We should take some encouragement that this week’s gathering of the powerful, the rich and the even richer in Davos chose technology risks as one of its key agenda items for discussion.
The World Economic Forum (WEF) has acknowledged that emerging trends such as artificial intelligence (AI), 3D printing, the internet of things and others present potentially huge societal challenges – not to mention established and well-publicised risks such as cyber security.
But it would be even more encouraging if the powerful, the rich and the even richer showed any inclination to actually doing something about it.
The red flags waved at WEF will be familiar to any close observers of the digital revolution.
AI and automation is likely to destroy many existing white-collar jobs – threatening to decimate the middle class the way that working classes were affected by the decline in coal, steel or manufacturing in western countries.
Secure, full-time jobs are already being replaced by self-employment and “flexible” work patterns in so-called “gig economy” companies that are led by technology, such as Uber or Deliveroo – both already the subject of legal cases around workers’ rights.
Who stands to benefit most from these trends – from replacing staff with machines, and reducing the rights of those workers they still need? Could it be the powerful, the rich and the even richer?
Where are the incentives for business leaders to look after the employees displaced by automation, or to train them in the new skills needed for a digital world?
Who has the influence to regulate gig economy firms to protect the employment rights of the workers upon which they depend?
And where are the movements showing how technology can address the popular discontent over the downsides of globalisation, such as growing social inequality?
None of these are insurmountable problems. They are not complicated to solve – but they are hard, and require focus and effort. But the Catch-22 is that the people most inclined to solve the problems don’t have the power to effect change, while the people with the power to effect change are not inclined to solve the problems.
It is, therefore, a positive step that WEF leaders are acknowledging the issues – look at us, we care, honest we do. But there is a long way to go before they start to do something about it.
Wearables, smart homes, smart buildings, smart cities and autonomous vehicles are among the technological breakthroughs that are starting to gain traction.
The Consumer Electronics Show (CES) in Las Vegas gives a glimpse of what the tech pioneers think will be hot in coming years, and the era of internet-connected things is starting to capture people’s imagination.
Internet-connected “things” are not considered computers, according to Forrester principal analyst Jeff Pollard, who, in this week’s issue, assesses the challenges the industry faces. You can’t expect a homeowner to patch his or her internet-connected fridge, heating system or baby monitor, even though – as was demonstrated last year – such things can be exploited to launch massive distributed denial of service (DDoS) attacks, taking down some of the internet’s biggest players.
Worryingly, many of the companies at CES only expect their products to last a couple of years. Two years’ support, while generous in IT terms, is meaningless if the device is embedded in someone’s home or integrated into thousands of street lights in a smart city.
People balk at the idea of paying upfront extended warranties to cover new products such as refrigerators or washing machines for five years.
Smart TVs just a few years old no longer get firmware updates because their operating system is unsupported. That is not very smart, especially if that device could be exploited in a DDoS attack.
Manufacturers want people to buy the latest product, but, as with a smart TV, the one being replaced still works. It may well be used as a second television or handed down to a family member, who will happily plug it into the internet, so it can carry on being exploited.
The use of the internet of things (IoT) to improve society is limited only by our imagination, but at the World Economic Forum in Davos this week, experts will portray IoT nightmare scenarios to business leaders and politicians.
If the Ukrainian power grid can be crippled by an internet attack, what else is possible? Whether or not it is proved to be true that a US presidential election can be influenced by hackers illustrates the possible risks an internet-connected society will need to consider.
A new year brings new challenges, but the CIO faces the same issue every year – to drive the business’s technology agenda while doing more with less overall budget.
Computer Weekly’s annual IT Priorities survey found that while budgets for staff and on-premise servers are falling, IT decision makers are planning to spend more on cloud services.
That should not come as a surprise given that cloud services are well and truly coming of age. In September 2016, the Ministry of Defence became the first tenant in Microsoft’s UK-based Azure datacentre, and in December, AWS’s UK datacentre came online.
But 32% of the CIOs who took part in the IT Priorities survey said hybrid cloud would be their top area of investment this year. In one way, this makes perfect sense: hybrid gives IT departments the flexibility to choose which workloads to deploy in the public cloud and which to keep on-premise.
The challenge for CIOs is that, given a choice, business stakeholders may not feel the urge to move anything to the cloud, especially given current economic uncertainty. In the survey, 28% of respondents said they would implement virtual private networks in 2017.
But in this age of user empowerment, flexible working, cross-organisational collaboration and IT consumerisation, the idea that IT still sees a need for a hard network perimeter, with highly controlled access, seems at odds with modern working practices.
Similarly, you could argue that a hybrid cloud, where most workloads remain on-premise, does not reflect modern IT. It is a similar story with legacy applications.
The IT Priorities survey found that 15% of IT decision makers expect to increase their maintenance budget in 2017. There is nothing wrong with spending more on something that continues to add business value, but how many CIOs are faced with demands for higher and higher maintenance bills from their legacy software providers?
Given that a small but significant proportion of IT decision makers are thinking about investing in cutting-edge initiatives such as the internet of things and machine learning, which are normally way beyond the remit of corporate IT, perhaps 2017 should be the year the CIO breaks free of the chains imposed by traditional IT.
Computer Weekly’s UKtech50 list of the most influential people in UK IT provides a fascinating insight into the big issues affecting the tech community, as we watch how the leaders who make the list change year by year.
Twenty of last year’s top 50 dropped out of the list in 2016 – the fact that 40% of influencers changed in just 12 months reflects the pace of digital transformation, as organisations bring in new IT leaders with fresh ideas, and as startups play a growing role in the UK economy.
Twenty of this year’s top 50 also work in the public sector, where – despite many false starts – momentum around digital transformation is gathering pace and political profile.
And the list features 16 women – approximately a third of the top 50 – the highest representation ever and a very welcome sign that female leaders are breaking the glass ceiling, establishing themselves as role models for what we all must hope will become a new generation of young women entering the IT profession.
These trends offer optimism for the UK tech community in 2017. With all the uncertainty around Brexit, it’s been a tough year for a lot of people in UK IT.
The UK has long been one of the strongest IT markets outside North America – over the past year giants such as Google, Apple, Amazon, Microsoft and Facebook have all announced significant investments in their UK businesses. This is helping to counter any negativity around Brexit, as tech firms recognise that whatever the UK’s future relationship with the EU, it remains a country where businesses and government bodies invest heavily in IT.
Into 2017 and beyond, we will see a growing shift to the cloud among UK organisations – all the big cloud providers are setting up UK datacentres now to target that demand. The government is starting to put investment and support into rolling out full-fibre broadband which will only stimulate the UK’s digital economy further. Overall, while there remains a lot of economic uncertainty, IT professionals are leading the transformation of their businesses to better cope with the future.
Corporate IT infrastructure will go through a generational shift over the next five to 10 years, and that’s a huge opportunity for IT managers and their technology suppliers. We wish all the very best to the UK’s influential IT leaders – those on the UKtech50 this year, and those who may join it in the future.
Twice in the past week, the UK government has passed legislation despite overwhelming concerns from the technology community.
The Digital Economy Bill – a mostly sensible attempt to update laws around the digital economy – was waved through the House of Commons in the face of warnings from privacy experts about the data sharing aspects of the bill. The House of Lords now faces the challenge of tackling those concerns.
In both cases, the new legislation is an attempt to apply 20th century, industrial-era constraints to the emerging digital world. There is a very real risk that both – or either – could instead hinder the progress of the UK’s tech sector by anchoring it in politics that cannot keep up with digital change.
Privacy experts described the data sharing proposals as applying concepts developed for paper documents to digital information – as if data that needs to be shared has to be “photocopied”, creating a new version for whoever needs it. There was no understanding of simple concepts such as distributed databases or application programming interfaces (APIs), which would avoid duplication, enhance privacy, and improve security.
The new surveillance laws include clauses that could allow the government to force communications companies to break encryption or allow backdoor access to their products. All it will take is one example of a UK tech company being forced to fulfil such a provision, and nobody will ever trust a product developed by a UK supplier again. Some US companies have already suffered from similar issues with US laws.
Separately, health secretary Jeremy Hunt was pilloried by the tech community this week after suggesting that technology companies should take responsibility for preventing children accessing online porn, or being victims of cyber-bullying. While well intentioned – nobody would disagree that social media firms, for example, have a role to play here – Hunt’s comments displayed a fundamental misunderstanding of how technology works, and perhaps more importantly, how people actually use that technology.
Increasingly our politicians are running to keep up with technology – and failing. Sadly, this is nothing new. The tech community has long complained about the lack of digital literacy among MPs. Nothing has changed, and most of those MPs have little incentive to do so.
It will take a generational shift in MPs, as they are replaced by younger, tech-savvy politicians, for the situation to improve. In the meantime, perhaps the tech community ought to take a different approach – instead of simply shouting from the sidelines (although don’t stop doing that), wouldn’t it be good to see IT experts getting actively involved in politics as well, maybe even becoming MPs themselves to take the lead.
Chancellor of the Exchequer Philip Hammond’s Autumn Statement showed a welcome and necessary understanding of the need to look at the long-term future of the UK’s digital economy.
The £1bn investment in fibre to the premise (FTTP) broadband and 5G mobile infrastructure – along with £2bn for research and development and £400m to help tech startups go beyond the startup phase – represent the first time the Conservative-led governments of the past six years have looked beyond short-term, vote-winning policies when it comes to the technology sector.
As former digital minister Ed Vaizey will be quick to point out, the government has spent money on the digital economy before – helping to fund fibre to the cabinet (FTTC) broadband and giving marketing support to Tech City, for example. But those initiatives were essentially short-term, filling a gap that the market was failing to fulfil.
Computer Weekly and others have long called for a minimum 10-year perspective on the UK’s digital infrastructure. Telecoms watchdog Ofcom set that process in motion when its communications market review declared that supporting a full-fibre broadband network was its key regulatory priority for the next decade. The latest government policy supports that intent. Full marks are deserved for making full fibre the focus.
Fibre broadband to the home is perhaps the single most important digital investment the UK can make over the next 10 years.
But understandably, there are still many people who will say, we don’t even have decent broadband or mobile signals at home now – can’t we sort that out first?
They are right, of course. The last thing we want is a two-tier digital Britain. But now is the time to invest properly in FTTP. As the adoption of broadband over the past 15 years has shown, if you build it, they will come. You might not need gigabit speeds for the next two or three years, but you can be sure you will before much longer.
The details of how the new broadband cash will be spent are still unclear, but the government has signalled that priority will go to smaller providers – the so-called altnets – who tend to operate in the areas that BT has decided are not “economically viable”.
The best solution, therefore, if the government also wants to court vote-winning popularity , would be to target that investment at a rural leapfrog strategy – give full fibre first to the people without any fibre today.
Dear readers, I’d like to ask for your opinion. Let me tell you a story.
In late October, I was approached by a whistleblower in the Department for Work and Pensions (DWP).
This individual, who understandably requested anonymity, claimed that hundreds of IT projects at DWP Digital – the IT department of DWP – had been put on hold and hundreds of IT contractors laid off.
This person said that senior IT managers at DWP had conducted a series of “all hands” meetings to inform staff and contractors of the move, caused – they claimed – by a huge overspend in budget.
Afterwards, I talked to several other contacts – some of whom said they had also been in similar internal meetings, while others knew of colleagues who attended. All of them, independently, told a similar story – about 300 contractors released, as many as 500 IT projects put under review. There were different figures quoted for the alleged overspend – £200m said one, £180m said another, £250m said others; another source claimed that DWP Digital spent the year’s budget in just seven months. Some of these sources named the DWP managers who held the meetings at which this information was announced.
Admittedly, some of these contacts were among the freelancers let go – so it could be said they had a grudge. But I also heard from people still working in the civil service, and their stories were consistent.
When I approached DWP for comment, they strongly denied the budget overspend – but did not dispute the figures around contractors and projects.
The official line from DWP was that it was normal practice to conduct regular reviews of projects to make sure resources are focused on delivering value for money for taxpayers.
The DWP also said that it is “on track to deliver record digital transformation on a scale larger than most FTSE 100 companies” in this financial year.
Soon after, I followed up with DWP again to clarify some of the issues.
I asked for details of which digital projects are due to be completed this year to “deliver record digital transformation”. I was told they don’t release that information.
In the weeks since then I’ve been approached by several other people with links to DWP Digital, all offering fresh information. They mentioned specific IT projects they claimed had been put on hold – including some strategically important initiatives. I was also told about a large systems integrator being brought in to review the operating model for technology.
I put these questions to DWP. The department doesn’t talk about individual projects, they said. But they added that certain projects I’d mentioned were “progressing well” and “on track to deliver.” They work with many different suppliers, they said, but could not comment on their involvement in specific projects.
There was one exception – I asked if it was true that Carer’s Allowance, one of the “exemplar” digital projects, had been put into “maintenance mode” with all current development work paused. That wasn’t denied (or confirmed) – instead it was pointed out that the service has high levels of customer satisfaction (which I hadn’t asked about).
Previously I had also asked DWP if they could confirm what the annual budget is for DWP Digital. I was told it wasn’t possible to provide a figure, because the budget is associated with so many different projects that it would take too long to work it out. It was suggested that I submit a Freedom of Information (FoI) request, and that way DWP could assess if the information can be provided within the constraints of FoI rules.
We now know that the DWP Digital budget for financial year 2016-17 is £1,032m. That figure was provided in less than 72 hours in response to a parliamentary question submitted by Labour’s shadow digital economy minister, Louise Haigh.
An earlier question from Haigh had revealed that DWP Digital’s year to date spending as at 30 September 2016 was £516.8m. Another question she posed also showed that DWP Digital had reduced the number of IT contractors in use this year from 652 down to 359 as of 2 November.
The spending and budget figures quoted support DWP’s original response that there is no overspend and they asked me to make that absolutely clear.
At this stage all I can add is there are still people claiming potentially significant problems at DWP Digital – knowledgeable sources, independently of each other, offering very similar stories about projects being delayed and raising questions about spending.
MPs have in the past repeatedly criticised DWP and other officials for a “lack of transparency”, a “veil of secrecy” and a “culture of good news” in their dealings over the flagship Universal Credit welfare reform programme.
IT programme manager and freedom-of-information campaigner John Slater spent four years battling DWP to release documents relating to Universal Credit under FoI, before the department was finally ordered to do so by a judge.
And during the period before Universal Credit was “reset” in 2013, journalists were consistently told the project was on track and on budget, despite persistent rumours of significant problems that were subsequently proved correct.
DWP is, however, a different place now – different ministers, in a different government. The department has offered a response to every question I have asked – even if the level of detail provided leaves the situation open to speculation.
So perhaps the people who approached Computer Weekly claiming problems at DWP Digital are, as the department insists, simply wrong.
What do you think?
Update: 22 November
DWP’s chief digital and information officer Mayank Prakash has posted an article on LinkedIn, which is at least partly a response to the story in Computer Weekly discussed above. You can read his article by clicking here.
After another summer of turmoil at the Government Digital Service (GDS), with several senior executives leaving and a new chief brought in to the surprise of many, expectations for its new strategy are understandably high.
You would presume the top civil servants in the Cabinet Office have equally high expectations after deciding that Kevin Cunnington was the right person to lead the digital transformation of government, instead of predecessor Stephen Foreshew-Cain who was unceremoniously dumped.
But if the leaked early draft of the new strategy is anything to go by, you have to wonder if the response wouldn’t be: “Really? Is that it?”
The draft plan contains no revelations or surprises; no stunning new insights or fresh ideas. It contains few measurable targets. One would hope that, at some point during the internal discussions leading to the final version, someone might suggest putting some dates and measures in to track progress.
Frequent use of words like “better” and “improve” are not enough – with £450m to spend, GDS needs to offer more than good intentions. How will services be better, by when, and how will we measure their improvement?
When talking to Computer Weekly recently, Cunnington acknowledged that the expectations on him are high – with visible change expected by the end of the current Parliament.
“What I’m trying to create is a narrative where the Cabinet Office minister [Ben Gummer] can say to people that Britain will be very different in 2020 because we’ll be a much more digital government,” he said.
It’s important to point out that the document seen by Computer Weekly is not the final version – it has yet to receive feedback from Whitehall departments, and will be further discussed within the Cabinet Office before it’s finalised. The version due to be published before Christmas could be very different – although that in itself would be instructive, to see what was changed, added or taken out, and more importantly, by whom.
Of the five objectives described in some detail in the draft, four are little different from what GDS has been doing for some time – government as a platform; data and identity; digital skills; and improving the technology used by civil servants.
Those four could have been published as part of a GDS strategy at any point over the past year – I’m told that much of what’s in there derives from an earlier document written by former strategy director Janet Hughes, one of the now-departed executives.
Even what appears to be the newest objective – “end-to-end transformation” of public services and back-office functions, is a goal that has been talked about for a long time, even if it’s not been formalised in an official strategy. In many ways it’s the critical part of the plan, the aspect intended to deter persistent criticism that GDS does little more than make prettier websites.
But it also encapsulates the biggest challenge – and surely, the one that Cunnington has been brought in to deliver – that of convincing departments and their permanent secretaries to agree to a plan that could see much of their back-office capability overhauled and potentially combined with other departments.
The siloed nature of the civil service is widely seen as the biggest blocker to digital transformation of government – but the siloed nature of the civil service is what most permanent secretaries are employed to sustain. The “permsecs” are effectively CEOs of their departments, answerable only to their ministers, responsible for all financial and budgetary affairs and for delivery of the services for which the department is responsible. Theirs is not a naturally collaborative role across departments.
Remember too that permsecs are also responsible for the Brexit implications for their departments, a task likely to be given greater priority than any digital overhaul.
And it’s those same permsecs – some of them, at least – who have actively lobbied to diminish the influence of GDS. The appointment of Cunnington – previously director of business transformation at the Department for Work and Pensions – was widely perceived as a compromise towards the permsecs by bringing a departmental man into the centre to run GDS, with all his understanding of what it’s like to be in the silo.
Some of the phraseology in the draft strategy cuts right across the conventional thinking of permsecs in big departments, for example:
- “Transforming the way government delivers… instead of being constrained by current organisational boundaries.”
- “When services are designed around the user, they often cut across organisational boundaries.”
- “We need to design services as a whole, underpinned by deep, whole organisation transformation.”
- “Government needs to change the way it delivers and operates itself. That means deep transformation that includes the digitisation of not just the front end or the service, but the back-office functions as well.”
- “Full transformation is about more than just the service a user experiences – it means ‘deep transformation’ of the organisation that provides it.”
Few outside observers would disagree with any of those statements, but they could prove to be the most contentious. Credit is due to Cunnington for including them – and even more credit if they are still there in the final version.
Full credit would be due if permsecs and departments actively buy in to such statements as well, and subsequently implement them. The digital transformation of government will not happen unless they do.
It’s probably fair to say that the world doesn’t need another journalist trying to explain why Donald Trump won the US presidency right now.
Nonetheless, I think that we in the technology sector need to look at both the shock being felt by many people at his victory, as well as the jubilation of those who won, and understand the role that tech played in enabling the rise of Trump – and the lessons we need to learn.
When writing in this blog about the impact of the digital revolution, I’ve often used the phrase, “technology fragments” – using “fragment” as a verb, not a noun.
The usual context for that phrase is to explain what happens to businesses in markets that are being changed as a result of technology innovation. The most commonly used word by technologists for this process is “disruption” – a word that fails to accurately portray the way the digital revolution works.
What tech does is fragment markets – it breaks them down into component parts, atomises them, takes away old barriers to entry, and opens up those markets to new entrants with very low startup costs, thereby shaking up the established old order.
Take Computer Weekly as an example. Where once we were a print magazine, protected in a market with high startup costs (the cost of printing, paper, ink, distribution, people), now we operate in one where anyone can write an article that our readers might be interested in, at no cost, and publish it to a potential global audience. Where once we provided tech news once a week only on printed paper, now we provide content daily on a website, through video, in PDFs, on social media, via email, and so on.
Our market has been completely fragmented – broken down into its constituent parts and opened up to anyone with an inclination to take part. The same thing is happening in the rest of the media industry. And it’s happening in retail, in entertainment, it’s starting to happen in banking and elsewhere.
The signs of technology fragmenting the old order are everywhere to see in business.
So if it’s happening there, who’s to say that the same trend isn’t affecting wider society? You could make a reasonably convincing argument that the protests represented by Brexit and President Trump are just such a social fragmentation in action, enabled by technology.
Much has been written about the influence of social media around Brexit and Trump – the creation of echo chambers where people only read articles that support their views, and only see comments from like-minded people. That’s certainly an example of fragmentation – the atomisation of opinion. It hinders one side from understanding the fears and concerns of another.
In the US as in the UK, technology has both hollowed out local journalism and enabled the creation of high-profile single-issue websites with often extreme views.
At the same time, an increasing number of us access such content through top-secret algorithms that determine what we are most likely to click on – and based on which adverts we’re most likely to respond to.
Those algorithms are closed and protected. They are unregulated – and yet they determine information gathering for millions of people.
Facebook is often singled out here, but Google is perhaps a better example of the risks inherent in algorithmic selection. Its search results – by far the most popular way to find information on the web – are decided by a software program that attempts to determine, on our behalf, what is a “quality” website and what is not; what is “relevant” content and what is not.
If – as Google often does – that algorithm changes, then some websites who no longer fulfil Google’s secret, unregulated criteria for quality and relevance, lose out and disappear from the top of the search results. Is that not, in some way, a subtle form of unregulated censorship?
We are on the cusp of a new phase of the digital revolution, led by artificial intelligence (AI) and automation. We will be expected to put our trust in unregulated algorithms for more and more aspects of our lives. Let’s not forget the role that financial trading algorithms played in causing the 2008 crash, too.
Increasingly, those algorithms will be replacing people’s jobs. What happens to those newly jobless workers, and who is preparing the workforce and society for this potentially huge change?
Not governments, yet – and certainly not the tech companies that will make it happen.
I’ve also written here in the past that there is a very strong risk the digital revolution could cause the same sort of social unrest that happened in the industrial revolution, as those who felt left behind by technological progress fought back to protect their livelihoods.
Sound like anything else that’s been said lately?
Another fact being bandied about after the US election relates to driving being one the most popular jobs in the US. According to US websites I’ve seen, the country has 2.9 million truckers and delivery drivers, 674,000 bus drivers, and 181,000 cab drivers and chauffeurs.
If and when driverless vehicle technology becomes mainstream – probably within the next 10 to 20 years – what happens to those 3.7 million jobs? Is anybody planning for what to do, and how to retrain those workers?
The past eight years since the great banking crash have shown that few Western governments are inclined to invest sufficiently in the sort of skills training and career transfer ecosystem needed to ensure that people in markets fragmented by technology are not left behind.
Brexit and Trump are widely perceived to be a result of the anger of working people who felt ignored by an establishment who foisted austerity on them, while the people and corporations that caused the crash prospered.
Technology undoubtedly played a huge part in enabling that situation – much as it has allowed those angry people to come together behind the likes of Trump and Nigel Farage through a fragmented media where strident voices are algorithmically fed to them.
Technology has given us the benefit of choice – but it also allows those choices to be narrowly filtered for purely commercial reasons, potentially to the detriment of social progress.
Silicon Valley culture
Meanwhile, perhaps we need to once more question the role of Silicon Valley culture here.
The Ayn Rand inspired, everyone-for-themselves approach of many tech entrepreneurs has, undoubtedly, led to great innovations that benefit us all. But it also rides roughshod over anyone left out of that digital progress. Who of the driverless car entrepreneurs are proposing ideas for how to help the out-of-work drivers their innovations will create? Their usual response is that “the market” will provide the answers. The last eight years has shown that “the market” does not.
Instead, we get billionaires in the Valley like Peter Thiel who wants to create an offshore island to avoid inconveniences such as taxes, regulations or employment rights in favour of unfettered entrepreneurialism. Look at Elon Musk, who wants to create a colony on Mars.
It’s no surprise that Silicon Valley has been a proponent of the movement for California to secede from the US. If you don’t like the laws of the land, make your own. Society –thanks to technology – thereby fragments. This is not a healthy attitude if you want to marry digital and social progress together.
In the UK, we might finally be starting to have some of these debates. The ongoing court case about the employment status of Uber drivers could be an opportunity to have a mature, forward-looking discussion about how 20th century employment laws need to change for 21st century jobs.
In the Uber case, both sides are partly right, and both are partly wrong. Uber is correct to say that it has attracted plenty of taxi drivers who want the flexibility of work on offer, and are happy to be considered self-employed. These sorts of jobs are growing in the so-called sharing economy – there’s a similar debate around Deliveroo drivers.
Uber is also wrong to say that it has no obligation towards the employment rights of its drivers. But it would be equally wrong to prevent Uber from using workers who feel they don’t want a blanket rule for how they should be employed.
The answer is somewhere in between – in devising employment rights that fit the new style of jobs that will increasingly be created by digital innovation.
But we are not having that conversation, at a time when many of our accepted, democratic, liberal social contracts are already being questioned. The digital revolution is only going to fragment those social norms even more, unless we acknowledge it and work to prevent that happening.
A networked society
Another phrase I’ve often used here is that technological progress is inevitable and unstoppable – barring any extreme Trumpism perhaps. A digital society is going to be very different from an industrial society, just as an industrial society was very different from the rural society it displaced.
For a start, a digital society will be networked, not hierarchical. That has huge implications for “the establishment” and “the elites” – phrases we’ve heard a lot in recent weeks. If Brexit and Trump represent a backlash against those at the top of the hierarchy, then it’s a step towards the networked society of the future.
Unfortunately it’s a step forward that has instead been co-opted by populists like Trump, who have one foot in the elites but who understand how to appeal to the frustrations of many of those who are not. A networked society offers progress – it is (or should be) by its nature equal, open and democratic. Populism led by the people can be a good thing. Populism led by political opportunists, perhaps less so.
The tech sector is making this happen. The reactions to Brexit and President Trump show us, in my opinion, the very real risks of what could happen if we allow society to fragment. Let businesses fragment through technology – that’s called competition. But people are not companies. Society is not “the market”.
Technology needs to be inclusive for everyone – it cannot allow some to be left behind purely for the benefit of others. The digital revolution will mean we need to evolve our 20th century social contracts for a different age. The technology sector needs to ask itself, seriously and soon, what its responsibilities are to making that change happen in a way that supports social progress and inclusivity, not fragmentation.
IT contractors working in government are under pressure like never before over their tax status, and many people in Whitehall IT fear that a clampdown on the use of temporary staff could lead to a damaging exodus of vital digital skills.
HM Revenue & Customs (HMRC) is closely scrutinising government departments’ use of contractors and in particular whether contractors are eligible to be taxed under controversial rules known as IR35. Freelancers using IR35 are treated as off-payroll, and are typically employed by a limited company of which they are a director – and as such, avoid PAYE tax on their contracted earnings.
HMRC wants to clamp down on contractors abusing the system by making public sector bodies treat them as salaried workers unless they can prove they conform to IR35 rules. Furthermore, forthcoming IR35 tax avoidance reforms will see public sector organisations assume responsibility for determining how limited company contractors should be taxed. It will be up to the public body to decide if the contractor has to pay tax through PAYE at source, rather than through their own personal companies.
At present, the onus is on contractors to declare themselves “outside” of IR35, to avoid being taxed in the same way as a permanent employee, and to conduct their business in a way that does not risk them being considered one.
For digital leaders in government, the need to prove contractors’ eligibility for IR35 is an additional level of paperwork and bureaucracy they could do without. For contractors, it’s a hassle that could cause many to leave the public sector entirely.
To give an example of what’s involved, Computer Weekly has seen a form being used by several departments to help determine the status of contractors. The paperwork runs to seven pages, and includes 38 questions that have to be answered by both the contractor and the civil servant employing them. Bear in mind there are hundreds of contractors in big departments – and this form would have to be filled out by and for every one of them.
The questions try to define the working relationship between the organisation and the contractors to see if they have – in HMRC’s terms – the same tax status as a direct employee. Here are examples of a handful of the questions:
- Are there in-house employees doing the same or very similar work or tasks as the worker?
- Does the worker work as part of a team while delivering the engagement? Please give details regarding ratio of civil servants to contractors
- Are you, the worker, obliged to provide a substitute if you cannot attend for whatever reason? If you are not obliged to provide a substitute, can you provide a substitute during this particular engagement?
- Could circumstances arise where the worker would provide a standard professional weekday’s work, without this being charged to the department? If yes, please provide details of all instances of this.
- Is the department obliged to provide the worker with continuous work throughout the period of engagement? For instance in circumstances where project milestones are amended
- Can the worker refuse work offered to them by the department during the engagement?
- Is the work subject to monitoring / evaluation, such as internal quality review, peer review, gateway review etc? Please provide as much detail as possible.
- Does the department have the right to direct the worker about working methods or when the work is done? If so, to what degree – please give detail.
- Does the worker follow a pre-determined business or programme plan in achieving work deliverables?
- Does the department restrict the worker from doing work for other customers or clients during the course of the engagement?
- How long has the worker worked for the department and how many times has the worker had his/her contract extended while working for the department? Please ensure that each extension is listed to give a complete record of your engagement with the department
Even from that small selection, the tone and intent of the questions are clear – to define, as closely as possible, if the job being conducted by the contractor is equivalent to that being done by a full-time employee.
Most IT contractors told they will be taxed like employees will simply walk away, leaving potentially huge gaps in capability at a critical time for the progress of digital government transformation. This was demonstrated earlier this month at the UK Hydrographic Office, an agency of the Ministry of Defence, where a dispute over IR35 led to a mass walkout – 30 of 32 freelancers left, causing major problems for ongoing IT work.
Meanwhile, the Department for Work and Pensions (DWP) has released over 300 IT contractors at short notice amid rumours (which the department denies) of a massive overspend in its DWP Digital team.
Pros and cons of contractors
Many civil servants resent the spending on contractors, who receive on average £600 per day, while staffers carry on through tiny austerity pay rises on already below-par wages. Interim staff sourced through big IT consultancies can cost as much as £2000 per day.
But government executives like contractors because they can be brought in and let go at short notice, with no need for employment costs such as national insurance and pensions. In digital government, the difficulty of recruiting scarce technology skills – with private sector employers sometimes offering two or three times the civil service salary for permanent IT jobs – means a huge reliance on short-term or interim workers.
Since the creation of the Government Digital Service, there has been a welcome move to bring technology skills back in-house – rather than relying on outsourcers. The number of digital and IT staff in the civil service has grown significantly – but still not by enough to fill every requirement, hence the importance of supplementing them with contractors.
A National Audit Office (NAO) report earlier this year into use of consultants and temporary staff in government showed that IT and project management staff account for 54% of the annual spend on freelancers. IT skills take up 11% of external resources brought in, but 25% of the money spent – a recognition of the high cost of hard-to-find technology and digital skills.
Acknowledging the reasons and the challenges behind this trend, the NAO said: “Two-thirds of the largest government projects are related to transformation IT and service delivery programmes… [But] significant skills shortages remain in the areas needed to transform government, including project management and IT, which are common specialisms of consultants and temporary staff”.
The ultimate irony of the crackdown on contractors’ tax status, of course, is that if they desert the public sector, IT chiefs will be forced to turn again to the big outsourcers and consultancies – many of which are adept at exploiting local accounting regulations to minimise their tax payments in the UK.
But for the progress of digital government at such a critical time, the prospect of losing many of the contractors upon which they currently rely is a serious concern.