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October 29, 2021

Sorcerer Sunak’s Sleight of Hand

By Tech Monitor

Rob Anderson, Principal Analyst for Central Government in the GlobalData Public Sector Technology team, analyses this week’s Spending Review and Budget statement, and asks if it offers new opportunities for Govtech suppliers.

It has now become commonplace for the Chancellor of the Exchequer, whilst standing at the Despatch Box in the House of Commons delivering their Budget speech, to ‘pull a rabbit out of the hat’ and offer some ‘good news’ that surprises everyone. This week, the mainstream media chose to see the reduction of the taper in Universal Credit payments as that piece of sorcery, which for some of the lowest-paid, who are in work but still on benefits, it may well be.

However, for those of us with a focus on broader public spending, and how that might benefit businesses supporting the Government, Rishi Sunak’s biggest trick was to find the ‘Magic Money Tree’, first coined by Theresa May. Many commentators, myself included, had forecast that there would be another squeeze on departmental budgets as the country seeks to recover from the huge costs of responding to the coronavirus pandemic. Instead, the Chancellor has juggled the figures to come up with an extra £150bn a year for public services by 2024-25, while staying within his own fiscal rules about the ratio of debt to GDP. I’ll leave it for the economists to argue as to whether those rules are being interpreted to the letter, and instead focus on what this bonanza might mean for IT suppliers in particular.

Digital transformation, it appears, is back front and centre of the political agenda. Except it isn’t really; there are only two occurrences of that term in the Budget Red Book. Digital alone gets 71 mentions, but that word can mean so much to so many these days. There are some specific amounts of cash, however, that are allocated to technology-led reforms, which can only be good news for those private sector organisations looking to help government drag itself into a body delivering online services that are fit for the 21st century.

The first figure to jump out of the pages is the £2.1bn allocated to the Department for Health and Social Care (DHSC) for “innovative use of digital technology so hospitals and other care organisations are as connected and efficient as possible”. That’s great news for providers of health tech and other software-driven tools that facilitate joined-up working. Arguably, however, the issue with the NHS isn’t how technology can help, but how politically and culturally it can be reformed to be more efficient. Those of us with long memories can recall Connecting for Health, the organisation set up under Richard Granger’s stewardship that spent £12.4bn over ten years on the National Programme for IT (NPfIT), but ultimately delivered few cogent deliverables.

The Department for Work and Pensions (DWP), meanwhile, is to receive an even larger sum of £2.6bn over the SR21 period for “digital activity to support the delivery of benefits and transform how customers interact with the welfare system”. Is it just me, or is that a very vague explanation? Are we not supposed to be living in a time of measurable outcomes? More definite is the £90m RDEL and £13m for measures to tackle fraud and error in the benefits system; the ROI on that, if successful could be enormous, given the tens of billions of pounds lost each year across the public sector. Data analytics specialists should be rubbing their hands with glee, though again, we’ve been here before as units in various parts of government have been trying to solve the problem for over a decade.

The most granular IT-related spending is allocated to Her Majesty’s Revenue and Customs (HMRC), which appears to remain closest to Sunak’s heart, having exceeded expectations in delivering the Coronavirus Job Retention Scheme (CJRS) – or ‘furlough’ – in record time. The tax agency will get £838m for critical customs systems, £136m to deliver the Single Customer Record and Account, £468m to “ reduce the risk of system failures, enhance the department’s ability to defend against cyberattacks and support the continued digitisation and modernisation of the tax system”, and £277m “to transform the way HMRC procures IT services, creating more opportunities for smaller businesses to compete for contracts and delivering greater technological innovation” – Aspire is finally dead it seems…hurrah!

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So, there is much for ICT suppliers, both incumbent and new, to be optimistic about over the next three years; there is money available that many believed would be difficult to come by. Delivery departments are still King though; the archaic way of HM Treasury allocated funds on a project-by-project basis continues. For all the razzamatazz of the establishment of the Central Digital and Data Office (CDDO) to coordinate more joined-up technology investment, the Cabinet Office appears to be the Department that comes out worst, with what looks like a diminishing budget in real terms. That for me is an opportunity missed and a dereliction of duty to learn lessons of failures-past.

Footnote: This blog has been adapted from a longer Market Impact report entitled 2021 Spending Review: A New Optimism which will shortly be available to GlobalData clients on the Public Sector Intelligence Centre.

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