HMRC and Home Office the big winners as spending review commits £600m to ‘fix outdated government IT’

Document also outlines projection of extra £700m revenue from digital taxation regime

Credit: Xinhua News Agency/PA Images

HM Revenue and Customs and the Home Office are the primary beneficiaries of a £600m commitment made by yesterday’s Spending Review to “fix outdated government IT”.

Between them, the two departments will receive the lion’s share of the tech investment fund; HMRC has been awarded £268m, and the Home Office £232m. The Department for Education will be given £64m to upgrade its IT infrastructure, while the Ministry of Justice is to receive £40m.

The review said that the money will help “ensure core systems are secure and can support better administration”, and will allow the departments in question to “to bring technology up to date”. 

“This investment reduces the risk of failures, improves efficiency and ultimately means a better service for the public,” it added.

Although it makes some longer-term commitments and projections, the review is only a one-year stopgap measure, with a full, four-year comprehensive spending review (CSR) due to take place next year. The process was originally due to take place in 2019, but has now been delayed twice – firstly as a result of the demands placed on government by Brexit, and then again because of coronavirus.

Last year the Government Digital Service undertook government-wide audit of legacy IT systems and – speaking in July, before the CSR was put back by a further year – chief secretary to the Treasury Steve Barclay said that the “a key focus of the spending review will be addressing legacy IT”.

The £600m will go some way towards that – although only four departments are named as recipients, with the vast majority being split between two of these. There is no mention of legacy IT anywhere in the text of the review.

But the cash injection for HMRC IT is in addition to £1bn set aside for the department to support the operation of the UK customs system after the end of the Brexit transition period. This money will be used for “investment in vital physical and IT infrastructure and additional support for UK traders”.

The tax agency will also receive backing of £146m to support the continued rollout of the Making Tax Digital scheme. 

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Having been introduced in April 2019 for VAT payments from businesses with turnover in excess of £10,000, from 2022 the programme will be extended and made compulsory for all VAT-registered companies. The following year, income tax returns for business or property income of more than £10,000 a year will also need to be made via the digital platform.

From the 2022/23 financial year, the government forecasts that the switch to digital payments will result in increased tax revenue. Between now and 2025/26 – when an additional £400m a year is projected to be coming into the Exchequer as a result of the move to MTD – a cumulative total of £700m in extra tax will have been collected, according to the spending review.

“This investment [in Making Tax Digital] will help more taxpayers to get their tax right first time,” it added.

One of HMRC’s arm’s-length bodies – the Valuation Office Agency, which advises the government on property and valuation issues related to tax and benefits – will also receive £22m to “modernise” its IT systems. This will help the VOA to “become more flexible, efficient and resilient”.

The Foreign, Commonwealth and Development Office is also to receive a £14m spending pot for “a new IT system to enable the newly formed department to operate as effectively and efficiently as possible”.

The FCDO came into being on 2 September, having been created via the merger of the Foreign and Commonwealth Office and the Department for International Development.

Infrastructure investment
Beyond the government’s own tech systems, the review also provides the Department of Digital, Culture, Media and Sport with £1.2bn “to support the rollout of gigabit-capable broadband” over the four-year period beginning in 2021/22.

The department will also receive £50m next year to provide support in “building a secure and resilient 5G network”, as well as £200m to spend across other digital infrastructure programmes including the Shared Rural Network 4G scheme, the 5G Testbeds and Trials project, and the Local Full Fibre Networks initiative.

Other programmes to receive backing in the review include a “data improvement… pilot designed to improve the cross-departmental evidence base and use of data to inform policy decisions and service delivery for children and young people”.

Some £9.6m has been awarded to the scheme, in which seven departments will take part: DCMS; the Department of Health and Social Care; the Department for Education; the Cabinet Office; the Home Office; the Ministry of Justice; and the Ministry of Housing, Communities and Local Government.

The Open Regulation Platform, which will receive £4.6m, is another tech pilot programme; its aim is to use machine learning technology to create a database of government information on the regulatory requirements of various industries. The intention is that this will be made “publicly available to enable third parties to develop tools that help businesses identify and comply with regulatory obligations”.

A total of £2.7m, meanwhile, will be given to support a trial programme focused on combatting online harms through the use of “innovative solutions to establish permanent systems to improve data sharing”.

The Department for Transport and the Department for Business, Energy and Industrial Strategy will receive £1.6m which they can then award as “match-funding to UK businesses and other organisations to undertake drone trialling activity and share learning on commercial drone use”.

Chancellor of the Exchequer Rishi Sunak said: “[The] Spending Review… delivers a once-in-a-generation investment in infrastructure. Creating jobs, growing the economy, and increasing pride in the places people call home.”


Sam Trendall

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