In a refreshing display of maturity, the government this week abandoned the fiction that it will put every single public service online by the end of next year. The Cabinet Office announced that, for reasons of policy, 26 government functions - 4% of the theoretical total - would continue to depend on pieces of paper and personal visits.

The admission, in the Cabinet Office's autumn performance report, removes a rod from the back of chief information officer Ian Watmore.

Although everyone working in e-government knew that the 100% goal was nonsense, it was the prime minister's target and had to be obeyed, even to the extent of "e-enabling" obscure procedures such as permission to be buried at sea.

Watmore told the Guardian this week that he could not remember exactly which of government's 657 services had been dropped from the 2005 target. However, they include procedures where officials need to scrutinise original documents, in applying for new passports for example. Other exemptions are to cope with the need to phase in new systems gradually "to mitigate project risk".

Others have been subsumed into separate initiatives, such as the NHS IT programme, which has its own deadlines, mainly around 2008. Still others are awaiting policy changes such as reforming the common agricultural policy. E-enabling services ahead of reforms would require "disproportionate effort for minimal gain", the Cabinet Office said.

While the change in target removes one worry, Watmore's e-government unit faces a busy year. Today, 75% of government services are available electronically, but the 130-odd that are left tend to be the awkward ones. Many involve connecting separate databases, or the applicant having to prove his or her identity.

The good news is that, after a slow start, Britons seem to be taking to e-government, especially for business processes. Nearly 80% of vehicle registrations are now electronic, as are 67% of company incorporations.

The Cabinet Office also claims that its new government portal (www.direct.gov.uk) has been a success.

However, its traffic - 600,000 unique visitors a month - is still lower than major portals such as the BBC (and the Guardian). For the future, beyond 2005, Watmore set out four priorities:

· To create more "citizen-centric" government by connecting more organisations to the Directgov site. This will include local councils, which run most public services.

· Encourage more citizens to do business with government over the web.

· Set up ways for private firms and voluntary agencies to act on behalf of government on the web.

· Use IT to help public servants do a better job. One example is the system of electronic health records being created for the NHS, Watmore said.

In his role as head of the IT profession within government, Watmore has recruited a "council of chief information officers" from across the public sector. The council, which will include a representative of local government, will meet for the first time next month. Watmore can expect a robust debate on the national identity card and the government's efficiency review. He declined the Guardian's offer to send a reporter to the event.

One issue that Watmore hoped would not be on his agenda resurfaced last week: the digital divide. Watmore's predecessor, Andrew Pinder, announced a year ago that the government had achieved its aim of providing internet access for all. Although only about half of adults have their own internet connections, nearly everyone knows that they can get online in a nearby library or community centre.

Last week, however, BT issued a warning that the digital divide could be with us for decades to come. It published a study suggesting that, in 2025, some 23 million people will be "at risk of digital exclusion". In an age of electronic public services, digital exclusion will be much more unpleasant than it is for the 24 million adults who are regarded as excluded today.

The study, by the Future Foundation, defines digital exclusion as not having internet access at home. Paul Flatters, the foundation's chief executive, said this is a proxy measure: it is impossible to predict what the definition will be in 20 years' time. However, he was confident that, without action, the kind of people who are not engaging with the internet today will not be engaging in 2025. The research, based on a long-term study of 5,000 households, criticises two comforting predictions about the divide. One is that digital exclusion is just another term for poverty, the other is that the problem will wither away as generations that are uncomfortable with computers die off.

The main barrier is not access but motivation, Flatters said. Internet users living below the poverty line tend to be much better educated than non-internet users.

Flatters called for efforts to be made to market the internet, and for continued promotional projects such as the industry-sponsored EverybodyOnline. "Intervention can work," he said.