25 May 2021

Digital ID cards could give us freedom and security online

By Lord Holmes of Richmond

Imagine if you could log on securely to any website using a single digital ID, without the need to remember endless passwords and pass through frustrating security checks. That’s the idea behind the Government’s plans to introduce distributed digital identification, and it has the potential to revolutionise the relationship between citizen and state and deliver significant social and economic benefits.

As we begin building back better from the devastating Covid pandemic we must put the development of a distributed digital ID firmly at the heart of our recovery. The economic benefits were analysed in research by the McKinsey Global Institute which showed how ‘good digital ID is a new frontier in value creation for individuals and institutions around the world.’

Their report states that: “Extending full digital ID coverage could unlock economic value equivalent to 3-13% of GDP in 2030, with just over half the potential economic value potentially accruing to individuals.”

In a recent report the Financial Conduct Authority (FCA) has noted that digital ID would also have a significant impact on the adoption of Open Finance. But the potential benefits are not merely economic. A trusted and effective government-issued central digital ID could empower people who are currently (or potentially) excluded from exercising their rights and accessing basic financial services. At the last census in 2011, 17% of UK citizens had no passport. A digital ID is an elegant solution to that problem.

So where are we at the moment?

After some unfortunate false starts it seems that the development of digital ID is now coming on apace. I see no reason why the UK could not be at the forefront of implementing this technology and setting the precedents on governance and legal liability, as we did so successfully in the digital payments sector. However, that will require greater focus and coordination. The independent Kalifa Review of UK Fintech, published its report in February 2021, which highlighted the need for a coalition on digital ID to avoid misunderstanding and confusion about competing standards.

I have been pushing for greater urgency on this issue for some time, and put forward several amendments to the recent Financial Services Bill. My proposed amendment would have required the Secretary of State, within six months of the passage of the bill, to publish the Government’s plans for the development and deployment of a distributed digital identification for individuals and corporate entities in the financial services sector.

My amendment also called for digital ID to be scalable, flexible, and inclusive, capable of deployment and take-up across the entire UK, and adaptable to change – not least in new technologies such as quantum computing. By “inclusive” I mean not just inclusion as it relates to protected characteristics set out in equality legislation, but something broader  – a guarantee that a digital ID will enable and empower everyone in our country.

The guiding principles of a digital ID that works in all our interests are that it must secure, decentralised, transparent, embed equity and inclusion, protect our privacy and be interoperable across online platforms and different technologies.

Finally, my amendment also required the Secretary of State to undertake a public engagement campaign around digital IDs to raise awareness and participation in the process. Why should any of us feel anything other than antipathy and scepticism if something is put forward which we have had nothing to do with, heard anything about or been able to influence, interrogate or even see close up? I call for, and would welcome, a public debate – engaging, enquiring, critiquing the plans.

An effective digital identity would put our personal data in our own hands – we must seize that opportunity.

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Lord Holmes is a Member of the Lords Select Committee on Science and Technology and writes about his work and thoughts on a variety of policy areas at https://lordchrisholmes.com/

Columns are the author's own opinion and do not necessarily reflect the views of CapX.