Public services in blockchains: improving data use

5 August 2016

Occasionally the collective hysteria around a new technology is justified. The internet is a case in point. Blockchain – hailed as the internet’s second coming – merits such praise.

You’d be forgiven for not having heard of it. Put simply, blockchain (explained here) is a transparent, tamper-proof public ledger on which transactions are recorded. It was originally developed to trace the online currency, bitcoin, but has far wider applications. As The Economist put it: “It is a way of making and preserving truths.”

Pioneered in private by the pseudonymous Satoshi Nakamoto, and hailed as the death knell of the state because of its potential to remove the need for government to oversee property rights, it may seem unlikely that the UK Government should turn its attention to the technology. But it has: this week, the first block chain supplier was listed on G-Cloud 8 – a whole-of-government online procurement website. This follows the Department for Work and Pension’s use of blockchain to track benefit recipients’ spending.

The potential of this genuinely disruptive technology within the public sector will not be fully understood for decades. To begin to explore the possibilities, Reform will identify key areas of use over a series of blogs. This first blog identifies its potential as a protector and facilitator of data use in three areas: health, procurement spend and fraud and error.

In healthcare, blockchain offers a highly secure way of sharing data directly between patients and the health service. Disconnection of patient data in the NHS inhibits commissioners designing healthcare services for the specific needs of patients in local areas. It also hinders researchers developing life-saving treatments. Programmes to address this have failed – notably the recently scrapped scheme, which was plagued by data-security fears. Blockchain’s security could overcome these concerns, while removing the need for a physical data-storage system. In Estonia, blockchain provides real-time information that enables healthcare professionals to react to accidents immediately, before any more damage occurs.

Built to monitor spend, Blockchain also has the potential to overhaul government procurement. Shockingly, government struggles to keep track of the £225 billion it spends on external suppliers each year, reducing accountability and undermining value for money. Blockchain allows government to track transactions by storing them on a public ledger – with its ID and timestamp making it impossible to tamper with. A real-time view of procurement spend would, according to the OECD, allow policymakers to approach buying more strategically.

A fully transparent chain of transactions would also allow government to monitor third-party spending of taxpayer money. Guaranteeing this has been a long-standing concern for government. Information on margins, and where contractors could be spending money more efficiently, would allow government to get better value for taxpayer money. Government could also use this to better understand whether spending targets, such as the proportion of procurement spend going to SMEs, are being hit.

This ability to accurately track money also allows government to identify fraud. According to government, benefits and tax credits are overpaid by £5 billion per year due to fraud and error. Blockchain’s accurate tracking, transparency and inability to manipulate, provides government with the tools to reduce this. It could also ensure that £1.8 billion of benefit underpayment reaches rightful recipients through immediately sharing the information necessary to process benefit claims through tracing income and benefit payments.

That these disparate policy areas can be revolutionised by one piece of technology is testament to its promise. In Distributed Ledger Technology: beyond block chain, the Government’s chief scientific adviser recently explained blockchain’s potential to deliver “disruptive innovations that could transform the delivery of public and private services”. Government should, the report recommended, look to trial the technology to begin to understand its benefits. Only through such exploration might it live up to the hype of being “as significant as foundational events such as the creation of Magna Carta.”

Alexander Hitchcock, Researcher, Reform



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