Rethinking how the UK funds the future of digital

Digital and AI transformation can only reach its full potential when the UK government changes how it is funded. The recent government announcement of the first-ever strategy to make AI deliver for the UK’s public service science and research efforts is a step in the right direction. But these plans alone are not enough. With a service built from fragmented infrastructure and department specific funding, leaders cannot expect technology and AI alone to fix current issues.

Rather, leaders must prioritise cross-government investment in shared data infrastructure, digital skills and interoperable systems. Only then can services which reflect how people live and use them be built.

Department-by-department funding leads to fragmented services

Public services are currently funded department-by-department with budgets allocated in siloes, independent from one another. While this structure supports oversight and control, it has led to the development of separated digital infrastructures and data systems, which rarely align with one another and are poorly connected. Health, justice, local government and central departments often operate on different platforms, governed by different standards and priorities.

This results in fragmentation, meaning data cannot be easily shared, insights remain partial and opportunities for coordinated intervention are missed.  Collaboration across departments requires additional agreements and technical workarounds to bridge gaps between systems, consuming significant time and resources in the process. Finally, and perhaps most importantly in the current climate, digital innovation and transformation is slowed.

This impact is felt by both citizens and frontline users. For the public, services are slower and repetitive, unable to join the dots, while frontline staff must work without a complete view of the people they’re supposed to serve. Ultimately, this siloed funding model restricts the ability of public services to act holistically, respond quickly to complex social challenges and fully realise the potential of digital transformation.

Fragmentation inhibits AI integration

AI is only as powerful as the systems and data it can access. Technology investments follow organisational boundaries rather than citizen needs, entrenching silos instead of breaking them down. Instead of designing services around joined-up outcomes, public bodies often optimise within their own remits, reinforcing fragmentation at both a technical and organisational level.

This means critical data is dispersed across departments, legacy platforms and local authorities, each operating with their own standards and access controls. AI deployed into this environment is forced to work with partial visibility, drawing conclusions from fragmented records rather than whole-system insight. The outcome is not just limited innovation, but distorted decision-making. AI systems trained or deployed in these conditions don’t simply produce weaker insights; they risk amplifying bias by over-weighting what is visible and ignoring what is not.

This is not a failure of AI itself – it is a structural consequence of fragmented governance and funding. Without unity in infrastructure, shared standards and aligned strategy, AI cannot truly transform public services; it can only operate within – and inadvertently reinforce – the gaps between them.

Cross-government investment

Rather than funding public services department-by-department, the government should consider prioritising cross-government investment in the shared foundations every department depends on. These include robust data infrastructure, interoperable systems and the digital skills to effectively use them. Rather than duplicating platforms and procuring technology in isolation, public bodies should co-invest in common architecture that enables secure data sharing, consistent standards and real-time collaboration. This would not only reduce waste and complexity but create the conditions in which innovation can scale beyond organisational boundaries.

Crucially, funding would be aligned around outcomes rather than ownership. Instead of asking which department has the budget to do so, the government could focus on the results it actually wants to achieve. This could mean safer communities, improved health outcomes and faster access to support, enabled by digital infrastructure designed to deliver these outcomes collectively. Investing in shared foundations such as interoperable systems and robust data governance would allow services to connect seamlessly, reflecting the reality that people’s lives do not fit neatly within departmental silos.

By shifting from fragmented procurement to coordinated capability-building, the government could finally design services around citizens rather than internal structures. The result would be more responsive, preventative and personalised public services – services that are genuinely fit for purpose.

Ultimately, for the UK government to fundamentally transform public services, they must first and foremost prioritise changing how they are funded. Through siloed funding which reflects departmental structuring rather than real life, the government are disadvantaging service-wide transformation. By aligning funding around outcomes rather than ownership, the government could finally build a service which reflects how people live and use it, rather than how departments are organised.