Government has unveiled plans to revamp the funding models used to support the delivery of digital projects and replace existing mechanisms that are “overly complex… [and are] delaying decision-making and service delivery”.
Shortly after the general election last year, the incoming chief secretary to the Treasury, Darren Jones, commissioned a Performance Review of Digital Spend. This assessment has now been completed and published, in a document setting out the review’s key findings and the recommended actions to address the issues identified.
Reviewers found that “a paradigm shift in how HMG allocates and funds digital programmes is needed” to enable government to get the most out of new technologies, including artificial intelligence.
To deliver this shift, a range of measures have been recommended in three areas: new funding methods; improved training and guidance; and better methods and metrics for measuring outcomes.
In the first of these areas, four new funding mechanisms will trialled over the coming months, as the first stage of a plan to “institutionalise” the models by the time of the 2027 Spending Review.
The first two of these new models will be based on “staged funding” – for innovative new technologies and existing live services, respectively.
For emerging tech, this will mean that “funding is based on demonstrated progress rather than speculative forecasts and extensive documentation”.
For services that are already up and running, meanwhile, the intent is “linking funding directly to outcomes through regular reviews, reducing bureaucracy and enabling faster decision-making”.
The third financial support mechanism to be rolled out is “portfolio outcome-based funding”, in which multiple projects form part of a broader transformation and upgrade plan. This method of funding will ask departments to “initiate digital portfolios represented through a single multi-year business case… and focusing on long-term outcomes”.
The final model proposed in the review is focused on “risk reduction in technical debt and cybersecurity”. Under this mechanism, ”investment plans will address legacy systems and technical debt, prioritising appropriate risk reduction over short-term savings, with clear metrics to track improvement”.
A number of digital and data projects earmarked for investment in the ongoing multi-year Spending Review will be chosen as “pathfinders” to test the new funding models.
The review says that the intention is to replace a single and unchanging method – which is often unfit for purpose – with a variety of “faster, smarter, and more proportionate funding processes”.
“Currently, every digital investment is put through the same business case approval process, regardless of scale or risk, leading to inefficiencies and delays in delivery,” the document adds. “This over-reliance on these processes stems from risk aversion, a lack of proportionate application of current guidance by departments, and a limited understanding of digital delivery methods within review and approval mechanisms.”
Theory of evaluation
The review also proposes three measures for improving the training and guidance that supports spending decision.
The first of these is for immediate and targeted training for certain agencies and spending teams “with a focus on building better-evidenced bids” for the 2025 spending review – which is due to conclude this summer.
The second proposals calls for a “a digital first approach to SR25” in which “departments have been asked to involve their CDIO and internal digital functions when preparing and scrutinising” their submissions.
For its part, the Treasury will also work with the Government Digital Service to offer ministers “consolidated advice across all… returns and investment priorities” for digital and data.
The final guidance-related recommendation calls for the publication of additional tech-focused advice intended to supplement the existing Treasury Green Book guidelines for appraising policies and projects. This “supplementary guidance… clarifies how to correctly apply Green Book principles when developing DDaT business cases, with a particular emphasis on legacy tech”.
There are also three recommendations designed to support better evaluation and measurement of investment, including plans to “develop new outcome metrics for tracking the benefits being delivered from major DDaT investments”.
It also recommends the Evaluation Taskforce – a joint unit of the Treasury and Cabinet Office – offers departments “advice on the development of robust evaluation plans for a few high value DDaT investments funded at SR25, focusing in particular on legacy tech”.
The review’s final recommendation is to “enable more strategic decisions at SR27, by agreeing priorities for business case development through the Digital Interministerial Group at least six months before the SR27 process begins”.
Unveiling the proposed spending-related reforms this week, technology secretary Peter Kyle said: “Technology has immense potential to build public services that work for citizens. But a decades-old process has encouraged short-sighted thinking and outdated tech, while stopping crucial innovation before it even gets going.
"These changes we’re making ensure innovation is the default. We will help give AI innovators in government the freedom they need to chase an exciting idea and build prototypes almost immediately.
"This review will help us build technology that will mean businesses can skip the admin and get on with driving growth, digital systems supporting the police are more reliable so they can keep our streets safe, and it will mean we can build new tools to speed up wait times for doctors’ appointments and get the NHS back on its feet are built.”