December 11, 2012 • 12:38 pm

“the costs of the data collection plan could overrun by £9.3 billion”

The Daily Telegraph, 11th December 2012

To some, it is a small price to pay to prevent another terrorist attack like 7/7; to others, a vast amount of money is set to be wasted on an unnecessary intrusion into people’s privacy. The purpose of the draft Communications Data Bill is to ensure that the police are in a better position to track people’s internet use if they should suspect illegal behaviour.

Under the proposals, service providers would retain data on internet use for a year, so the authorities would be able to monitor an individual’s patterns of communication (although without accessing the content of a message).

While the draft Bill has not only attracted controversy on account of its price tag, the Telegraph has seized on how much the proposals are set to cost the average household in order to point to what it perceives as the folly of the scheme.

The Daily Telegraph reports that Lord Marks QC has estimated that, far from the Home Office’s estimate of £1.8 billion, “the costs of the data collection plan could overrun by £9.3 billion”.

What is the £1.8 billion figure based on?

The Joint Committee notes that, according to the draft Bill, the total cost to the economy will be £1.8 billion over the 10 years of the programme from 2011/12. However, this calculation does not allow for inflation, VAT and depreciation. 

The Home Office suggests that almost half of this sum (£859 million) would be the cost to private companies, who would need to be reimbursed for the cost of collecting and supplying government with citizens’ data.

However, the Joint Committee observes that this number was produced without consultation with Communication Service Providers (CSPs) – the internet companies and social media sites in charge of obtaining the data. When interviewed by the Joint Committee, the likes of Microsoft, Vodafone, Twitter and Facebook distanced themselves from the £1.8 billion statistic, emphasising how problematic it is to produce a specific estimate.

For starters, it’s not clear to what extent private companies would be involved in implementing the proposals. For instance, if in five years’ time the government were to request that companies produce more detailed data on their customers, it would in all likelihood need to pay extra for this.

Charles Farr, the Home Office’s top “securocrat”, admitted to the Joint Committee that the £1.8 billion “builds in quite a lot of optimism bias”. To put it another way, it’s close to a best-case scenario. In reference to the likelihood of costs increasing, Mr Farr chose the example of Microsoft: “Even if we gave you a figure now, I would be willing to bet money that in 10 years’ time that cost will have multiplied grotesquely”.

From £1.8 billion to…£9.3 billion?

Lord Marks QC, a Liberal Democrat peer, not only contested the £1.8 billion estimate but produced a calculation of his own. He based his statistic of £9.3 billion on research into the previous Labour government’s plan to introduce a national ID card.

In 2002 the Labour government had envisaged that the initial cost of such a scheme would be £3.1 billion. However, Lord Marks draws on a 2005 academic paper produced by the London School of Economics (LSE), which examined the actual cost implications of the proposal:

“We estimate the likely cost of the ten-year rollout of the proposed identity cards scheme will be between £10.6 billion and £19.2 billion, with a median of £14.5 billion. This figure does not include public or private sector integration costs, nor does it take into account possible cost overruns.”

In other words, the ID cards scheme was estimated to have cost far more than the Labour government initially estimated. On this basis, Lord Marks appears to suggest that the measures laid out in the draft Communications Data Bill will likewise over-run to a similar extent.

Using the LSE’s figure for the maximum over-run of the ID cards scheme (£19.2 billion), Lord Marks calculates that there would be an over-run factor (based on the initial cost of £3.1 billion) of 6.2. Lord Marks applies this over-run factor to the cost estimates for the draft Communications Data Bill: the £1.8 billion estimated cost would end up as £11.1 billion, so the proposals would potentially cost an extra £9.3 billion.

However, it’s important to point out that in May 2005 the Labour government revised its estimate of the cost of the ID cards scheme, increasing it to £5.8 billion. LSE describe this as the “best available estimate”. This new number was produced after “allowances for contingency, optimism bias and non-recoverable VAT”.

The new estimate would produce an over-run factor of 3.3 (keeping to the maximum over-run), close to half of Lord Marks’ estimate. We’d then be dealing with an over-run of some £4.1 billion with the proposals in the draft Communications Data Bill.

How similar is the Communications Data Bill to Labour’s ID cards?

There are certainly similarities between Labour’s ID cards scheme and what the Coalition has proposed in this latest Home Office Bill.

The Joint Committee is clear that from the evidence it received the Government has failed to account both for the cost of data security and also for the rise in payments to private companies.

Meanwhile, in 2005 the LSE academics pointed out: 

“the identity system would require security measures at a scale that will result in substantially higher implementation and operational costs than has been estimated…Private sector costs relating to the verification of individuals may account for a sum equal to or greater than the headline cost figure suggested by the government.”

While it was intended that the expense of Labour’s scheme would be borne by the direct contributions of citizens who would pay for their ID cards, the draft Communications Data Bill also allows for the Government to raise revenue in this way. This leads Lord Marks and the Daily Telegraph to suggest that householders with broadband will be presented with a large bill.

The Deputy PM Nick Clegg has said that the Government needs to “go back to the drawing board” with the Bill, citing his concerns about its possible impact on civil liberties. The Labour government’s ID card scheme inspired the same anxieties.

However, it is problematic to directly compare the proposals. It is certainly the case that for both Bills, there has been – to use the phrase of LSE’s academics – “no stable cost environment”. But the same could be said, for instance, about the Department of Health’s over-spend on the NHS National Programme for IT. UK governments have been prone to under-estimating the costs of dealing with constantly evolving technology and securing massive volumes of data. 

Of course, we have no idea whether the actual over-spend would have occurred. Lord Marks’ figure of a £9.3 billion likely over-spend on the draft Communications Data Bill is therefore a worst-case scenario estimate that is itself based on a set of speculative figures.

Flickr image courtesy of JLM Photograph

CORRECTION

We initially stated that the ID card scheme was never written into law. The overall scheme was in fact written into the Identity Cards Act 2006 but this was repealed by the Coalition’s Identity Documents Act 2010. Thanks to our Twitter followers for the spot.

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