Whitehall staffing cuts add to digital skills shortages and risk increased costs, say MPs

• Government estimates it has under half the number of digital, data and tech professionals it needs
• PAC calls for digital responsibilities of most senior officials to be formal part of appointment

Digital skills shortages in the civil service are likely to see increased risks and costs to Government. In a report published today, the Public Accounts Committee (PAC) finds that a lack of digital expertise means Whitehall is unable to genuinely transform its services, and can only make incremental upgrades. This risks increased costs in the long run, with Government continuing to run its services on ageing legacy systems.

The number of digital, data and technology professionals in the civil service is around 4.5%, according to Government estimates. This is less than half the number it needs when compared to an equivalent industry average of between 8% and 12%, meaning this number will need to double. However, pay constraints mean that Government departments are unable to fully compete with the private sector in hard-to-recruit roles. The PAC’s inquiry heard of particular shortages of cyber security experts, whose skills command a premium.

The PAC was disappointed to learn that some digital skills shortages are self-inflicted through counter-productive staffing cuts. Digital headcount has been rationed in Government departments – against the backdrop of a struggle to recruit and retain the necessary skilled people in a drive to double the civil service’s digital workforce.

Only 10 of government’s ‘top 75’ services are at a ‘great’ standard and 45 require significant improvement, when assessed for how easy they are for people to use and how efficiently departments are providing them. Services often lack a single point of accountability in a senior owner who could provide transparency on efficiency and effectiveness. The PAC’s report calls for Departments to identify a suitably senior and experienced single owner for each government service.

A surprising finding of the PAC’s inquiry, given the importance of digital to a modern civil service, was that the requirement for senior generalist leaders to have a better understanding of digital business has not been formalised. The PAC recommends that digital responsibilities, such as improving digital services and addressing the highest risk legacy systems, should be included in letters of appointment at the most senior levels in all departments.

Dame Meg Hillier MP, Chair of the Committee, said: “One of the hallmarks of the Digital Revolution has been rapid and accelerating change. Our inquiry has found that Whitehall’s digital services, far from transforming at the pace required, are capable of only piecemeal and incremental change. Departments’ future-proofing abilities are hobbled by staff shortages, and a lack of support, accountability and focus from the top. In particular, a lack of cyber-security experts should send a chill down the Government’s spine.

“The Government talks of its ambitions for digital transformation and efficiency, while actively cutting the very roles which could help achieve them. Our inquiry leaves us unconvinced that these aims will be achieved in the face of competing pressures and priorities. Digital must not be treated merely as a sideline, but must sit right at the heart of how Government thinks about delivery. Without swift and substantial modernisation, opportunities to improve services for the public will continue to be lost.”

PAC report conclusions and recommendations 

Government's public services need fundamental reform but often lack a single service owner and timely metrics on costs and performance which are essential foundations for identifying existing costs and tracking efficiency improvements. Understanding the full costs of services is key to delivering efficiency and is considered foundational in the private sector. Business cases need to include basic costs of service provision and other details, such as numbers of staff needed to help run the service, to understand the baseline position and justify funding for improvement. There is a lack of visibility and control over end-to-end services with many requiring manual administrative effort and interaction between different systems. Only 10 of government’s ‘top 75’ services are at a ‘great’ standard and 45 require significant improvement, when assessed for how easy they are for people to use and how efficiently departments are providing them. Having a single owner with responsibility for the entirety of a service would give end-to-end visibility and accountability for how efficiently and effectively it is performing. CDDO agrees with the need for an end-to-end service owner to manage operations, gauge performance over time and plan effectively.

Recommendation 1:

1. a) Departments should identify a suitably senior and experienced single owner for each government service.
2. b) Service owners should be tasked with identifying the full costs of the services for which they are responsible and for identifying and tracking the benefits gained from transforming those services or the opportunity costs of not doing so.

Departments are mainly making piecemeal changes to legacy systems rather than investing in more efficient wider service redesign which would reap greater benefits. It is difficult to transform services where they are supported by poorly performing legacy systems and data. When government does not have the right resources and capabilities at all levels it tends to make more superficial incremental changes. This is a lost opportunity to fully redesign and transform services to achieve long-term efficiency benefits. CDDO has assessed the scale of legacy issues in 153 systems so far, across 16 departments. The highest-risk systems have been identified and remediation plans have been set up and funded. Some departments can describe the benefits gained from transformation, but many still struggle to systematically identify the opportunity costs of failing to transform. The Cabinet Office acknowledges that decision-makers will under-invest if they do not understand how transformation would reduce future operating costs. The consequences of not having enough capable resources are to defer opportunity and prolong the risks of continuing to rely on legacy systems.

Recommendation 2: As part of business cases, departments should explicitly set out how they will resolve issues caused by changes to old legacy systems and data and demonstrate how wider service redesign will reduce the future costs of the services they support.

The requirement for senior generalist leaders to have a better understanding of digital business has not been formalised, and training is not focused on how digital developments interact with the complex government operational environment. The continued engagement with digital transformation of departments at permanent secretary level is essential to maintain traction. Setting up the Digital and Data Board is a good start, although we have heard that some permanent secretaries have been sending deputies. Committees on their own do not deliver anything if the right people do not attend and take required actions. We were also surprised to see that while the standard appointment letter for permanent secretaries includes reference to their financial responsibilities, it does not include anything relating to digital responsibilities. Ongoing capability building and training for senior leaders is essential. Various training programmes are being delivered, but the Digital Excellence programme has only recently been piloted and is not yet widely rolled out. Government acknowledges this area needs continual attention. Suitably experienced non-executives in board roles in departments are an excellent way to guide and educate senior leaders in digital matters. Around half of non-executive directors in government consider they have digital expertise but those with a background in similar legacy environments to departments will be most valuable.

Recommendation 3:

2023. a) Digital responsibilities, such as improving digital services and addressing the highest risk legacy systems, should be included in letters of appointment at the most senior levels in all departments. The Cabinet Office should set out the steps it will take to work with civil service HR and other relevant stakeholders in writing to the Committee by December 2023.
2024. b) All Departments should appoint at least one non-executive director with relevant digital, data and technology transformation expertise to their Board.

Digital skills shortages, including those self-inflicted through headcount cuts, risk costing government much more in the long run because opportunities to transform are foregone, and delays increase the risks of prolonging legacy systems. Government estimates it has under half the number of digital, data and technology professionals it needs, when benchmarked against comparable organisations. Yet departments are constrained in what they can pay and, while they try to offer more for specialist roles, cannot fully compete with the private sector in hard-to-recruit roles such as data architects and cyber security experts. Despite offering interesting opportunities, and the new possibility of digital career progression to executive committee level, departments are vulnerable to trading on the goodwill of staff if pay is consistently lower than outside the civil service. Departments are also rationing digital headcount, such as apprenticeships, when they are struggling to recruit and retain the skilled people they need. Such shortages are a risk to achieving the Roadmap’s aims.

Recommendation 4:

1. a) CDDO should support departments to avoid counter-productive digital headcount cuts when they are seeking to double the size of the digital, data and technology profession in the civil service.
2. b) Departments should, as part of its Treasury Minute response, quantify the impact of the under-resourcing of digital skills both on their ‘business-as-usual’ operations and change programmes, and take action to address these such as by scaling back programmes and being explicit about delays and missed opportunities.

Central functions, such as procurement, have not made significant progress in treating digital programmes differently from physical infrastructure programmes. The Infrastructure and Projects Authority is responsible for assuring major programmes across government and has started to appoint people with digital expertise onto review teams. However, CDDO is working with the central functions on some of the broader challenges associated with understanding and embedding digital thinking into the areas for which they are responsible, aiming to address these by 2025. The civil service is more specialised than it was 10 years ago but is still quite generalist and policy-driven overall. The types of challenge are:

• Departments find it easier to secure capital funding than for ongoing resource allocations to run services. However, limiting resource expenditure on systems can be a false economy. Cuts can have a devastating future impact and exacerbate existing problems with legacy systems.
• Procurement processes are considered inflexible and do not comfortably fit with the complexities and uncertainties of digital programmes.  Departments often cannot precisely define and scope their requirements yet continue with procurements and expect suppliers to make priced proposals as if these uncertainties were not a problem. Once awarded, contract lots are not always allocated to best fit the delivery plan and focusing on cost minimisation rather than best outcome can lead to defensive behaviours from all parties rather than constructive partnership.

Recommendation 5: Central functions should write to CDDO by December 2023 to describe their strategy and plans to achieve the necessary digital reforms to central processes so CDDO can identify what blockers and disagreements exist, and how to resolve them.

We are unconvinced that departments will be able to maintain commitment to the agreed Roadmap activities in the face of competing pressures and priorities. Departments must buy in to the long-term advantages of following the digital change agenda. CDDO can monitor progress from the centre, but departments must continue to play their part in completing the agreed activities in the Roadmap. Lack of sustained leadership engagement is a risk to delivery that needs to be taken seriously and CDDO must continue to push for priority with senior leaders. We agree that overall pressures on spending in the current climate require better delivery for improved efficiency at lower cost. Competing pressures and changing priorities will present challenges to the delivery of the Roadmap despite CDDO’s best endeavours. Effective and timely reporting is necessary to hold departments accountable for completion of the agreed Roadmap activities, and CDDO must ensure it maintains suitable levers to keep progress from stalling.

Recommendation 6: CDDO should report to Parliament in six months’ time, and 6-monthly thereafter, on each department’s progress towards achieving the Roadmap commitments they have agreed to. We note that the first 6 monthly report has been published.