Think tank warns UK government: Legacy IT threatens digital ambitions

Public‑sector digital reform has become a headline‑driven sport, but a new report from the non‑partisan think tank Re:State pulls back the curtain on a more structural problem: an ever‑growing base of legacy IT that is silently draining productivity and raising the risk of failure for high‑profile initiatives.

The observation – legacy systems are deepening, not receding

The report, From Legacy to Leadership, draws on the State of Digital Government Review 2025 and finds that 28 % of central‑government applications are classified as legacy, with some departments hovering near 60 %. Since 2023 that share has risen by 26 %, and 22 % of those systems are “red‑rated” – meaning they are both highly likely to fail and would have a severe impact if they do.

These numbers translate into a tangible cost: 4–7 % of the public‑sector budget is lost to inefficiencies caused by outdated technology. In real terms, that is billions of pounds that could otherwise fund new services, improve citizen experience, or accelerate AI‑driven automation.

Evidence of the ticking time bomb

Several recent incidents illustrate the danger:

• Police National Database cloud migration – a £35 m effort stalled, forcing the Home Office to abandon the move and keep data on‑premise.
• Afghan informant breach – a legacy data‑handling pipeline exposed names, prompting a parliamentary outcry.
• Farm Payments system – a decades‑old platform struggles to integrate modern analytics, leading to delayed payments for thousands of farmers.

Each case shares a common thread: departments were forced into crisis‑mode fixes because the underlying platforms could not support incremental change.

Why the problem persists – funding and incentives

Re:State identifies two intertwined mechanisms that keep legacy IT alive:

1. Funding model – Capital is allocated as project money rather than service money. Core operating costs of legacy platforms must be re‑approved as separate projects, making it easy for ministries to trim those budgets in favour of new, more visible initiatives.
2. Incentive structure – Success in Whitehall is measured by delivering headline‑grabbing programs (e.g., AI pilots, digital identity schemes). Departments therefore prioritize transformations that carry larger political credit, leaving legacy remediation to the back‑burner.

The report warns that “systems aren’t transformed unless they fail in substantial ways,” creating a feedback loop where the gap between what services need and what the technology can deliver widens each year.

Counter‑perspectives – is a central taskforce enough?

While the report’s authors champion a Digital Modernisation Taskforce with a match‑funding approach – the central government would match any departmental spend on legacy replacement – critics argue that adding another bureaucratic layer may not solve the cultural inertia.

• Procurement risk – Past attempts at centralised procurement (e.g., the NHS’s large‑scale cloud contracts) have shown that standardising contracts can lock ministries into sub‑optimal vendor relationships, especially when legacy migration is bundled with new services.
• Skill shortage – Even with funding, many departments lack staff with the expertise to modernise monolithic mainframes or rewrite critical COBOL applications. Without a concerted talent‑development programme, money alone will not move the needle.
• Political turnover – Funding cycles align with the five‑year spending review, but ministerial priorities can shift dramatically after an election, potentially leaving the taskforce under‑resourced before any measurable progress is made.

The proposed path forward

Re:State outlines six concrete steps:

1. Create the Digital Modernisation Taskforce with a clear mandate and authority to enforce cross‑departmental standards.
2. Adopt match‑funding for legacy‑remediation projects, ensuring departments have skin in the game.
3. Shift budgeting from project‑based to service‑based, allowing continuous investment in platform health.
4. Introduce a legacy‑risk register that is publicly reported, creating accountability.
5. Re‑engineer procurement to separate legacy replacement from new‑service contracts, encouraging competition on modernization expertise.
6. Launch a talent pipeline – apprenticeships, secondments, and a central pool of legacy‑modernisation specialists to assist departments lacking internal capacity.

What this means for the future of UK digital services

If the government embraces these recommendations, the immediate benefit would be a reduction in crisis‑driven spend and a more predictable path toward delivering services like the ID‑card scheme, digital tax filing, and AI‑enabled citizen portals. In the longer view, a healthier technology stack could unlock data interoperability, allowing departments to share insights and automate processes that are currently siloed.

Conversely, if the status quo persists, the next decade may see more stalled cloud migrations, higher breach risk, and a widening gap between citizen expectations and government capability. The report’s stark warning is that legacy IT is not a technical footnote; it is a strategic liability that will shape the success—or failure—of the UK’s digital agenda.

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The full Re:State report can be downloaded here.