Tech matters - a look ahead to the General Election and beyond
by Inline Policy on 02 Mar 2015
The technology sector has rightly become a source of optimism for all UK politicians in recent years. Rapid growth, job creation and sustained investment have become the norm. Recently published statistics from Tech City UK in its Tech Nation report indicate that digital job growth in the UK will outperform all other occupation categories by 2020. In addition, 1.46 million people - 7.5% of the entire UK workforce - are already employed in the digital industries. Importantly, the report found that 74% of digital companies in the UK operate outside of London, with significant clusters of activity in areas such as Greater Manchester, Brighton and Hove, Belfast and South Wales. The supply side is clearly getting stronger with the presence of not just a thriving tech start-up scene, but also a significant number of established and global tech players operating, and investing, across the UK. On the flip side, the demand side is becoming more demanding. Businesses and consumers increasingly expect digital, and not analogue, to be the default. This, of course, is both a great challenge and opportunity for the sector.
Whilst the success of the industry is overwhelmingly driven by the entrepreneurs and innovators working in it, the policies put in place by those in Whitehall play a critically important role in determining sector confidence and investment. That is why the UK General Election, to be held on the 7th of May, is so important. Drawing dividing lines between the major political parties in terms of their respective technology agenda is not as clear-cut as it is in other more contentious areas of policy such as health, education or welfare. In fact there is, broadly speaking, a great deal of consensus on the importance of the industry and the need to champion and nurture it. There are, nonetheless, numerous subjects, whether it be future digital infrastructure policy; how to best harness digital technology across the public sector; or how to tackle digital exclusion; where points of difference can be found and where political advantage will be sought over the coming weeks.
Tech in the public sector
One area in which there has been significant development over the past five years is in how technology has been harnessed across the public sector. Conservative Cabinet Office Minister, Francis Maude MP, has overseen the creation of the Government Digital Service (GDS), the G-Cloud framework to increase the adoption of cloud technologies in the public sector, and reforms designed to make it easier for SMEs to do business with central government. GDS, in particular, has been heralded a success, replacing hundreds of Government websites with a single Government website, which has now been visited over 2 billion times. It has also been the driving force behind a shift in how central government not just explains what it is doing, but also in determining how services should be delivered. “Simpler, clearer and faster to use” is its motto. The advent of GDS has been welcomed across party lines and the Labour Party has committed to keeping it if it wins the election. Labour has, however, argued in its Making Digital Government Work for Everyone report that more needs to be done to ensure that the digitally excluded are not left behind as more services move online.
With the deficit remaining stubbornly high, technology will have to play a central role in driving cost savings across the public sector in the next Parliament and beyond. The prize remains substantial in this regard, across Government (both central and local). A Policy Exchange report, for example, recently concluded that Local Authorities could save up to £10 billion by 2020 through smarter and more collaborative use of technology and data. Another report, published by the Department for Communities and Local Government, concluded that Local Councils could save £500 million per year for the next ten years by switching to digital. There are numerous such reports, which all make clear that there is still significant untapped potential for a smarter use of technology across the public sector. This presents an enormous opportunity for digital businesses, whether they are large or small. The policy framework put in place by politicians during the next Parliament will play a vital role in determining whether this opportunity is seized.
Skills and immigration
A number of policy changes designed to boost digital skills and ease skills shortages in the technology sector have been implemented during this Parliament. Most of these have been supported across party lines. This Government has, for example, overseen the introduction of a new computing curriculum. England has become the first country in the world to mandate computer programming in primary and secondary schools. There have also been moves to improve the quality of IT apprenticeships, as well as the publication of government and industry strategies, such as the Digital Skills Strategy. Shadow Education Secretary, Tristram Hunt MP, recently pledged that a Labour Government would create “scores of new specialist colleges for high-level technical and digital training.” There is undoubtedly cross-party consensus about the need to be much more proactive in equipping the next generation with digital skills, however the scale of this challenge remains large. Around 10 million people in the UK are still lacking basic digital skills. This acts as a barrier to social mobility as well as a barrier to economic growth. A recent House of Lords Digital Skills Report looking at this issue concluded that digital skills will “make or break the UK” and underlined that whoever forms a government in May will have to make addressing this issue a top priority.
An area which has proved contentious in recent years is around immigration policy and its impact on technology businesses. Guy Levin, Executive Director of Coadec, whilst supportive of the Government’s broader tech agenda has, for example, been critical of its approach to immigration policy, which he has argued is the “black mark” on the Government’s tech startup record. In spite of policies such as the introduction of an Entrepreneurs Visa, many tech businesses continue to argue that it is too difficult to recruit much-needed staff from abroad. A report recently published by the Migration Advisory Committee, the Government’s independent immigration advisory body, found that British tech start-ups are at a particular disadvantage due to existing visa rules. It also recommended that several digital roles should be added to the Shortage Occupation List to help tackle skills shortages. How actively any incoming Government will aim to address this issue is a critical question, given the highly politicised nature of policy in this area.
Infrastructure and innovation
Boosting the UK’s digital infrastructure is vital for the nation’s economic future and should therefore be an issue of interest to all politicians. In relation to broadband, the current Government’s aim during this Parliament was for everyone in the UK to be able to access broadband speeds of at least 2 megabits per second (Mbps) and for 95% of the UK to receive greater speeds (at least 24Mbps) by 2017. Recent figures suggest that superfast broadband has reached more than two million homes with the Government maintaining that it is on track to meet its objective by 2017. The Labour Party has been critical of the coalition’s broadband strategy, arguing that it is too vague and behind schedule. It has also been critical of a lack of attention on bringing broadband to rural communities. Such disagreements will no doubt intensify in advance of the election.
With regards to innovation policy, Innovate UK, an executive non-departmental public body, sponsored by the Department for Business, Innovation and Skills, has taken on added responsibility during this Parliament. A network of Catapult Centres has been designed to transform the UK's capability for innovation in seven specific areas (including high value manufacturing, the digital economy, and offshore renewable energy) to help drive future economic growth. The central role of Innovate UK in developing policy and delivering projects looks set to continue into the next Parliament with all major parties committed to preserving its role. Looking ahead, there are various other issues, such as how the UK can make the most of the internet of things (IoT) opportunity, which will become big issues for Ministers during the next Parliament. Ofcom, the communications regulator, has recently set out how it intends to support investment and innovation in the IoT. Ministers will play a key role in helping to drive this agenda forward.
An area which has received considerable attention in the last couple of years has been the sharing economy. The Coalition Government has been incredibly active on this front, most noticeably with a commitment to reform London planning laws to enable homeowners to let out their residences for 90 days per annum without having to first obtain planning permission. A sharing economy review, undertaken by Debbie Wosskow, CEO of Love Home Swap, was commissioned by Business and Enterprise Minister, Matt Hancock MP, in September 2014, and published in November 2014. The review made a series of sector wide recommendations, as well as in relation to specific sharing economy sub-sectors. The Government’s response is imminent and the 2015 Budget may contain some measures to boost the sharing economy further. The Labour Digital group also called for a review of the sharing economy back in September 2014. This issue is therefore increasingly on the minds of politicians. The nascent nature of this sector and the growing number of regulatory issues which are arising, mean that legislative reform in the next Parliament is highly likely, especially in controversial areas such as the regulation which governs the taxi and private hire vehicle industries. The approach taken by Ministers to address such challenges will play a fundamental role in how fast or slowly the sharing economy evolves in the next five years.
One of the areas in which we have already seen pre-election sparring is around the Government’s vision for the future of the digital economy in the European Union (EU), and the digital single market in particular. The Government has set out what it sees as the problems with Europe’s digital economy in a policy paper: consumers are disadvantaged by not being able to access the streaming, or other digital services, they have paid for when travelling in the EU; a lack of access for start-ups to a large market to work and trade in; the stifling of innovation (especially in the peer-to-peer area) by over burdensome member state regulation; and a lack of public services being delivered digitally to citizens. The paper then goes on to outline what the Government thinks needs to be done to tackle these challenges to deliver what it believes would be a truly open and flexible digital market.
In response to the Government’s policy paper, Harriet Harman MP, Labour’s Shadow Secretary of State for Culture, Media and Sport, wrote a letter, published online, which called into question the Government’s priorities and was especially critical of its approach to copyright exceptions. Harman concluded her letter by saying: “Your paper to Jean Claude Juncker shows a lack of understanding of the issues that the creative industries sector face and I am calling on you to reconsider these decisions as a matter of urgency.” This sort of pre-election dispute is no surprise as the Conservative and Labour Parties, in particular, are at odds over what Britain’s approach to Europe should be and especially whether or not there should be an in/out referendum on the UK’s membership of the EU. Putting aside the thorny issue of the UK’s future in the EU there are numerous EU digital policy issues to be resolved, the Data Protection Directive being a paramount example of this. A truly digital single market has huge potential benefits, with some estimates suggesting that an ‘online’ single market alongside the offline single market could boost EU GDP by €340 billion. It is therefore vital for the UK to be at the forefront of these discussions, whoever is in power.
An area which has become back into fashion in the UK since the financial crash in 2007/8 has been the need for government to have an active industrial strategy, rather than just rely on the free market to deliver growth. Vince Cable MP, the Liberal Democrat Business Secretary, has been a driving force behind this shift. UK Chancellor, George Osborne MP, has also prioritised this area of policy during his tenure. The UK technology sector has benefited from this approach through the convening of a Digital Economy Council (DEC) and the publication of an information economy strategy in 2013. The DEC is a government/industry body designed to identify what needs to be done to improve the business environment for technology businesses in the UK and to ensure that the UK makes the most of its tech strengths. Prime Minister, David Cameron, has also convened his own Digital Taskforce. There have been other important developments, such as the creation of a new role in 2014, Minister for the Digital Economy, which is currently the job of Ed Vaizey MP. His role was designed to ensure that there is more co-ordination across Whitehall in relation to tech policy. Such a post is vital, as historically there has often been a lack of co-ordination across key departments. The Labour Party and Shadow Business Secretary, Chuka Umunna MP, in particular, has called for an even more active industrial strategy in the next Parliament. Umunna has argued that for industrial strategy “to be effective, it must be an animating mission for the whole of government” and has made clear that he will, if he becomes Business Secretary, build on the existing eleven sector strategies and deliver a more strategic approach to industrial strategy.
UK Tech start-ups, and the need to put in place policies to nurture and support their growth, has become an increasingly significant part of policy makers’ attention in recent years. Tech City UK, a new government body based in East London, designed to help make the UK the best place to start and grow a digital business, was an early initiative of the Coalition Government, which has helped to bang the drum for UK tech at home and abroad. Tech City UK has had its remit extended to link up what’s happening in London with other tech clusters across the UK. Alongside such initiatives there have been numerous schemes and policies such as the Future 50 programme; the Start-up loan scheme; the Business Angel Co-Investment Fund; and the Seed Enterprise Investment Scheme. Such initiatives have been broadly supported and look set to continue beyond May.
The challenge, as Sherry Coutu OBE, angel investor and entrepreneur, outlined in her recently published Scale-Up report, commissioned by the DEC, is for more start-ups to scale up. This report has a number of practical recommendations for all political parties. It also explains that a boost of just one per cent to the UK’s scale-up population should drive an additional 238,000 jobs and £38 billion of Gross Added Value to the economy within three years. Getting the environment right for medium and large tech businesses is also absolutely critical to ensure a thriving ecosystem and healthy supply chain.
Tech policy is certainly moving up the political agenda and the industry is one of the bright spots for the UK economy. That is why the general election matters and why a supportive policy framework is vital in the next Parliament, whoever is victorious in May.