Could “blockchain” technology transform public sector budgets?

Surprisingly, perhaps the most interesting policy proposal in the race for Mayor of London has come from George Galloway, the controversial Respect candidate. Galloway’s economic guru, Max Keiser, has set out plans in a white paper and campaign video to place the entire mayoral budget on a blockchain. The policy has yet to attract much coverage but the idea could feasibly garner support from both the left and the libertarian right, and suggests an interesting direction for liberals at all levels of government.

The technology behind the cryptocurrency Bitcoin, a blockchain is a decentralized record of transactions. Instead of a central record, a ledger of transactions is stored on every node of the chain. The veracity of the data is guaranteed by the distributed ledger, making the technology fraud-proof. As the technology is trestles – actors in a financial transaction don’t need to trust each other – it eliminates a range of middlemen and intermediaries. 

Galloway’s campaign believes that this means moving the £18bn Mayoral budget onto MayorsChain would save vasts sums of money which could instead be invested in transport or policing. This is supported by a recent report from the government’s chief scientific advisor which argues that blockchain technology could be used by government departments to reduce the cost and complexity of tasks in the fields of data collection, taxation and procurement. Liberals should endorse his recommendation that government runs pilots testing the use of distributed ledgers in the public sector and local government.

The technology can also help to make politics more transparent. Walport’s report argues the blockchain has ‘the potential to redefine the relationship between government and the citizen in terms of data sharing, transparency and trust’. Perianne Boring, the founder of the Chamber of Digital Commerce, has described blockchain as offering ‘radical transparency’. MayorsChain would allow the public to scrutinise how the City Hall budget was being spent, bringing examples of corruption, incompetence or waste to light and incentivising politicians to manage taxpayer’s money more carefully. Similar, innovative uses of blockchain technology by politicians can help support a direct, participatory democracy.

Arguments of fiscal prudence and transparency are hard to rebuke and could appeal to the left, the libertarian-right, localists and those with a mistrust of politicians and bureaucracy. A liberal government could follow the lead of trailblazers like Honduras and Vermont that have explored the potential of blockchain technology to unlock democracy. Politicians could support moving the budgets of a variety of central government departments onto blockchain platforms, inviting public scrutiny and efficiency savings. Local government officials could move town hall spending onto a blockchain to allow citizens to see how their council taxes were spent and encourage them to take an active role in reshaping their communities. LGIU have argued blockchain could have a variety of uses in local government, such as implementing smart contracts that delivered payment-by-results models, scaling pooled budgets and ensuring that savings made as a result of innovation could be seen even when their results were felt in other departments. 

The Big Society agenda formed a key part of the coalition agreement, but the Conservatives have since abandoned much of its language of empowerment, devolution and direct democracy. Moving public budgets onto the blockchain therefore offers a promising avenue for liberals to craft a distinctive agenda for a technology-driven, decentralising liberalism.

* Alex Hardiman is a liberal, although not currently a party member. He works for Floreat Education Academies Trust, and has written articles on policy for Left Foot Forward, the Bright Blue think-tank and Libertarian Home.

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