Select Committee on Digital Skills - Report of Session 2014–15
Make or Break: The UK’s Digital Future
Make or Break: The UK’s Digital Future
Chapter 1: Introduction
Impetus behind the inquiry
Major technological change
1.The House appointed this ad hoc Committee to “consider information and communications technology, competitiveness and skills in the United Kingdom”. The twenty-first century has already witnessed remarkable technological breakthroughs and has been considered to be a revolutionary period of history—a ‘second machine age’.1 This revolution has been driven by the development of digital technology and is taking place on a global scale—affecting everyone—at a pace that is historically unprecedented.2
2.Many of the giants of the digital revolution, such as Google, YouTube, Facebook and eBay, were either relatively small or non-existent at the turn of the century. The first iPhone was introduced in 2007, a mere eight years ago. Innovations in robotics and medical diagnostics have had lifesaving impacts (see Box 1) and driverless cars are now a reality.3 We are facing a tsunami of technological change, driven by the digital revolution, affecting virtually all areas of our lives.
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The digital economy
3.Estimates of the value of the digital economy vary.10 The Government estimated that the digital sector alone contributed around £105 billion in gross value added (GVA) to the UK in 2011.11 The Organisation for Economic Co-operation and Development (OECD) found that in 2012, information industries accounted for approximately 6% of total value added and 4% of total employment in the OECD area.12 Research by McKinsey & Company found that the internet accounted for 3.4% of gross domestic product (GDP) in 13 countries studied in 2011 (6% of GDP in the UK), and 21% of GDP growth in the five years preceding 2011 in mature (most developed) countries.13 It is clear that whatever the precise figure, the digital opportunity is huge.
4.Historically, the UK’s economy has performed well. The UK is currently one of the leading global digital economies (see Box 2), ranked 9th14 in the World Economic Forum’s (WEF) Global Competitiveness Index for 2014–15.15 The UK has also ranked highly on digital indices16, meaning that, up to now, the UK’s infrastructure environment, public and private sector digital services, and education—along with other measures—have been amongst the best in the world. This adds up to a great opportunity for the UK.
5.International comparisons, however, show that in some areas the UK is lagging behind, especially in providing resources for science17 and skills training.18 The countries ranked higher than the UK (including Switzerland, Singapore, the USA, Finland, Germany, Japan, Hong Kong and the Netherlands) have invested heavily in digital ‘foundations’, including up-skilling the population in technical expertise and digital capability, and driving universal access and usage. Yet no one in the world has fully grasped the digital opportunity; it is there for the taking. Booz & Company estimated that if the UK had ranked 1st across the board19 in 2011 it could have increased its GDP by up to a further £63 billion;20 we believe that recognising the pervasive nature of digital technology is fundamental to the UK grasping this opportunity.
The whole economy has become digitised. It would be a mistake to take the ‘digital sector’ as our sole focus of interest. As digital is pervasive across most aspects of our lives, so the ‘digital economy’ is becoming synonymous with the national economy. Digital skills—the skills needed to interact with digital technologies—are life skills, necessary for most aspects of life. |
6.It is increasingly the case that even tiny enterprises cannot proposer without using the internet—or would be unlikely to survive for very long. Customers expect businesses to provide an online service; quotes, invoices and receipts are routinely sent electronically. In order to file a tax return, businesses are expected to log on and use the internet.
7.As well as the workplace, everyday tasks increasingly require interaction with technology: delivery drivers use iPads; shoppers can ‘click and collect’ goods (order online and pick up in-store later); doctor, dentist and hospital appointments can be booked online; and internet banking is routine for many. Gone is the need to remember or carry around train and bus timetables—live travel information can be accessed from mobile devices while waiting at the station or stop. Paying for meals in restaurants via mobile phones is now possible; and tenants of an office block in Sweden have had microchips implanted under their skin that allow them entry and access to office machinery.21 Every day the media carries stories of new digital advances.
The labour market and automation
8.The digital revolution is changing the labour market fundamentally. For instance, advanced robots are gaining enhanced senses and dexterity, allowing them to perform a broader range of non-routine manual tasks. This is likely to change the nature of work across industries and occupations. With the improved sensing available to robots, jobs in transportation and logistics are now, for the first time, fully automatable. The autonomous cars being developed by Google, for example, theoretically could make bus and taxi drivers, along with many logistics occupations, redundant.
9.In addition, the potential scope of automation now extends to cognitive, as well as manual work. According to a recent study, approximately 35% of the UK workforce is susceptible to automation over the next two decades.22 The research indicates that the jobs least at risk from computerisation are in areas such as: senior management and financial services; computers, engineering and science; education; legal services; community services; the arts and media; and health care. The jobs most at risk are in: office and administrative support work; sales and services; transportation; construction and extraction; and production (manufacturing).23
Implications for inequality
10.The benefits of recent technological innovations have not been widely shared. There is evidence that the level of automation that has occurred already is one contributing factor in new inequalities that are emerging.24 A recent report by the Resolution Foundation25 predicted that living standards for many low-to-middle income households in Britain were likely to be lower by 2020 than they were in 2008.26
The skills requirement
11.While the industrial revolution created vast employment opportunities for low-skilled workers, as the artisan shop was replaced by the factory system, the digital revolution so far has mainly created jobs for highly-skilled workers in entirely new occupations and industries. ‘Big Data’27 architects, iOS28 developers, digital marketing specialists and data scientists are all jobs that barely existed five years ago. Furthermore, video and audio streaming, internet auctions and social networking services are all new industries that have emerged in response to recent technological developments.29 Most of the jobs in these occupations and industries share one common characteristic: they are substantially more skills-intensive than the jobs they replace.
12.Over the coming years the UK will witness a transformation of unprecedented magnitude as workers will have to move to new occupations and industries. It is unknown whether there will be net job loss on a large scale or whether new jobs will be created in other areas—both familiar jobs and others no one has yet been able to foresee. In the past, workers have adapted to technological revolutions by acquiring new skills. To manage the coming transition successfully, an overhaul of the skills of the entire population is crucial.
13.The labour market disruption ahead may be greater than anything we have seen in the past. In this context, the task of this Committee has been to evaluate whether the UK risks falling behind, or whether it is ready to embrace these technologies; will this digital revolution make or break the UK?
The role of the Government
14.It is clear that immediate and extensive action is called for; the country must place itself in the vanguard of technological transformations.
15.The incoming Government in 2015 will have a major role, especially in providing resources for science, infrastructure, education and skills training. In evidence to the Committee, the Minister of State for Skills and Equalities, Nick Boles MP, described the ‘everythingness’ of digital change. We agree. The five years after May 2015 will be critical for the UK. There is an urgent need to clarify the role of the incoming Government in helping to manage this change positively: a comprehensive Digital Agenda for the UK is fundamental to this.
The Committee’s inquiry
16.As this Committee was an ad hoc appointment, it ceased to exist on the production of this report. We were set a tight timetable to complete this report by 5 March 2015.
17.We issued our call for evidence in July 2014 and took oral evidence from 59 witnesses during 20 sessions held between July and November 2014. We received 111 pieces of written evidence and visited the following stakeholders: Guardian Media Group and Google Campus (September 2014); the BBC Blue Room and BBC Research and Development (October 2014); the Hartree Centre, Warrington (October 2014); and Imperial College London (November 2014).
18.During the oral evidence sessions, each witness was asked to provide a key suggestion as to what recommendations this Committee should make to the Government. Our witnesses provided excellent suggestions, which have subsequently been collated into a single volume and can be found on our website.30
19.Within our remit of considering information and communications technology, competitiveness and skills in the UK, this report focuses on:
- The core pre-conditions: hard infrastructure; soft infrastructure; and cyber risk management (Chapter 2);
- Fostering and developing talent: digital ability levels; medium- and high-level skills; future-proofing our young people; and filling the immediate skills gap (Chapter 3);
- The business environment: connecting and supporting business; and regional ecosystems and clustering (Chapter 4); and
- Making it happen: a leading Government; and a Digital Agenda for the UK (Chapter 5).
20.The Members of the Digital Skills Committee who carried out the inquiry are listed in Appendix 1, which shows their declared interests. We are grateful for the written and oral evidence that was submitted to the inquiry; the witnesses who provided it are shown in Appendix 2. We are also grateful to our two specialist advisers, Dr Carl Frey and Mr Andy Westwood, for their assistance.
21.The call for evidence is shown in Appendix 3. The evidence received is published online.31
See: Erik Brynjolffson and Andrew McAfee, The Second Machine Age: Work, Progress and Prosperity in a Time of Brilliant Technologies (New York: W. W. Norton & Company, 2014)
2 Deloitte, London Futures: Agiletown: the relentless march of technology and London’s response (November 2014): http://www2.deloitte.com/content/dam/Deloitte/uk/Documents/uk-futures/london-futures-agiletown.pdf [accessed 30 December 2014]
3 For instance, see: HM Government, ‘Driverless cars: 4 cities get green light for everyday trials’: https://www.gov.uk/government/news/driverless-cars-4-cities-get-green-light-for-everyday-trials [accessed 17 December 2014]
4 Research Councils UK (RCUK), Regenerative medicine: http://www.rcuk.ac.uk/RCUK-prod/assets/documents/documents/RegenerativeMedicineTimeline.pdf [accessed 16 January 2015]
5 McKinsey & Company, ‘Spurring the market for high-tech home health care’: http://www.mckinsey.com/insights/health_systems_and_services/spurring_the_market_for_high-tech_home_health_care [accessed 15 January 2015]
6 Department of Health, Research and development work relating to assistive technology 2012–13 (July 2013): https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/336321/2012–13.pdf [accessed 15 January 2015]; University of Southampton, ‘Rehabilitation and Health Technologies Research’ Group: http://www.southampton.ac.uk/rht/research/neurorehabilitation/upper_limb_neurorehab.page [accessed 15 January 2015]
7 ‘Paralysed woman’s thoughts control robotic arm’, BBC News (17 December 2012): http://www.bbc.co.uk/news/health-20731973 [accessed 15 January 2015]
8 For instance, see: ‘The Robot Will See You Now’, The Atlantic (20 February 2013): http://www.theatlantic.com/magazine/archive/2013/03/the-robot-will-see-you-now/309216 [accessed 15 January 2015]
9 ‘How robots are helping children with autism’, The Guardian (1 February 2015): http://www.theguardian.com/lifeandstyle/2015/feb/01/how-robots-helping-children-with-autism [accessed 3 February 2015]
10 A report by the National Institute of Economic and Social Research (NIESR) in 2013 found that the digital economy had 270,000 active digital companies in the UK, compared to estimates of 167,000. See: NIESR, Measuring the UK’s Digital Economy with Big Data (2014): http://niesr.ac.uk/sites/default/files/publications/SI024_GI_NIESR_Google_Report12.pdf [accessed 18 December 2014]. The Office for National Statistics (ONS) has recently consulted on measuring the digital economy. See: ONS, ‘Consultation on Measuring the Digital Economy’: http://www.ons.gov.uk/ons/about-ons/get-involved/consultations-and-user-surveys/open-consultations/2014/consultation-on-measuring-the-digital-economy/index.html [accessed 16 January 2015]. A recent article in The Economist emphasised how far away measures like gross domestic product (GDP) are from capturing the benefits of the internet. See: ‘Hidden in the long tail’, The Economist (10 January 2015): http://www.economist.com/news/finance-and-economics/21638142-consumers-reap-benefits-e-commerce-surprising-ways-hidden-long [accessed 16 January 2015]. See also: Erik Brynjolffson and Andrew McAfee, The Second Machine Age: Work, Progress and Prosperity in a Time of Brilliant Technologies (New York: W. W. Norton & Company, 2014)
11 HM Government, Information Economy Strategy (June 2013): https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/206944/13-901-information-economy-strategy.pdf [accessed 6 January 2015]
12 Organisation for Economic Co-operation and Development (OECD), Measuring the Digital Economy: A New Perspective (2014): http://www.oecd.org/sti/measuring-the-digital-economy-9789264221796-en.htm [accessed 16 January 2015]
13 McKinsey & Company, Internet matters: The Net’s sweeping impact on growth, jobs and prosperity (May 2011): http://www.mckinsey.com/insights/high_tech_telecoms_internet/internet_matters [accessed 10 December 2014]
14 Placing the UK behind Switzerland, Singapore, the USA, Finland, Germany, Japan, Hong Kong and the Netherlands.
15 World Economic Forum (WEF), The Global Competitiveness Report 2014–2015 (2014): http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2014–15.pdf [accessed 6 January 2015]. The Framework includes 12 pillars: institutions; infrastructure; macroeconomic environment; health and primary education; higher education and training; goods market efficiency; labour market efficiency; financial market development; technological readiness; market size; business sophistication; and innovation.
16 15th on the WEF’s Networked Readiness Index (as of 30 January 2015), which measures individual, business, and Government usage and ‘readiness’, as well as market, political and regulatory, and infrastructure environments: http://www.weforum.org/issues/global-information-technology/the-great-transformation/network-readiness-index [accessed 30 January 2015]. This is down six positions since the Index was published in the Global Information Technology Report 2014: http://www3.weforum.org/docs/WEF_GlobalInformationTechnology_Report_2014.pdf [accessed 30 January 2015]; 12th on the Booz & Company Digitization Index in 2012, which measures digital foundations: affordable, fast and robust broadband network of infrastructure, public- and private-sector digital services, and residents with a high level of education. See: Booz & Company, “This Is for Everyone”—The Case for Universal Digitisation (November 2012): http://www.go-on.co.uk/wp-content/uploads/2013/12/The-Booz-Report-Nov2012.pdf [accessed 30 January 2015]; and 4th on the 2014–15 Web Index produced by the World Wide Web Federation: http://thewebindex.org/wp-content/uploads/2014/12/Web_Index_24pp_November2014.pdf [accessed 3 February 2015]. This is down one position from previous years.
17 As explained in paragraph 151, the WEF showed that the UK ranked 14th in 2014 for company spending on research and development (R&D).
18 Ranking 19th for higher education and training. See: WEF, The Global Competitiveness Report 2014–15 (2014): http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2014–15.pdf [accessed 30 January 2015]
19 As defined by the Booz & Company Digitization Index. See footnote 16 above.
20 HM Government, Information Economy Strategy (June 2013): https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/206944/13-901-information-economy-strategy.pdf [accessed 6 January 2015]; Booz & Company, “This Is for Everyone”: The Case for Universal Digitisation (November 2012): http://www.go-on.co.uk/wp-content/uploads/2013/12/The-Booz-Report-Nov2012.pdf [accessed 16 January 2015]; and McKinsey & Company, Internet matters: The Net’s sweeping impact on growth, jobs and prosperity (May 2011): http://www.mckinsey.com/insights/high_tech_telecoms_internet/internet_matters [accessed 10 December 2014]
21 ‘Office puts chips under staff’s skin’, BBC News (29 January 2015): http://www.bbc.co.uk/news/technology-31042477 [accessed 2 February 2015]
22 Deloitte, London Futures: Agiletown: the relentless march of technology and London’s response (November 2014): http://www2.deloitte.com/content/dam/Deloitte/uk/Documents/uk-futures/london-futures-agiletown.pdf [accessed 30 December 2014]
23 Deloitte, London Future: Agiletown: the relentless march of technology and London’s response (November 2014): http://www2.deloitte.com/content/dam/Deloitte/uk/Documents/uk-futures/london-futures-agiletown.pdf [accessed 16 January 2015]. While automation in the past has been confined to rule-based repetitive tasks, “The ability to collect and analyse Big Data allows machine learning (ML) algorithms to perform some cognitive tasks more efficiently and effectively than labour, making possible—and desirable—the automation of some knowledge work.” (page 6)
24 Erik Brynjolffson and Andrew McAfee, The Second Machine Age: Work, Progress and Prosperity in a Time of Brilliant Technologies (New York: W. W. Norton & Company, 2014)
25 The Resolution Foundation is a non-partisan and award-winning think-tank that works to improve the living standards of those in Britain on low to middle incomes. See: http://www.resolutionfoundation.org [accessed 2 February 2015]
26 Resolution Foundation, Gaining from Growth—the final report of the Commission on Living Standards (October 2012): http://www.resolutionfoundation.org/wp-content/uploads/2014/08/Gaining_from_growth_-_The_final_report_of_the_Commission_on_Living_Standards.pdf [accessed 13 January 2014]. “A typical low income household in 2020 is set to have an income 15 per cent lower than an equivalent household in 2008, a return to income levels not seen since 1993. A typical middle income household in 2020 is set to have an income 3 per cent below that of 2008, a return to income levels last seen in 2001.” (page 11)
27 Big Data refers to extremely large data sets that may be analysed computationally to reveal patterns, trends and associations, especially relating to human behaviour and interactions.
28 iOS is an operating system used for devices manufactured by Apple—for example, iPhones and iPads.
29 Oxford Martin School, University of Oxford, Technology Shocks and Urban Evolutions: Did the computer revolution shift the fortunes of U.S. Cities? (2014): http://www.oxfordmartin.ox.ac.uk/downloads/academic/Technology%20Shocks%20and%20Urban%20Evolutions.pdf [accessed 15 January 2015]
30 The full list of key suggestions made by witnesses is available online at: http://www.parliament.uk/documents/lords-committees/digital-skills/key-suggestions-from-witnesses.pdf
31 Evidence published online is available at: http://www.parliament.uk/digital-skills-committee