievable now. Beyond that, the value of individual tools becomes much harder to assess, and the risk of more haste, less speed is real.

“Critically, AI must be evaluated across the whole patient pathway, not just individual touchpoints. Accelerating one element without addressing capacity elsewhere risks moving bottlenecks, rather than resolving them, and frustrating both patients and staff.

“The review also needs to confront the infrastructure question: fragmented procurement pathways and the absence of a coherent health data framework have consistently undermined previous technology ambitions in the NHS. Mark Bailie’s review will only be as credible as the implementation architecture that follows it.”

Mr Healey also announced direct investment in Scotland’s high-growth industries, including £18 million for advanced chip design led by Edinburgh University.

The Chancellor announced £6 million for the Glasgow Scottish Event Campus.

Mr Healey also said devolved governments will receive equivalent funding for the Budget measures.

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