The Digital Economy Contents

Conclusions and recommendations

Measuring the digital economy

1.Good policy making, tax policy and the allocation of resources require high-quality data. This does not exist at present in the digital economy, and policy making cannot therefore be reliably expected to support as much as possible the digital economy, one of the UK’s key drivers of improved productivity. The Government’s Digital Strategy should be informed by, and policy measures should be driven by, reliable data. We recognise the difficulty of measuring the digital economy, but the Government should look to the work of the Office of National Statistics, and explore ways of collecting real-time data in the digital economy, and ensure that established Standard Industrial Classification (SIC) codes are agreed and used, in different parts of the digital economy. (Paragraph 13)

The Government’s digital strategy

2.We look forward to the publication of the Government’s Digital Strategy, in the summer of 2016 (six months later than expected), which should explain how the Government will build on its success. We regret this delay, and call on the Government to explain the reasons for it, and why they initiated a three-week consultation over the Christmas break on what the Government should include in the strategy. (Paragraph 16)

3.While the Government is supporting the digital economy, including support of Innovate UK, Tech City and Tech North, there is no overall strategy for this support. We hope that the digital strategy will provide an overview of present and future Government policy on the digital economy, which will be published as soon as possible, and in its reply the Government must provide us with an update of any changes made to the strategy since it was originally written. (Paragraph 17)

4.The Government must also explain how the Digital Strategy will be affected by the referendum result. It should also set out in its reply and in the Digital Strategy a list of specific, current EU negotiations relating to the digital economy. (Paragraph 18)

5.At the forefront of the issues explained, the Digital Strategy must address head on the status of digitally-skilled workers from the European Union who currently work in the UK. The digital sector relies on skilled workforce from the European Union, and those individuals’ rights to remain in the country must be addressed, and at the earliest opportunity. (Paragraph 19)

Businesses and the digital economy

6.While we recognise that the provision of digital skills may never keep pace with the speed of innovation, there must be a bedrock of core skills that people need to acquire, so that they can build on, extend and then adapt to meet the needs of changing technology. We have not replicated the work of other Committees on the dearth of digitally-skilled workers, such as the Science and Technology Select Committee and the House of Lords Select Committee on Digital Skills, both of whom highlighted the shortage of workers with IT skills. However, both Reports were published before the result of the referendum, and the Government needs to state in its reply how tech firms that employ EU nationals will be affected in the short, medium and long term. The Government needs to provide clarity surrounding skills, post referendum, otherwise skills and talent will be lost to other countries. (Paragraph 26)

Showcasing the success of digital businesses

7.The UK is one of the prime destinations in Europe to set up a tech business. The gaming industry does not have the recognition it deserves as an innovator and, in some cases, a world leader. It is making a larger contribution to the economy that is not picked up because of the way in which the gaming industry is measured. (Paragraph 31)

8.The United Kingdom is a world leader in Fintech, with the sector estimated to be worth £20 billion in annual revenues. This position could now be at risk as firms will want to be part of the single market of financial regulation. The Government needs to set out with urgency how it will address this, to avoid our strengths in fintech being eroded. (Paragraph 32)

Apprenticeship levy

9.We are currently running a joint inquiry on apprenticeships with the Education Committee, and therefore will not comment on substantive aspects of the apprenticeship levy in this Report. However, small businesses (including digital businesses) employing highly-skilled workers may not have the capacity to employ apprentices, and therefore the current apprenticeship levy requirements could hinder those businesses financially. The Government needs to address how differing business workforce models, such as tech firms, with a small number of highly-skilled workers, are not compromised through the operation of the apprenticeship levy. (Paragraph 37)

The challenge from ‘disruptive’ technologies

10.The fact that disruptive technologies are inevitably evolving, and the pace of change is accelerating, means that it is crucial that public policy is ‘future-proofed’ as far as possible, to ensure that the need for constant regulatory reform is minimised. (Paragraph 42)


11.We recommend that the Government sets out clearly its key objectives for the regulation of disruptive change. Our view is that they should promote productivity, innovation, and customer choice and protection. The Department for Business, Innovation and Skills must be at the forefront of the regulation debate, with BIS Ministers initiating cross-Whitehall co-ordination with colleagues from relevant Departments to explore the regulatory opportunities that exist within the digital framework, and to ensure that regulations are in place to take account of new technology. (Paragraph 50)

12.A major characteristic of the digital economy’s model is the reliance on customer feedback. We recommend that the Government explore ways in which compliance solutions can be developed, to ensure a more collaborative approach to regulation that involves users and providers. (Paragraph 51)

13.We recommend that the Government should study ways in which platforms providers could themselves become key players in the regulatory framework, ensuring that users are complying with current regulations, in order to reduce the risks posed to the public. This issue should be addresses specifically in the Digital Strategy. (Paragraph 52)

14.Workers using the platforms should be entitled to reasonable employment conditions, and should not vulnerable to exploitation, and we will be returning to this topic in greater detail, when we carry out our inquiry into the future world of work in the autumn of 2016. (Paragraph 53)

Intellectual property

15.Intellectual Property is increasingly important to the economic success of the UK, but it is hard to manage in a digital context. The Intellectual Property regime in the UK is flexible enough to withstand technological and digital challenges. While we have not carried out a detailed study into the work of businesses working within IP issues, we were impressed with the evidence from the Copyright Hub, which incentivises creators and creativity, ensures that mechanisms are keeping up with technological disruption, and uses identifiers to connect the work with the creator. (Paragraph 58)

16.The Government has shown foresight in leading on this work, in supporting the Copyright Hub, through the Digital Catapult (set up by Innovate UK, to drive future economic growth in the digital economy). It needs to continue to pledge financial support for this world-leading asset, particularly during the next few years of the Copyright Hub’s existence, when its work will be focussed on driving adoption. (Paragraph 59)

17.The Coalition Government introduced some wide-ranging changes to the intellectual property regime through primary and secondary legislation on important issues such as copyright exceptions. The current regime strikes the appropriate balance between the rights of the creator and the consumer, and further change in this area would not be helpful at the moment. (Paragraph 60)


18.The IP Crime Unit was set up by the City of London in 2013, with £5.6 million funding by the Government until 2017. We support the work it does in stopping people breaking the law, and preventing creative industries from having their rights infringed. We recommend that funding should be available beyond 2017. Furthermore, we recommend that the Government replicates the work of the IP Crime Unit in other parts of the country, and provides the necessary resources to support this. (Paragraph 64)

19.The Government should be proactive in stopping metadata stripping, which removes identifiers from digital works. This is already an offence under the Copyright, Designs and Patents Act 1988. The current Digital Economy Bill includes the provision that perpetrators of online crime are subject to similar punishment to perpetrators of non-digital crime, which we support. Just as regulation must keep pace with digital economy development, so must enforcement. (Paragraph 65)

Digital Single Market

20.The decision to leave the European Union risks undermining the United Kingdom’s dominance in this policy area. We could have led on the Digital Single Market, but instead we will be having to follow. The Government must address this situation, to stop investor confident further draining away, with firms relocating into other countries in Europe to take advantage of the Digital Single Market. (Paragraph 68)

21.The implications of the European Single Digital Market were beyond the remit of this inquiry, but the Government needs to address the issue of whether businesses will be able to access the European Single Digital Market, if they want to do so. In broader terms, we recommend that the Government sets out in its digital strategy the implications of withdrawal from the European Union, in reference to specific, current EU negotiations relating to the digital economy. The Government must address this situation as soon as possible, to stop investor confidence further draining away, with firms relocating into other countries in Europe, to take advantage of the Digital Single Market. (Paragraph 71)

Digital co-ordination in the public sector

22.There needs to be better co-ordination between Government Departments on digital innovations, in order to improve public sector efficiency, which in turn will benefit the economy. For the Government to have a holistic view of the different digital initiatives that each Department is undertaking, the Minister responsible for the Digital Economy should take the lead in overseeing digital projects. We recommend that this issue is addressed in the Government’s Digital Strategy. (Paragraph 74)

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15 July 2016