The data-driven future of funding services

As the (still fairly new) government finds its feet, some quiet policy shifts that have already happened give clues to how digital technology and data will need to adapt over the next few years. One area is funding - how central government sends money out to other parts of the public sector, businesses, charities or individuals - to support policy delivery.

To declare an interest: A fair few TPXimpact colleagues and I are self-confessed funding nerds, having spent three years as MHCLG's Strategic User Centred Design and Delivery partner for their Funding Service from 2021-2024. 

I think you can look at what is happening in departments and predict that a more data-driven, low-friction, user-centred funding model will dominate government over this parliament. This will demand digital services that are not only fully integrated with the data department’s hold (and therefore data will need to be good, well organised and accessible) but that are also designed end-to-end in such a way that promotes transparency, clarity and predictability for those organisations in receipt of funding. 

Our work with MHCLG was during a sort of golden age for funding. Post-Brexit, the Conservative Government had made a huge commitment to continue the same kinds of infrastructural, social and economic funding the Commission had in place. The Levelling Up Fund, UK Shared Prosperity Fund, Towns Fund, Community Ownership Fund - all multi-million (and billion) pound pots that places, businesses and charities could apply for to invest in their areas, buildings, roads, community assets, skills and employment. The particular flavour of funding under the last government was competitive. There was no guarantee you'd receive funds if you made an application, and the process of competition was much analysed, often challenged in the press due to the amount of resources it took to pull together a compliant funding bid. We supported MHCLG to remove that burden (as much as was legally desirable/possible) but also to use user-centred design to give organisations the best possible chance of being successful in their bids.

We worked on how you design end-to-end funding services that are simple to use, gather the right data to enable decisions and, crucially, are set up so civil servants can evaluate the impact between funds and across funding rounds. This involved creating clear user-centred principles, common data standards between funds, reusable application and assessment patterns for quite complex data, and onboarding and self-service guidance so the service was sustainable.   

However, there’s a whole other world of funding - non-competitive funding, or allocative funding - that already powers areas like local authority grants at MHCLG and school grants at DfE. This is where money is made available to everyone through policy, and is allocated according to calculations related to need. In housing policy, this is known as "continuous dialogue funding" and gives flexibility to design and direct funding where it is needed most, and to release it close to when it will be used (i.e. to dig holes in the ground and build homes). During the last government, the hints at a change of direction away from a competitive landscape for funding towards one that was almost exclusively allocative were in the air. It seems like the new government will be following this course, and whilst the future shape of local places funding is unknown, it's unlikely that large scale competitions - for, say, infrastructure funding - will exist in the same way as before.

So, for departments needing to make a shift in response to a likely change of direction, what does this mean for digital teams asked to run, manage or adapt a funding service? Here are some ideas:

Data is everything

You can't do good allocative/grant funding without a data store that powers decisions. Departments like DfE are ahead of the game here. But for others needing to shift their model, funding services need to demand that consistency of data between funds/grants is an essential foundation for funding that is powered by data and decisions based on calculation rather than competition. 

You need solid service patterns

Even without a mammoth application and assessment process, funded organisations will still be required to interact with government, mostly through data returns, but also to monitor funds that might be new, or to keep track of different fund cycles. These need well-tested, consistent service patterns that provide users with certainty and confidence. The move to allocative funding must not accompany a retreat to the macro-filled spreadsheet - we know how to do good digital services that are focused on data exchange, and it's for digital and UCD teams to advocate for proper, mature digital services as early as possible in the policy design process. This is the stuff that really excites us at TPXimpact - how user-centred design strategists and the insight they bring can help shape the policy before it is fully designed so its implementation in the digital world is successful

Think system-wide and whole-user experience

The key users of allocative funding services - local authority finance officers, school leaders, housing developers, and business owners potentially - will access these as part of a very complex set of actions and processes as part of their day-to-day job. The receipt of funding is business-critical and there should be no question that the necessary bureaucratic processes attached to the funding might be uncertain, confusing, time-consuming, or not really designed at all. Administrators are users too, and the best funding services get to know those users and how they interact across their system of governance in their organisation or place. UCD teams must be as excited about learning about these people as they would be about any other citizen interacting with the public sector.

Advocate for the minimal data exchange build on trust

For some departments, moving from a competitive to an allocative model will be a major culture shift. Their instincts to over-monitor and gather too much data as part of early stage "applications" will create the complexity and burden of competitive funding service, just without the competition bit. Based on user-driven insight and using examples from elsewhere, funding services need to give confidence to policy teams that large amounts of public money can be allocated, spent and evaluated with much less data gathering than had gone before. Part of this trust building is to work with policy teams to model out different calculations of funding based on the data they have, showing how solid, well-tested code can remove risk.

There's still a place for competition

I would advise Labour not to totally ignore the benefits of competition for funding. Through a well-structured, clear, fair and dynamic competition, organisations can be supported to put together more impactful projects. Take the Community Ownership Fund. Their competitive process supported community groups to put together detailed business plans to enable them to, quite often, buy and run a community pub. Community users are also a good test case for a wider funding service - if a layperson can use the service patterns, then a finance professional from a local authority should be able to as well. Some local authority housing funding - for example via Homes England - is also still distributed via competition.

The potential incoming changes to funding are transformative, both for departments that are switching to an allocative model and those that have always distributed grants via calculation and not competition. Departments must rethink their models, prioritise trust, and design services that truly serve the people who rely on them.