Chris Yiu is Head of the Digital Government Unit at the think tank Policy Exchange, and author of its recent report 'The Big Data Opportunity'. 

Follow Chris on Twitter: @PXDigitalGov

Getting to grips with data and analytics could revolutionise the business of government, but presents challenges as well as opportunities. Recent research from Policy Exchange points a way forward. 

The modern world generates a staggering quantity of data, and the business of government is no exception. Extraordinary quantities of data are amassed in the course of running public services – from managing welfare payments and the National Health Service, through to issuing passports and driving licences. Regardless of the stance a government chooses on openness and transparency (and the recent open data white paper suggests good progress is being made on the points we care about), an abundance of data and computing power gives the public sector new ways to organise, learn and innovate. 

The opportunity for public service transformation is real. For citizens, the application of data, technology and analytics has the potential to save time and make interacting with government a much smoother experience. This runs across the whole spectrum – from pre-populating forms rather than asking for the same information twice, through to personalising welfare to help people access the support they need. 

There is also significant scope to save money. The government's annual budget is around £700 billion, so even incremental improvements in productivity can add up to big savings (and are long overdue – public sector productivity has been pretty much flat for a decade). We already know that fraud in the public sector costs around £21 billion a year, a further £10 billion is lost to errors, and £7-8 billion lost in uncollected debts. And we know that the tax gap – the difference between theoretical tax liabilities and what people actually pay – is around £35 billion. So there is clearly potential to make progress. 

Of course, data and analytics technologies alone are not a silver bullet for transforming the public sector. Governments must have the capability to conduct, interpret and consume the outputs of data and analytics work intelligently. This is only partly about cutting-edge data science skills; just as important – if not more so – is ensuring that public sector leaders and staff are literate in the scientific method and confident combining data with judgment. 

Governments will also need the courage to pursue this agenda with strong ethics and integrity. The same technology that holds so much potential also makes it possible to put intense pressure on civil liberties. Both governments and businesses are exposed to tensions when attempts to extract value from data collide with individuals' wishes not to be tracked, monitored or singled out. 

Our research on big data made two main recommendations on a way forward. 

First, to kick-start progress an elite data team should be set up in the Cabinet Office, with responsibility for identifying big data opportunities and helping the public sector to unlock them – be they in central departments, local authorities or elsewhere. In its first year it should look to identify savings and benefits for government, over and above existing plans, worth at least £1 billion. We propose a lean, agile approach, modelled on lessons learned from the Nudge team. This is emphatically not about starting with a large, lengthy IT programme. 

Second, the government should adopt (or possibly even legislate) a Code for Responsible Analytics, to help it adhere to the highest ethical standards in data use. Important elements of such a code might include being transparent about what data and analytics capabilities are being accumulated and why; respecting the spirit of the right to privacy; and committing to review big data initiatives in a lab environment before implementation. 

Both of these proposals could be acted on quickly and without significant up-front costs. The prize at stake from making better use of data in government is large. We need to accelerate practical, radical efforts to capture it, whilst being mindful, always, that we do not sacrifice our integrity along the way. 

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