Digital government in 2026: From fiscal survival to system reform

The UK public sector enters 2026 with little expectation of respite. Budgets remain tight, demand continues to rise, and public confidence is fragile. Yet when digital leaders and practitioners across government and industry were asked what comes next, their responses pointed to something more consequential than another year of firefighting. Constraint, they argue, is becoming a catalyst.

“The year ahead will bring no surprises for the public sector,” said Chris Hornung, managing director, public sector at Totalmobile. “Budgetary pressure will remain the dominant theme… the squeeze is here to stay for a while more, and that reality will shape every part of the sector in 2026.”

What has changed is how organisations respond to that reality. According to Hornung, the era of marginal efficiency gains is largely exhausted. “Across all services – healthcare, social care, emergency services, infrastructure – the challenge is no longer about doing more with less. It’s about doing things differently. Incremental savings have already been made. What’s left now is real transformation.”

Planning beyond the next financial year

One of the most significant enablers of that shift may be structural rather than technological. “From April 2026, councils will return to multi-year financial settlements,” said Hornung. “Having visibility of budgets beyond a single year allows councils to plan strategically, to invest in transformation in year one and see benefits in years two and three. The current one-year cycle has made that almost impossible.”

That longer-term visibility matters because digital transformation in government rarely pays back inside a single financial year. Without it, many programmes stall at pilot stage or focus narrowly on short-term savings.

But funding certainty alone will not deliver change. James Towner, chief growth officer at Arvato Connect, warns that ambition without execution remains a major risk. “Momentum is building quickly,” he said, pointing to government-wide transformation initiatives. “But this potential – and the investment behind it – is at serious risk of evaporating without structured execution, clear governance and genuine cultural transformation at all levels of government.”

Culture, not technology, as the constraint

Towner argues that digital government programmes still fail too often because they are insufficiently grounded in how people actually work. “We will see a widening gap between organisations that embed real end-user insight into their programmes and those that don’t,” he said. “Many government bodies still aren’t grounding decisions in citizen needs, accessibility considerations or lived experience.”

Internal culture is equally critical. “Over half of organisations have failed to gain colleague buy-in for their projects,” Towner notes. “In government – where digital leaders must navigate politics within politics, entrenched processes and competing agendas – building trust has to be the top priority.”

That theme of trust surfaces repeatedly. For Derek Allison, general manager of UK&I at DXC Technology, digital transformation is no longer discretionary. “With every government department operating under intense scrutiny, digital transformation is no longer a discretionary project, it is a fundamental strategy for cost-efficiency, service resilience and citizen trust,” he said.

Allison warns that fragmented approaches will widen the gap between expectations and delivery. “Without coordinated, long-term investment, the gap between public expectations and the government’s ability to deliver will only widen.”

Rethinking delivery models

Several contributors point to new delivery models as evidence that reform is already underway. Hornung highlights councils that have moved away from siloed service thinking. “Transformation happens when services are viewed as part of the same system, not in silos,” he said, citing examples where shared digital platforms span housing, highways, inspections and care.

This ecosystem view aligns with broader debates about sovereignty and control. Alf Franklin, head of public sector, international at Elastic, frames digital government as a strategic capability. “Looking ahead to 2026, open source will be central to how governments define digital sovereignty and strategic autonomy,” he said.

“As digital services and AI become the backbone of government operations, open source will become the standard for transparency, auditability, and public trust. Open source isn’t just a technology choice. It’s a strategic commitment to a more capable, confident, and connected public sector in 2026.”

Joined-up government, joined-up systems

Nowhere is the need for system thinking clearer than in health and care. Hornung predicts early movement toward shared budgets between NHS community services and local authorities. “At present, those two funding streams often pull against each other,” he said. “Bringing those budgets together allows for a more joined-up approach, one that supports people earlier and reduces costly, lengthy hospital admissions.”

Technology underpins this shift, but it is not the objective. “Technology will be a key enabler of that change,” said Hornung, particularly in supporting people safely in their own homes.

Across government, similar logic is being applied to digital platforms, data sharing and identity. The emphasis is moving from isolated service improvements to end-to-end journeys that cut across organisational boundaries.

Rebuilding public confidence

Underlying all of these discussions is a recognition that public trust has been eroded. “Across every part of the public sector, one theme runs through everything: a loss of public confidence,” said Hornung. “People no longer assume that the services they rely on will deliver effectively.

“Restoring trust requires openness, transparency, and innovation. The public doesn’t expect perfection. They expect progress.”