Chancellor of the Exchequer Rishi Sunak is spearheading a Treasury initiative to reach out to leaders in the UK tech sector, such as CEOs, investors and startups, to better understand what the industry wants from the government in the post-Brexit world of “Global Britain”.
In recent years, the government has established a variety of schemes to support tech firms, including investments in research and development, funding for innovation, as well as backing infrastructure projects such and broadband and 5G. This has included taking equity stakes in innovative tech firms for the first time, as part of the Future Fund. Just this week, the Treasury announced that taxpayers now own parts of 158 such companies.
The Chancellor, a former economist, hedge fund manager and a Stanford MBA, has a close connection to the tech sector – his father-in-law, Narayana Murthy, was the founder of Indian IT services giant Infosys, and Sunak spent time in Silicon Valley while living in California.
On 14 September, Sunak hosted a new event, Treasury Connect, to meet tech leaders and discuss their needs. Computer Weekly was invited to put questions to Sunak as part of a “fireside chat” to open the event. To Sunak’s credit, we were allowed to ask whatever questions we wanted. Here we present the conversation with the Chancellor in full, covering topics such as government investment in tech, plans to reform UK data protection laws, the opportunities for tech in a post-Covid world, and the digital skills gap.
Supporting the UK tech sector
Computer Weekly: Chancellor, this is the first time you’ve done an event like this. You have, both politically and personally, a very close connection to the technology sector. What do you most hope to achieve from this session? What would you like these people to do differently as a result of coming here to listen to you?
Rishi Sunak: I think probably two things. One is hopefully it will demonstrate our commitment, not just to the industry, but also about the mindset we have when it comes to policymaking. Our approach has been that of a “startup Treasury”. We’re trying to think more creatively and innovatively about policymaking. And we had to do that a lot in the [Covid-19] crisis – the furlough scheme we conceived, designed and implemented with a phenomenal team of people in the space of days and weeks. And it’s that mindset in a crisis that I want to try and embed a bit more on how we think about things.
It’s not always easy in politics to do things, and then they don’t work out. All of you [in the audience] do that all the time. And that’s part of learning rather than failing – and that’s how we get better. So, hopefully, it conveys the fact that we think this is really important, we want to try and support [the tech sector]. And we’re willing to be innovative about how we do so.
The second thing out of today is, hopefully, we leave with a bit of a to-do list. And I’m saying to you, be honest, be challenging, be ambitious with us. I’d like to think we’re doing a lot already, but we can’t be complacent. Where there are things we should look at, that we think will be helpful, that I can afford to do in these slightly straitened times, we’re up for doing that. Because we know that [the tech sector’s] success is good for the country. And we want to learn from [the tech sector] about the things that we should have on our to-do list.
Making UK tech internationally competitive
CW: Not that many years ago, Computer Weekly would write an article before every Budget saying the government needs to invest in tech and digital, knowing there would be nothing forthcoming. We’re pleased that has changed. We’ve written about so many government schemes around R&D and innovation and startups, which everyone welcomes. You’re putting hundreds of millions into the sector, and that’s great.
And yet – when you look around the world, you see China, for example, putting billions of dollars into AI [artificial intelligence] alone, as well as many other areas of digital innovation. The US remains by far the biggest investor in homegrown tech firms – and both have the advantage of an enormous home market in which to grow those firms. How confident can you be that the investments you’re making in tech will be enough to make UK firms internationally competitive over the next decade?
RS: They are massive markets – and companies in those markets have the advantage of very large domestic markets. That is obviously a bit different here. But I don’t look at that as a barrier to our success, because there are plenty of things that we have going for us that they don’t. Fintech and life sciences are two areas where we are absolutely globally best in class. We’re lucky that financial services is something that the UK does really well, we have regulators that get that, and they, I think, are far more supportive of innovation than regulators in the US – I’m happy to be challenged on that, but I think that is the case. And that’s why fintech here has been an enormous success.
There are many different ways that people set up healthcare systems, but you’ve seen in this crisis, the way that we do genomic sequencing is world-leading. They didn’t do that in the US. They weren’t doing that in China. We do that here. And it’s a testament to the life sciences strength that we have. We’re not going to do everything at the same level that the US and China do. But, as with any business, we need to focus on the verticals where we can clearly do things at world-class levels. And there are plenty of opportunities for us to do that.
The foundation all of that is built on is people and ideas. If you look at the quality of what’s coming out of our universities, I don’t think that it is less good than any of those places – we have fantastic quality university research. And this [country] is a magnet for high-quality people in a way that I don’t think some of these other places are. That’s part of our island mentality. We’ve always been a very open country in an open economy. And our migration reforms that I announced in the Budget will cement that – this is a place where people from all over the world want to come because it’s a fantastic place to live and work. So I feel pretty optimistic that we can compete at that level with those guys. But I can’t change everything – I can’t change the weather between here and Palo Alto.
CW: So the message is: focus on the things that we’re really good at, rather than trying to be good at everything?
RS: I think that’s a good life lesson in any case, but yes.
Reforming data protection laws
CW: The government recently announced a major consultation on data protection – the consultation document alone is 146 pages, and it’s going to be a significant process. Nobody would claim that GDPR [General Data Protection Regulation] is perfect, nor that there isn’t scope for improving it. But the data adequacy deal we have with the EU ensures the free flow of data supporting about £90bn in digital trade. Since the consultation was announced, there’s been huge concern that it puts that data adequacy deal at serious risk. What reassurances can you give that this process won’t destroy our vital data adequacy status with the EU?
RS: I think there’s a lot of excitement about it. It’s the result of months, if not years of painstaking policy, work and engagement with many of you in this room and lots of others, for us to figure out, actually, we’re completely in charge of our data protection rules now. As any other country has done, it’s reasonable that we take a look at them ourselves. That’s what you elect us to do – not to outsource these decisions, and to figure out what the optimal path forward is.
There are plenty of countries that have adequacy decisions with the EU, that are sensible countries, whether it’s Switzerland, whether it’s Japan, whether it’s Canada, New Zealand, or more that don’t do GDPR. So first of all, the idea that you have to have GDPR to have data adequacy, I don’t think is right. There are demonstrably many other people that don’t. And as you acknowledge, there are lots of things that probably we think are a bit more in the box-ticking kind of approach to regulation in GDPR. Whereas, what we want to focus on is the substance – we want to protect individuals’ data, but we don’t want to inhibit innovation.
Our view is there are things that we can change that will be pro-innovation, while protecting rights and getting rid of some of the box-ticking, and will end up in a good place that is net positive for the UK as a whole. But we’ll look forward to getting [people’s] thoughts on it. But as I said, I think it strikes a sensible balance between those interests, and it’s entirely reasonable that we look at it afresh, given that it’s our job [as a government], essentially, and we shouldn’t just outsource these decisions to another party and inherit them and then not look at them.
CW: Is there an underlying objective that at the end of this process, while doing all the good things that you want to do, the aim is to keep that data adequacy deal with the EU? Or is there a feeling that maybe we can get away without it?
RS: In general, we always want to have a constructive approach to our EU friends. In financial services, which is my very specific responsibility, we have [the concept of] equivalence. The EU has chosen to not grant us equivalence in lots of different areas, for reasons that are known to them. It’s hard for me to understand why, because we left the EU with exactly the same regulations. And we want to, if anything, strengthen our regulatory approach here, but they’ve chosen to adopt a different approach. We’ve chosen to do the best thing for the UK. So we’ve made some unilateral equivalence decisions.
And then similar to what we are doing on the data side, we can figure out where are the advantages of the new freedoms we have in financial services. Whether it’s in things like insurance and solvency, whether it’s on the capital side for banks, whether it’s on listings reforms, whether it’s on wholesale capital markets – all things we can do to incrementally make financial services really competitive in the UK, while maintaining our reputation for being a great and safe and high-integrity place to do business. And I think that is the approach that we should have. But we’re not trying to poke an eye for the sake of it, we’re just trying to do the things that are in the best interest of the country.
The role of tech after Covid-19
CW: It’s fair to say that without technology, the economic and health impact of the pandemic would have been far greater. Just imagine if Covid had come along 10 years ago – there’s no way we would have had the capability for millions of people to suddenly work from home, or to support digital initiatives in the NHS. It’s shown the enormous positive benefit technology can have socially, as well as economically. Now, looking forward, with millions of people working from home instead of commuting, it could cut the ongoing cost of public transport; it could revitalise local high streets. Empty retail premises or even libraries could be repurposed as remote working hubs. Fewer people working in offices in cities could free up brownfield sites for affordable housing – all great opportunities for levelling up. We don’t see any evidence of that sort of strategic, long-term thinking from the government – looking at how we can digitally transform the UK at a societal level thanks to the opportunities of technology. Or is that statement wrong?
RS: That’s a really interesting thesis and it’s fair for us to reflect on it, but I’d say a couple of things. One is when it comes to how do we use technology to improve public services? It’s right to challenge us on that, and what have we learned from this crisis that we should embed for the future? We had to do things and quick, lots of things – and it turns out, some of them are probably sensible things in general that we should have been doing. It’s completely reasonable that all of you ask to make sure that your money is spent in the best possible way and goes as far as it can. If technology is part of the way to do that, we should be embracing that and driving that change. So I completely agree with that.
With regard to the reshaping of cities and offices and commuting patterns – I don’t know, is the honest answer. I don’t know if anyone does know, it’s probably a bit early to tell what it will settle back down to – it sounds like it will be some degree of hybrid. And then we’ll have to see what that looks like and the impact on commuting and everything else. It turns out, actually, if everyone takes Monday and Friday [to work remotely], that is a very different impact for the economics of commuter rail and what you can do, versus everyone equally taking a day off a week. So actually, how that manifests itself will have an impact on the things you said.
You asked what should the government be doing about that? I’m generally not of the view that we should be dictating to people how they should work. There was obviously a very particular set of circumstances in the pandemic, when it was part of the health response. And that’s one thing, but as a general rule, it’s not my job to tell you how to manage your staff, or to tell them exactly what type of job to accept – you [as employers] will figure that all out.
It certainly was beneficial to me in my career when I was young, to be in an office with people who were mentoring me, training me and formed good relationships that are benefiting me to this day. And it would be sad if that was lost. Now, there’s no reason for that to be lost if people are doing things in a hybrid fashion. But if people are exclusively doing things in a digital fashion, I do worry about those connections being formed. But that’s probably something most people would agree with. Beyond that, as I said, it’s probably a bit early to see how it shakes out. But making sure we get the benefits of digital transformation and public services, that is absolutely right for us to do.
Bridging the digital skills gap
CW: When we talk to technology leaders about their biggest challenges, the most common response is the lack of digital skills in the UK. From not enough students with the relevant qualifications, through to mature workers with outdated skills, it’s a huge issue that’s seriously holding back the potential of the UK’s digital economy. There have been numerous initiatives over the years, but the problem hasn’t gone away. What do you need to do differently to tackle the digital skills gap?
RS: I agree with you – it’s the single thing that people raise with me. There’s lots we’re doing, and we constantly will need to do more. I think it’s a mix of making sure we’ve got skills training in this country – which I think we’re doing a better job of, although there’s always more you can do – and making sure that we can attract the best and the brightest to come here as well. We should be doing both things, not one exclusively. The migration reforms we announced in the Budget earlier this year are doing some of the latter. And whether it’s apprenticeships or other things, I think we’re making progress on the upscaling of our adult workforce. But there is certainly a lot to do because that’s an area we lag behind most of our international peers.
UK tech sovereignty
Audience question: I wanted to talk ask you about tech sovereignty – in the light of questions around Chinese companies trying to buy UK tech firms, for example. How do you see getting the balance right between keeping the tech sector open and inclusive in terms of talent and investment, while also protecting areas that are going to be strategic for UK tech in the future?
RS: I don’t have a short answer, because it’s something that we are grappling with. There isn’t an easy answer. What we have done is improve our ability to protect ourselves against investment into the UK that is antithetical to our interests. That’s something that we passed legislation to do. The old legislation was designed quite well for the old world, where a big foreign company was trying to take over a big public company listed in the UK. It’s not obvious it worked as well for, say, an interesting shell company taking quite a large stake in an emerging tech business being spun out of university – it’s a very different set of thresholds and rules. So we’ve updated those to allow us to protect ourselves better, which we needed to do, because clearly that is a risk to us.
Now, this strategic autonomy question is a complicated one – we saw it in the telecoms industry that there was a problem. I think some of the lesson from that, certainly for me, was we probably need to think in advance about the things that are coming down the pipe and work with allies, because it’s not obvious that we can do absolutely everything ourselves. What we want to make sure is that among like-minded partners – whether it’s the Five Eyes intelligence relationship, or the G7, or others – there are groups of like-minded countries that collectively can make sure that we have access to technologies that we need.
But that requires a degree of trust, even between us, and clearly some of the things that happened over the pandemic strain that, and we saw that. The Prime Minister is very good about making sure that we are always an advocate for free and open markets as something that is important to this country. The Prime Minister passionately champions that, but it does involve working with allies, because we can’t do it all on our own. We can’t replicate absolutely everything here. And probably that autarchic approach is not one that is ultimately available or likely to be successful for us, either.
Supporting women in tech
Audience question: You mentioned that you want the UK to be able to attract people from all across the world into the UK. But women get less than 2% of venture capital funding in the UK, and also for people of colour and other minorities, there’s a huge disparity. What are you able to, or what are you planning on doing, to try and address that sort of disparity?
RS: One thing we were pleased about in [applications to] the Future Fund was the stats on both mixed-ethnicity founder groups and gender were really positive, which was a good thing. Now, we didn’t set out to design it in a way that did one thing or another; it was designed to be agnostic to that. But it disproportionately worked in that way, which is a nice thing.
I don’t have a silver bullet for you. Alison Rose [the CEO] from NatWest has done some really good work for the government – previous Chancellors appointed her – and she’s got taskforces and initiatives around women entrepreneurs that we are keen to support. And broadly, I think, I’ve done all the things that she has said to us. Something we have talked about is getting more girls into science at an early age. We were talking about Jacqueline [de Rojas] earlier as an inspiring figure for the tech ecosystem – I sat down with my two girls and showed them little clips of her. I think we just need to do more of it. We need to make sure that we have inspiring people, for those younger generations to look up to, and then remove the barriers. I’m interested to hear, what are those barriers that mean we are not getting funding working in a more equitable way? And if those are government barriers, you should let me know – I find a lot of these things probably are not [government barriers]. But if there are, I’m happy to take them away.
Audience question: As well as a thriving tech sector, the other big prize is digitising the rest of the economy, particularly levelling up parts of the economy and other parts of the country. How does your policy affect those things?
RS: There is clear evidence that we lag behind. We’re great at creating all these new technologies, but the tech diffusion and adoption among our SME base of businesses in the UK lags behind our peers, particularly with regard to things like ERP [enterprise resource planning], CRM [customer relationship management], and accounting software. And clearly those things drive up productivity. So we created Help to Grow at the last Budget, where we’re providing vouchers for a curated set of software offerings in those areas to help digitally upskill our SME base, and it’s going to come with some learning resources around it. It’s modelled on a programme in Singapore, which we did a lot of work on and seem to be the world’s best version of this. I’m keen that we close the gap because it is definitely holding us back.