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Digital public finance: top trends in October 2023

Expert comment

Written by Nicholas Gates, Cathal Long

Image credit:UK Government / Flickr

Welcome back to the Budgets and Bytes blog, where it is time for another monthly review of the top trends in public finance and digital.

This month was a busy one, with the World Bank/International Monetary Fund (IMF) Annual Meetings in Marrakech occupying a huge amount of attention. Here in the UK, the recent AI Fringe has dominated the news cycle and prompted a lot of discussion around the role of artificial intelligence (AI) in the public sector. There was also a glut of events on the topic of public procurement and its relationship to digital transformation.

Without further ado, here are some of October’s top trends in digital and public finance.

1. The World Bank/IMF Annual Meetings served up few surprises on digital and public finance

Digital technology is now a regular feature of high-level summits on public finance, and the World Bank/IMF Annual Meetings are no exception. A talk organised by the IMF’s Capacity Development team on ‘Transforming Public Finance Through GovTech’ discussed applications for ‘GovTech’ in the IMF’s capacity development and analytical work. Meanwhile, the World Bank’s ‘Knowledge Café’ focused on ‘e-Government: Improving Service Delivery and Increasing Trust’, although the majority of this event dealt with conceptual framing rather than the specific lessons to support transformation.

Unfortunately, these sessions often slipped into discussions on supply-driven technology solutions (e.g. GovTech) instead of the broader transformation (e.g. capabilities, governance, etc) needed to drive public finance reform. While we can appreciate the (unsurprising) focus on GovTech – which both the World Bank and the IMF argue is highly focused on user needs – it sometimes feels like this advances a narrow and unclear view of the role technology ought to play in public financial management. Focusing on implementing the solutions can crowd out discussions on capabilities and governance, which are critical for digital delivery.

Additionally, instead of forming a key part of the programme, much of the advocacy for digital in public finance found at the Annual Meetings was hidden away in specialist sessions. We hope that both the World Bank and the IMF can regain their focus on more holistic discussions of the key issues – such as data, reform models and procurement – that can ultimately improve how technology for public finance is funded, governed and delivered. Doing so will go a long way towards ensuring GovTech does not entrench itself as a solutions-driven approach.

2. The public sector continues to reckon with AI and its role in delivering public services

AI is an issue of increasing importance – and concern – for public sector digital transformation all over the world. What do we mean by AI in the public sector? A report from the Ada Lovelace Institute notes that we usually refer to applications of foundation models, a subset of generative AI (for more on the differences, check out this explainer).

In the UK, a recent report by political think tank Labour Together finds that while the British public is broadly optimistic on the opportunities that technology can provide, these attitudes are almost entirely reversed when it comes to AI, with older voters worried the most. Interestingly, respondents are broadly more positive on the potential applications of AI than on the technology itself; for example, 69% support AI use to help hospitals predict admissions. This suggests that the public’s misgivings on AI is the result of a lack of trust in the government’s ability to responsibly manage the technology.

Governments in the West are taking steps to respond. In the United States, President Joe Biden recently issued an executive order on AI safety, highlighting the US's increasing interest in debates around AI governance. Here in the UK, stories of bias in the deployment of AI systems are starting to reach the public, showing that the government has moved too quickly. UK Prime Minister Rishi Sunak — keen to control the narrative and fend off criticism — hosted an AI Safety Summit that was seen as (broadly) successful. At the same time, an AI Fringe staged on the margins of the summit has prompted debate on the role of AI in diverse sectors including health and education.

But the West’s scepticism of AI is a luxury that is not universally shared by other governments, particularly those seeking to shore up public finances. For example, a recent Bot Populi article reports that there is evidence that incentives to attract development financing are forcing governments to adopt AI quickly (e.g. to enhance their fiscal positions and attract research and development funding for science, technology and innovation programmes). What does this mean for public finance more broadly? While there has been some movement on understanding the implications for public finance through discussions on process automation and how AI can generate tax revenue or reduce accounting workloads, AI’s true applications for managing public finances have yet to be fully explored.

3. Reforming public procurement to deliver public sector (digital) transformation

Public procurement is one of the most important levers that a government can wield to improve the funding and delivery model for digital transformation. As this Euractiv piece argues: ‘Innovative technology and traditional public sector processes do not always align.’ We saw some of these themes reflected in other events this month, including an Open Exchange Series on public procurement from the Organisation for Economic Co-operation and Development (OECD) and a recent webinar from the Global Government Forum.

In our paper, we noted how a sequential approach to project management in public procurement forces the specification of requirements and/or solutions upfront in order to minimise uncertainty, with funding then linked to milestones. Nevertheless, there is some movement to change this. For example, Morocco issued a ‘reverse auction’ framework for evaluating tenders, which allows for competitive dialogue around how solutions meet government/user needs. It allows companies to work with the government more as a partner and facilitates the proposal of amendments or new services/products, giving the tendering body more leverage.

The Moroccan experience shows us the importance of pre-procurement planning in enabling the government to deliver across the commercial life cycle. This reflection was a key part of the Hub’s recent webinar on 26 October. Co-organised with Curshaw Commercial, it looked at agile procurement and digital transformation, exploring the relationship between the two and whether they can be used as levers to improve public spending. The webinar went into some detail on how a ‘golden thread’ of principles, practices and ways of working flows throughout the whole commercial life cycle. Read our webinar round-up blog here.

News from our network

Public Digital Partner and Hub contributor James Stewart attended the World Bank/IMF Annual Meetings in Marrakech to speak at the first session of the New Economy Forum, entitled ‘Building an Inclusive Growth: Strategies for GovTech Transformation’. The panel also included the IMF’s Gerardo Uña and Ghita Mazzour, Morocco’s digital minister.

We want to thank the Chartered Institute of Public Finance and Accountancy (CIPFA), with whom we participated in a series of study tours this month to present ideas from our papers to delegations from Mongolia and North Macedonia. Thanks also to the EdTech Hub, who published Cathal’s report on education management information systems (EMIS) entitled ‘The Future of EMIS: A Public Financial Management Perspective’ (thanks to Charlie Goldsmith for a comprehensive write-up on Twitter/X).

Finally, over on ICTworks we’ve published an article that covers some of the key points from our working paper published earlier this year (‘Digital public financial management: An emerging paradigm’).