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UK Government’s spending watchdog calls for digital, data and procurement change (again)

Derek du Preez Profile picture for user ddpreez January 17, 2024
Summary:
The head of the National Audit Office, the British Government’s independent spending watchdog, highlights a number of digital and procurement issues we’ve heard time and time again.

Image of Whitehall

This week the head of the National Audit Office (NAO), Gareth Davies, gave a speech in parliament that aimed to provide a ‘blueprint for value for money’, to ensure that the government gets the ‘most from every public pound’. Some of the ideas presented included rethinking how the government uses data, how it procures its goods and services, and how technology can be used to transform service delivery. 

Sounding familiar? Well, you’d be right - these are themes that we’ve heard time and time again over the past decade (if not longer). Going back to 2021, diginomica highlighted then how the lessons the NAO was pointing to for government digital services change were a rinse and repeat from previous years. And yet, here we are again. 

That’s not to say that this is the fault of the NAO - its job is to put a spotlight on where the government is failing taxpayers and offer suggestions of room for improvement. It’s the fault of successive governments that have seemingly gone out of their way to undo the good work of introducing spend controls, promoting innovative frameworks such as the G-Cloud and making the civil service an attractive place to work for digital talent.

Of course there have been some, erm, extenuating circumstances in recent years (as highlighted by Davies in his speech), including Brexit, COVID-19 and the war in Ukraine. Distraction has been a key theme. However, let’s not pretend that oftentimes these disruptive forces are an opportunity to do things differently (as we did see with some of the digital services introduced during the pandemic). 

And it would be too harsh to say that the needle hasn’t been moved since a decade ago. It’s true that there are some excellent digital teams working in Whitehall and beyond, as well as some departments doing some truly innovative work. But reading through Davies’ speech, it’s clear that legacy forces are strong and the status quo is proving hard to deviate away from. 

The (familiar) challenges 

It’s an election year and whilst there is a likely change of government incoming, Davies notes that “government of whatever complexion” faces a tough challenge in the years ahead. Some of the reasons for this include an aging population, parts of the national infrastructure are crumbling, out-of-date IT systems are slowing down modernization efforts, higher inflation is increasing costs of projects, and the public sector is finding it harder to retain staff. 

Davies said: 

These factors and others have combined to leave public services with a productivity problem. When you add to this the sharply increased cost of servicing government debt, this is a challenging fiscal picture.

He added that there is good evidence from the NAO’s work that the government can achieve more with what it already spends - arguing that improved productivity and efficiency could result in tens of billions of pounds in savings each year. However, he notes: 

Of course, if greater efficiency on this scale was easy, we’d be doing it already. 

Well, quite. That’s a point that has been argued time and time again over the years. 

The NAO is focusing on a number of areas that need improving so that the government can get better value for its money. Again, these are topics that have been ‘problem areas’ for a number of years and continue to prove wasteful. 

For example, Davies highlights major infrastructure projects that still see failures of value for money and delivery, at a huge cost to the taxpayer. He notes: 

Our work on HS2 and the New Hospital Programme suggests that for the biggest projects, Whitehall has a governance problem. These two programmes are examples of what I call mega projects which are arguably too large for the risks to be manageable by the relevant departments and their arms-length bodies. They have overall budgets of many tens of billions and project lifetimes spanning decades, let alone Parliaments.  

In both cases, decisions to proceed were not accompanied by sufficiently robust and realistic assessments of affordability. If overspends emerge, it’s likely that they will be too large for the host department to manage, and the question becomes one of government’s overall priorities.

So I think a new approach to the governance of the small number of genuine mega projects is needed, reflecting the scale and nature of the risks involved

Procurement is another area that continues to prove problematic to the government’s spending habits. As Davies notes, it’s staggering that of £100 billion worth of contracts awarded by major departments during 2021-22, approximately a third were either direct awards of contract extensions. Hardly a win for competition. 

He adds that government still spends more than it should, often relying on expensive temporary contracts with misaligned commercial incentives. For the early proponents of G-Cloud, the following excerpt from Davies’ speech will make difficult reading: 

Our report on competition in public procurement identified ways of securing further significant savings through improving data, market engagement, and active contract management. 

Government’s spend on IT services is an excellent example of where further efficiencies lie. Maximizing government’s buying power in that market dominated by global giants is essential.

Equally, Davies points to the fact that the technology exists to transform service delivery, reduce costs and improve user experience. As has been the case for the past decade. He adds that the Central Data and Digital Office is working to improving its approach to digital transformation - but for anyone that has followed the rise and (somewhat) fall of the Government Digital Service will know that the power struggles in Whitehall often win in the end. Davies said: 

This work must replace antiquated IT systems, improve the quality and shareability of data, and recruit and retain scarce skills in high demand across the economy. The challenge is vast. In 2020 Defra estimated that it would need to spend more than three quarters of its digital budget on addressing legacy system issues.

The MoD is in part reliant on kit dating back to the Cold War for its defense inventory management.

The (familiar) solutions

Davies said that the government now, given the wide-ranging challenges in recent years, should be on focusing the energy of civil service leaders, managers and teams on “making the changes necessary to drive better productivity and release resources, despite the inevitability of new emergencies”. 

So, what are the key enablers for this desired change? Well, they’ll sound all too familiar. They include a focus on better data, innovation, skills, etc,. Davies said:

Firstly, better data. Consistent standards and definitions, along with a greater focus on quality, are essential if citizens are to see service levels rise and costs fall. Without it, government ambitions on artificial intelligence will not be realized, as poor data means arriving at wrong answers, only faster.

Secondly, innovation and evaluation – which itself relies on good quality data. In our work we see plenty of innovative thinking from teams across government who spot the need for operational improvements. Creating an environment where this is encouraged, tested, evaluated and scaled up is proving more challenging.

Thirdly, the planning and spending framework can better support this drive for efficiency and productivity. Our recent report on combatting the harm from illegal drugs provides a good example of how government needs to work across existing departmental boundaries to get the most from the available resources. The Shared Outcomes Fund is aimed at encouraging this approach. Yet examples like this are still the rare exception and many other opportunities for better allocative efficiency remain to be exploited.

The planning and spending process also needs to address the personal and organizational incentives for high performance on efficiency. By personal incentives, I mean demonstrating to talented staff that developing delivery skills is a route to career progression and success. For the organization or department, there’s a strong argument for retaining a share of the financial return to invest in further improvement.

Davies reiterated his point that all of this requires skilled leaders (there are many in the civil service, but they need support from government) and a blend of “homegrown talent and expertise from outside”. Finally, Davies called on government to make productivity a high priority (again) and said that whilst some of the savings can be realized quickly, others will require-up front investment and grow over time. He finished by saying: 

So in conclusion, Paul Krugman’s well-known line that productivity isn’t everything, but it is ‘almost everything’ seems particularly relevant to the fiscal challenge facing the UK at the moment.

My take

All of Davies’ points are entirely sensible and should of course be a top priority for the current (and potential incoming) government. The problem is, they’ve been sensible for many years. Whilst the current Prime Minister seems intent on focusing all his efforts on a multi-million pound (probably unworkable) plan to send asylum seekers to Rwanda, time continues to be wasted on improving the delivery of services for citizens who continue to face higher costs and pay their taxes. This change requires a strong willingness from the top to make it happen - and yet, priorities seem to lie elsewhere. 

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