Public finance digitalisation ‘years behind private sector’

24 Nov 17

Digitalisation in government finance is losing the “arms race” as it is years behind its private counterparts, according to a professor from the London School of Economics. 

As governments move closer to a digital revolution in public finances, the change can deliver mixed results and is hard to do, a panel on digital revolutions in public finance at the Overseas Development Institute discussed on Tuesday.

Professor Patrick Dunleavy of the LSE said at the event that the public sector is “always 10-15 years behind the private sector”.

He added that this is a problem because you are not “usually winning the arms race” when you are dealing with tax and other regulations and “digital change is incredibly hard to do”.

But ODI’s head of public finance and institutions Simon Gill, at the panel, said: “The fact that the public sector is behind the private sector is quite useful.”

He added that the public sector could “piggy-back” off the private sector and learn from their mistakes, and particularly developing countries should be “a couple of steps behind”.

Martin Lindpere, the economic advisor to the prime minister of Estonia, explained at the event that although Estonia had been successful in creating a digital society, he was fully aware that it may not always be easy for bigger countries.

“The public sector is very often severely punished for its failures and it can bring throwbacks,” he said, referring to the challenges of digitalisation.

He added that “we should not look at digitalisation as a narrow part of the economy. We need to look at digitalisation of the whole society” to get “the whole benefit”.

Dunleavy, at the same event, also said the sector should recognise the important of ensuring capacity and that those with the skills and expertise of digitalisation do not leave the public sector.

“It’s very important to pay people working in digital parts of government at a good rate,” he said.

The panel - which also included Michael Keen, IMF deputy director of the Fiscal Affairs Department, and Clare Franklin of Ernst and Young - agreed that scale is very important when thinking about digitalisation in public finances.

Keen said, referring to the book, Digital Revolutions in Otsubo7, which was launched at the event, that data is the new natural resource and could be extremely useful. But it is about getting the processes and systems right – technology in itself won’t be enough.

He also said “[we] can see clear gains” of digitalisation and there are many more opportunities within the digital sphere. 

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