Jake Shepherd
The Labour Party, now in government, is using its early days in office to demonstrate to the electorate it can run the country effectively.
Among the most pressing challenges it faces is the management of public finances, one of several major headaches the new prime minister and chancellor have inherited. This includes a depleted budget for public services, an NHS funding crisis, and threadbare local councils. In light of these problems, Keir Starmer and Rachel Reeves ought to be desperate to find ways to make what money they have go further, enhancing public sector efficiency.
One way to do that would be to look at software licensing. It might not be the most glamorous or high profile topic, but millions of pounds of public sector money is spent on software, and rules restricting its use can have far-reaching implications for productivity. If the new government’s modus operandi is quietly getting on with the job rather than chasing headlines – actions not words – then this is just the sort of efficiency they should be pursuing.
Software licensing refers to the legal rights, restrictions, and terms and conditions of on-premise software that users may seek to use on cloud infrastructure. As cloud services, which offer organisations greater agility, efficiency, and cost savings, are increasingly adopted, software is also migrated to the cloud and deployed on the internet.
Cloud technology represents a significant opportunity for the public sector, especially in the context of restrained budgets. As such, the government’s ‘G-Cloud’ – the procurement framework mandating cloud service adoption by central departments and encouraging it among wider public sector organisations – accounted for £17.3bn over the past decade, from 2012-13 to 2023-24.
But due to the licensing practices of some legacy software vendors, including, but not limited to, Microsoft, users can be tied into a single cloud provider, making it difficult or costly to explore alternatives. These practices can impose higher costs for acquiring and moving software to rival cloud systems, while limiting competition among providers.
In response to these concerns, the Social Market Foundation, the cross-party think-tank I work for, set out to quantify the potential economic impact of these practices on the UK public sector. Our research indicates that addressing restrictive software rules could save public finances millions of pounds a year, amounting to at least £300m over the next parliament.
This represents a significant amount of wasted resources, funds that could otherwise be invested in public services. Commercial harm aside, there may also be opportunity costs associated with alternative resource allocation, weakening already-wounded essential services like healthcare or education. Inefficiencies in the system also pose a risk of stifling competition and innovation, potentially hindering the new government from achieving its technological, economic and security goals.
To complement these hard economic numbers with the real-life experiences of these practices, we interviewed public sector IT professionals from central government, local government and charities to explore the day-to-day operational impacts. They shared anecdotes revealing various tensions and complications due to restrictive licensing practices. These include diminished service expectations and compromised user experience, even decisions whether to streamline staff or software.
According to one IT professional working in the public sector, there are “positives to having one provider with a suite of things that work together very well, but the challenge of that is you’re tied in”. This was supported by another participant, who expressed feeling restricted to a legacy software provider, stating “you don’t always have freedom of choice in the public sector”.
The wider implications of these consequences could be significant. One public sector IT worker, a civil servant, told us that millions of pounds spent on inefficient technology could be “publicly embarrassing” and potentially lead to a ”disaster”, especially since any excess costs are ultimately funded by taxpayers.
Reforming cloud licensing, then, isn’t just a technical matter, but an economic and social imperative to improve access to cloud software and prevent further waste of public resources. With money as scarce as it seems to be, the new Labour government can’t afford to ignore this opportunity to demonstrate its commitment to prudent financial management and maximising taxpayers’ money. This approach would not only distinguish it from the previous fourteen years, but it sets the tone for a more financially responsible government in the years ahead.
