To modernise government digital spending, a new policy paper advocates for agile funding and strategic investment. It proposes shifting from complex processes to outcome-focused models, emphasising innovation and value for money
Policy paper calls for agile funding and strategic investment in digital initiatives
A newly released policy paper, “Performance Review of Digital Spend: Enabling Strategic Investment and Innovation,” has unveiled a comprehensive overhaul of how the UK government funds and manages digital initiatives.
Commissioned by the Chief Secretary to the Treasury (CST) in August 2024, the review highlights the urgent need for a shift towards more agile, outcome-focused funding models to address the complexities and inefficiencies of current processes.
The case for change: Addressing current shortcomings
The review identified several critical issues hindering effective digital investment. Current processes are often overly complex, particularly for innovative technologies and smaller projects, leading to delays in decision-making and service delivery. Furthermore, a persistent lack of funding for service maintenance and improvement has resulted in mounting technical debt and outdated legacy systems.
“Financial pressures during and between Spending Reviews (SRs) often mean short-term savings are prioritised over long-term digital investments,” the report states. “This results in mounting technical debt with outdated legacy systems and hampers progress.”
The review also points to the absence of agreed-upon metrics for measuring outcomes, limiting the ability to demonstrate value for money. Early involvement of digital experts in policymaking is also lacking, narrowing delivery options and hindering the exploration of potential solutions.
Recommendations: A three-pillar approach
To address these challenges, the Review Team has outlined a series of recommendations built on three key pillars: testing alternative funding mechanisms, enhanced training and guidance, and improved outcomes metrics and evaluation. The government aims to test, iterate, and institutionalise these approaches by Spending Review 2027 (SR27).
- A portfolio of pathfinders: Testing new funding models
The report recommends the implementation of a portfolio of pathfinders to test new funding models, including:
- Staged funding for innovative technologies:
- Introducing iterative funding for areas like AI, based on demonstrated progress rather than speculative forecasts.
- Staged funding for live services:
- Implementing performance-based funding for live digital services, linking funding directly to outcomes.
- Portfolio outcome-based funding:
- Initiating digital portfolios represented through a single multi-year business case, focusing on long-term outcomes.
- Risk reduction in technical debt and cybersecurity:
- Establishing departmental tech and cyber risk appetites and investment plans to address legacy systems.
- Training, guidance, and strategic spending decisions
To improve the quality of digital investment decisions, the review calls for:
- Upskilling through DDaT training:
- Delivering targeted training for departments and Spending Teams.
- A digital first approach to SR25:
- Involving digital experts in the Zero-Based Review (ZBR) process.
- Green Book supplementary guidance:
- Publishing guidance to clarify the application of Green Book principles to digital business cases.
- Improved outcome metrics and evaluations
The report emphasises the need for:
- Outcome metrics:
- Developing new metrics for tracking the benefits of digital investments.
- Evaluation plans:
- Providing advice on developing robust evaluation plans for high-value investments.
- Strategic decisions at SR27:
- Enabling more strategic decisions by agreeing on priorities for business case development.
International inspiration and UK implementation
The review draws inspiration from international examples, including New South Wales’ outcome-based funding model and Estonia’s stage-gated approach. These examples demonstrate the potential for more agile and effective digital investment.
The UK government plans to implement these recommendations through a phased approach, starting with the launch of targeted training and the publication of new guidance during Spending Review 2025 (SR25) phase 2. The goal is to establish a more strategic and outcome-focused approach to digital spending by SR27.
Looking ahead: A more agile and effective digital future
By adopting these recommendations, the government aims to revolutionise its digital spending practices, enabling faster spending approvals, greater flexibility, and improved value for money. The focus on outcome metrics and evaluation will ensure that digital investments deliver tangible benefits for citizens and the public sector. The policy paper represents a significant step towards a more agile, efficient, and innovative digital future for the UK.
