IT Industry Hit Hard By UK Government Cuts

HM Treasury yesterday announced that IT spending cuts and the cancellation of “wasteful” projects such as ID cards would play a key role in the country’s bid to save £6 billion during the current financial year.

In his maiden speech as chancellor of the exchequer, George Osborne said Britain’s budget deficit this year would be among the largest in the world, and announced 22 June as the date for the emergency budget.

“The coalition has agreed that £6 billion of savings to non-front line public services should be made this financial year,” said Osborne. “The departments for health, defence and international development will also make savings but they will be reinvested in their front lines. The coalition has also agreed that, given the state of the public finances, the great majority of the £6 billion of savings from other departments will be used to reduce the deficit.”

Reducing wasteful spending

In an HM Treasury press release, it was stated that some of the savings would be made “through doubling the current delivery plans for savings in IT spending” and “cancelling wasteful projects like ID cards”. Other core areas where spending cuts will be made include consultancy, travel, property and recruitment. The Treasury also said that immediate negotiations would commence to bring about cost reductions from the 70 major suppliers to government.

“By tackling wasteful spending now, rather than later, we can demonstrate our commitment to tackle the deficit,” said Osborne. “We can help the independent central bank keep interest rates lower for longer. And we can begin to turn the tide of debt that is threatening our economy.”

A report by analyst group TechMarketView earlier this year predicted that public sector spending on software and IT services would grow by an average of just 0.8 percent per year under a Tory government, compared to 2.9 percent under a Labour government. However, under a coalition government the Tory and Liberal parties are bound to clash on where some of these cuts should be made.

“The devil is (and will be) in the detail,” said TechMarketView analyst Georgina O’Toole in a report dated 12 May. “On some issues there seems to be broad cross-party agreement – opening the way for increased adoption of open source software, moving towards software-as-a-service where possible, the consolidation and rationalisation of IT infrastructure, and opening up the Government IT market to smaller providers.”

“Where the parties differ is in their approach to achieving these goals – and that will raise its head when dealing with the practicalities begins and procurement reform is put under the spotlight,” she added.

A green glimmer of hope?

While spending cuts in some areas of IT infrastructure are inevitable – and much needed in light of the fact that failed government computer systems cost the tax payer more than £26 billion under a Labour government – there may be a window of opportunity opening up for green IT solutions.

Speaking to the Department for Energy and Climate Change (DECC) over the weekend, Prime Minister David Cameron pledged to make the coalition the “greenest government ever” and announced that all ministerial departments must cut their carbon emissions by 10 percent.

“The three things I would pick out are first of all the green economy; we’ve got a real opportunity to drive the green economy, green jobs, green growth and make sure we have our share of the industries of the future. Clearly there’s the climate change agenda where we have got to get back on track both nationally and internationally, and third there is the issue of energy security which I think is vitally important and I think we need to do a huge amount of work on,” said Cameron.

The IT industry has an indisputable role to play in all three of these areas, as well the potential to reduce costs. In December 2009, a leaked draft of a document entitled “Government ICT Strategy: New World, New Challenges, New Opportunities”, revealed that rationalisation and consolidation of public sector data centres alone could reduce costs by £300 million per year and power consumption by up to 75 percent.

In March, repair company Comtek launched a petition to urge the government to abolish VAT on IT repairs, as a way to encourage users to get most value out of their IT, and reduce the country’s carbon footprint. In response to the government’s green agenda, Comtek’s CEO Askar Sheibani questioned whether its proposals would have any teeth in the real world.

“If the new government is so committed to furthering the green economy, it needs to actively empower consumers and businesses to adopt more sustainable practices,” he said. “Zero rating VAT on ICT repairs would decrease the amount of faulty equipment being sent to landfill sites whilst increasing the amount of business available to local repair companies.”