Legacy technology, procurement and workforce identified as ‘Big Nasties’ of future spending for British Government

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With a General Election looming, Britain faces some tough choices about its future direction of travel. Following years of austerity, Brexit, multiple Prime Ministers, the pandemic, a flailing economy, and more political psychodrama than your favourite TV soap opera - Britain is desperately in need of some new ideas, effective strategy and consistent, long-term thinking. 

It is still unknown when exactly the election will be called (although we do know it will be this year); but what’s clear is that effective change and some new political ambition is needed. And before change is put in place, it’s always a good idea to understand what the structural challenges or obstacles are. Ambition is fine, but if you don’t know what difficulties lie in your way, that’s all it is…ambition. 

The mood amongst the general public also appears to be that politicians are making policy decisions based on short term news bulletins or are catering to extreme fringes of their respective political parties (as well as opinion on Twitter). If the nation wants to pull itself out of the depths of its decade long depression, it needs to take a long-term view that may come with some short-to-medium term pain. It needs to address the structural problems. 

With all this in mind, it was with interest that the Public Accounts Committee (PAC) Chair’s 8th Annual report was published today, outlining what it sees as the ‘Big Nasties’ of future spending problems for the British Government. The report focuses on key themes for a future government: long-term thinking and investment; resilience; and risk management and understanding. 

Some of the ‘nasties’ identified are unsurprising (and less relevant to this title), such as hospitals, schools, Net Zero, healthcare, housing, and preparedness for future pandemics. However, the Chair of the PAC, Dame Meg Hillier MP, raised a number of points that are of interest and are worth considering as topics for future thought, as Britain looks to establish its new government. 

Chair of the Committee, Dame Meg Hillier MP said: 

As a former government minister, I came to the PAC with a sound knowledge of how Whitehall works, how projects are devised, how policy is delivered, and how to keep things on track. However, as chair of the PAC, I have observed how frequently the same mistakes are made and how the system seems to be incapable of developing institutional learning and memory.

Hillier has been on the PAC for thirteen years and as such has some good insight into what needs to be done in the future, more broadly. She wrote: 

Firstly, we must recognise that some of the major challenges facing Britain require long-term investment and planning. These challenges should never become merely matters of political controversy, but instead should be dealt with over decades, and always in the national interest.

These might include how to accommodate our ageing and growing population, how to marshal the awesome potential of digital technology for the public good, how to manage major infrastructure projects, how to tackle man-made climate change, how to root out fraud, inefficiency and waste, and how to sustain an effective defence capability. The UK Government spends over one trillion pounds a year, but the scale must never mask the need to look after every penny.

Secondly, this need for scrutiny must be matched by the tools to do the job. The PAC remains an incredibly robust means to hold the powerful to account. Yet there is a scrutiny gap. As systems become ever-more multifaceted and labyrinthine, the job becomes more complex. We must always have the resources to fulfil our remit.

Thirdly, there are areas where eye-watering sums of the public’s money are being spent, but which cannot be openly scrutinised. As a former Home Office minister, I recognise absolutely the need to maintain security and do nothing to aid the UK’s enemies. Yet there is still an imperative to ask the right questions and investigate all areas of the public accounts, even if sensitive and secret.

Hillier is calling for new mechanisms to scrutinize the effectiveness of government. She believes that there is a role for pre-project scrutiny, akin to pre-legislative scrutiny, where there is a public airing of the plans for a major programme. Equally, the government needs a better mechanism for allocative efficiency - spending money where it makes the most difference. 

Elsewhere, the report highlights a number of ‘Big Nasties’ of future public spending. Some of which include the following:

Workforce resilience

A point that has been highlighted by diginomica on a number of occasions, the PAC points to the need for the government to create a resilient workforce. For organizations to succeed, they need to hire the right people and keep them in order for them to be effective. It writes: 

Government has fewer than half the digital, data and technology professionals that it needs, leaving departments reliant on contractors. Concerningly, there are particular shortages of cyber security staff. Despite this, headcount cuts are still taking place, which risk costing government more in the long term. For example, when government’s own recruitment service cut its headcount by 40% in 2022, it had to reverse the cuts a year later to avoid service failure. To ensure long-term benefit, government should avoid simplistic headcount targets and instead invest continuously in staff development to maintain resilience.

Legacy digital systems

Unsurprisingly, the report highlights legacy IT systems as being a barrier to progress and as a significant cost to government. It’s something we’ve analyzed time and time again on diginomica, where there are no easy solutions, as so much of it is tied up in the power structures of Whitehall, as well as skills, investment requirements and a willingness to change. The report states: 

Government has significant issues with ageing IT systems. 30% of DEFRA’s applications are so outdated that they are not supported by their supplier.DEFRA uses around 1,962 different systems, as older systems usually were built for a single purpose. Older systems provide poor service for those using them—the Committee found that the MoD’s aged systems make even routine tasks like ordering boots complicated. Legacy systems are expensive to maintain, expensive to modernize, and at risk of failure and cyber-attacks.In 2019, the MoD stated that it would need to spend £11.7 billion to update and replace its legacy systems. 

Since then, government has struggled to deliver programmes to replace these systems—calling two of the programmes ‘unachievable’. Government must upgrade its legacy systems, using a realistic programme.

Procurement

One other relevant area - or ‘nasty’ - that’s worth highlighting is the are of procurement. In years gone by, Britain made significant progress in this area, by introducing innovative procurement frameworks, such as the G-Cloud, which brought in new suppliers and additional competition to the public sector. However, power being power, the emphasis on these frameworks slowly faded and progress on taking them further was muted. As the report highlights: 

Departments’ approaches to procurement affect competition, the risks which they need to manage and long-term supplier relationships. High bid costs, lack of confidence in evaluation, and lack of feedback deter suppliers—especially the smaller suppliers which government says that it wants to encourage. Departments could make better use of competition by designing realistic requirements for the goods and services which they are procuring, and by holding information on suppliers so that they can better manage the risks of procuring quickly.

Often, government’s poorly designed requirements and sourcing has led to few bids, or granting contracts to unsuitable suppliers. In some markets, there are too few competitors for the market to work.

For example, when scrutinising rail franchises, the Committee noted that “[T]here is a real risk to value for money if market interest in operating rail franchises declines any further”.

Government must “develop alternatives to its current commercial approach so it is well placed to deliver value for money if market interest falls to a level where intense competition cannot be guaranteed”. Government has recognised that improvements in procurement could bring savings of £4–£7.7 billion per year. The new Procurement Act may lead to improvements, but the increased flexibility which it offers will bring additional risks to manage.

My take

My main gripe with modern politics in Britain (and often elsewhere) is the reluctance to adopt a long-term strategy. The way the media, parliament and government works in reaction to short term problems, without thinking about the mechanisms that could be introduced to make structural changes, is very frustrating. If the polls are to be believed and the opposition party delivers a landslide victory at the next election, then I would hope that the Labour Party leader will use his large majority in Parliament to make some difficult decisions that take a little longer to pay off, but deliver more benefits for a brighter future. We will see.