UK government sets out new ‘start-up’ approach to funding digital and AI projects
The UK government has announced plans to overhaul the way AI and digital projects are funded in the public sector in a bid to reduce spending waste and boost innovation.
The Department for Science, Innovation and Technology (DSIT) has pledged to learn from start-ups by embedding a ‘test and learn approach’ for funding small AI projects and replacing outdated technology. This follows a review which found that many digital projects face overly complex spending approval processes that can slow them down or prevent them from getting off the ground entirely.
The Performance Review of Digital Spend – undertaken by DSIT, the Treasury and the Government Digital Service – said that: “It is essential to simplify governance for smaller projects while maintaining rigour for larger ones.”
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Staged funding
Four new approaches to funding innovation will be tested from April. This will include building on the development of the GOV.UK Chat generative AI chatbot to provide staged funding for innovation.
More agile funding processes will be used to build and test an initial prototype more quickly. Progressing in stages, projects will be supported through larger and larger tests if early trials show the potential to save money and improve public services. In addition, there will also be a strong focus on developing new outcome metrics and evaluation plans for major digital projects.
Other approaches outlined in the review include staged funding for live services, which links funding directly to outcomes through regular review, and ‘portfolio outcome-based funding’, where multiple digital projects are grouped into a single, long-term investment plan aligned to government spending guidelines and focused on outcomes. Another is ‘risk reduction in technical debt and cybersecurity’, meaning investment plans that address legacy systems and technical debt, prioritising long-term risk reduction over short-term savings, with clear metrics to track improvement.
“The review aims to stop chunks of the public sector’s technology bill not delivering on intended outcomes for the public,” a statement said.
Read more: UK PM says government needs to be ‘happier with innovation’ as he sets out reform plan
Technology secretary Peter Kyle commented: “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.”
He added: “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.”
Addressing ageing systems
The government’s State of Digital Government Review published in January revealed that one in four of the digital systems used by central government are outdated and for the worst affected organisations, this figure rises to 70%. The government says this outdated technology can rack up large maintenance costs that can be three to four times higher than if the technology was kept up to date. A growing number of these systems are also “red-rated” for reliability and security risk, meaning they have both high likelihood and high impact in terms of potential risks.
The associated ‘blueprint for modern digital government’ outlined a plan to adopt a digital-first operating model, underpinned by new funding approaches.
Read more: Our coverage of the UK government’s blueprint for modern digital government
Chief secretary to the Treasury, Darren Jones, said: “This government is determined that digital transformation of the state and our public services will deliver better outcomes for people, and ensure every pound of taxpayers money is spent well.”
The announcement on new funding approaches comes ahead of the government Spending Review, which is set to conclude in June.
In February, Patrick Vallance, the UK’s minister of state for science, research and innovation, said that the government will use the Spending Review to address digital infrastructure.
“The UK government is in the process of a Spending Review which will be used to tackle the state of historic legacy IT, invest in cybersecurity, cloud-based computing, and the technologies that harness the benefits of AI for the public sector,” he said in a written answer to a question asked by Lord Taylor of Warwick.
“The government has a clear focus on taking advantage of new technologies such as AI to improve public sector productivity and deliver a better user experience for citizens.”
Read more: UK Spending Review will upgrade legacy technology in government, says minister
About Sarah Wray
Sarah has over 15 years’ experience as a journalist with a specialism in the public sector and topics such as digitalisation and climate action. Sarah was formerly the editor of Cities Today and Smart Cities World, as well as a specialist video-based publication in the aerospace sector. She has also written for publications including Smart Cities Dive, Mobile Europe, Mobile World Live and Computer Weekly.
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