Public spending and the Spending Review – what you need to know
Every few years the UK government allocates public sector funding and sets out objectives for each government department through a Spending Review, led by the Treasury and the Chancellor of the Exchequer. Guidelines for when and how public money can be spent are laid out in the Treasury’s Green Book, which includes the criteria for market failures that justify government interventions, and models for assessing the impact and value for money of public spending.
On 27 October 2021, UK Chancellor Rishi Sunak presented the 2021 Spending Review to cover a period of three years from Spring 2022.
There are four key headlines for data and digital from the 2021 Spending Review:
- Department of Digital, Culture, Media and Sport: £160m in funding over three years has been allocated for data and digital priorities, including around £110m for online harms and around £50 million for AI and data scholarships and for data policy and digital identities.
- Department for Business, Energy and Industrial Strategy: annual spending on research and development (R&D) will increase by nearly £3bn, supporting priority areas set out in the Innovation Strategy including artificial intelligence and bioinformatics.
- Other Departments:
- around £2.1bn to the Department for Health and Social Care to spend on innovative use of digital technology
- around £130 million for the Competition and Markets Authority which will include roll out of the dedicated Digital Markets Unit as government looks to legislate for a new digital markets regime
- £294 million for the UK Statistics Authority for high-quality core statistics, including a new Labour Market Survey and delivery of the government’s Integrated Data Service for improving the availability of cross-cutting data across government
- £200m for a new round of the Shared Outcomes Fund for piloting projects to test innovative ways of working across the public sector (in the 2020 Spending Review, £100m of the £200m Shared Outcomes Fund announced then was ringfenced for data projects)
- Other interventions: the Spending Review announcement also includes reforms to R&D tax credits in the form of the government expanding qualifying expenditure to include data and cloud computing costs
These interventions will be critical to the government’s digital ambitions; but data investments are also vital to non-data, non-digital ambitions – from the government’s net zero targets to its ‘levelling up’ agenda. In this blogpost, we outline how we think ministers and their teams can use their new funding allocations to invest in data to address the priority areas that matter to voters, businesses and communities.
Tackling market failures
Changing data flows changes how social and economic systems work, creating value by providing information to those who would not otherwise have it. In this way, data flows and data ecosystems can help tackle some of the market failures described in the Green Book such as monopolies, externalities, or information asymmetries.
The government’s data policies can help to achieve outcomes where the market is failing to deliver, from housing and transport to carbon impacts and energy markets. We’ve outlined some of the ways in which data policies can be used to foster better competition in markets for equitable and sustainable growth and innovation. Ministers and their teams can use these principles to invest well to deliver against their departmental goals.
Tackling data market failures
Data ecosystems themselves can be subject to market failures that need government intervention. For example, it’s not always the data controller who stands to benefit the most from the use of data, and so they might have little incentive to allow access to the data or act to share it. This can lead to what we at the ODI call a ‘data-hoarding’ future. In other cases, data sharing might worsen inequalities or lead to other negative consequences in the medium to long term, which could then hinder longer-term trust in data practices. This can lead to what we call a ‘data-fearing’ future.
The data future we want to see is one where data is used and shared appropriately to get the best outcomes for society and economy. A recent report by Frontier Economics found robust evidence that trust is a key determinant of data sharing, and therefore also of value creation from data. This means that trusted and trustworthy data ecosystems are crucial for unlocking the real value of data for economy and society. Ministers and their teams should look beyond short-term measures, and also consider how policies and practices can foster trust in data ecosystems in a sustainable way for real impact. We’ve made some suggestions here.
Delivering policy priorities
Some kinds of data are directly subject to the kinds of market failures described in the Green Book: for example, some kinds of data can be considered a public good that needs to be maintained by the government, because there are not enough incentives for the private sector to maintain that data on a commercial basis.
Governments are one of the largest and most powerful agents in national data ecosystems, collecting and controlling significant datasets across sectors and communities. And so the data practices of a government matters for how that country’s national data ecosystem develops overall across sectors and domains. For example:
- Publishing: The government is a major publisher of open data, which can be used by businesses and others for economic (and social) growth.
- Leading: The government has a major influence on what others do through setting expectations and sending signals – it can inspire others and lead by example with its own data practices.
- Collaborating: The government’s own data ambitions are likely to require support from private (and third) sector partners, providing these partners with opportunities which could lead to wider economic benefit.
- Supporting: The government can produce resources of wider interest and benefit, such as toolkits and research, which other actors in the data economy can learn from.
- Stewarding: The government is a major steward of data that can be valuable to data economies and data flows.
By adopting good practices in the above areas, the government can better coordinate with private sector and civil society stakeholders involved in delivering public services, ensuring data works for the wider economy and society. We’ve mapped all the data initiatives in UK government and compared them against our ODI manifesto for the elements of open and trustworthy data ecosystems: infrastructure, capability, innovation, equity, ethics and engagement. Ministers and their teams can use our map to help them deliver effectively against their departmental goals and policy priorities.
Beyond Whitehall and Westminster
The period around the Spending Review is hectic in Whitehall and Westminster, as the details of departmental budget allocations are finalised and ministers and their teams set their priorities and work plans. But stakeholders like industry, civil society, academia and local communities have an influential role too, and important contributions to make.
The government’s proposals for reforming the UK’s data protection regime – part of its National Data Strategy – is currently out for consultation until 19 November, for anyone to submit their views and evidence. We’ve published several resources to help, including a chapter-by-chapter explanation of what’s in the consultation.
The government has also published a draft framework for monitoring its progress against the objectives of the National Data Strategy, and which includes possible indicators and data sources for mapping the value of data for the economy. It’s open for feedback and evidence until 3 December: we plan to respond and we hope you do too.