How the Spending Review will Affect the IT Industry

Chancellor George Osbourne delivered a hard hitting spending review this week which outlined spending cuts running into £80billion over the next four years. According to state documents released after the Chancellor’s statement, the Central Government’s IT function will be subject to a “tough new efficiency regime” bringing it in line with the £800m saving from ‘de-scoping’ major IT contracts.

IT contracts valued at £1m up will remain suspended which means the existing IT contracts currently under review and covering over 300 ICT projects will increase, this comes just as the main suppliers sign agreements promising to cut costs.

We understand that the Cabinet Office has also mentioned a further £1billion worth of IT projects which will be scaled back or scrapped completely.

With an average budget cut of 19% for each public sector department, a large amount of job losses is anticipated, especially in IT and back office roles. However, on the plus side, although permanent staff may be looking at redundancy this could signal more work for contractors to fulfil interim opportunities.

Chancellor Osbourne has promised to help those in the public sector losing work to find new jobs, stating: “Some redundancies are unavoidable when a country has run out of money.”

HMRC has been tasked with finding a 15% saving with technology playing a pivotal role in the process by putting in place “new technology, greater efficiency and better IT contracts”. HMRC have also been told to crack down on tax evasion and tax fraud which could see more IT contractors under investigation in the coming months.

The Spending Review document also states that the government will continue to access savings by using open source software and councils can expect more shared services and more outsourcing for the future, in line with the government’s IT strategy which the Spending Review fully supports. Local councils will also be expected to use IT to automate many services.

Although the NHS retains its budget, it is inevitable that IT will be hit as savings of £20 billion over four years are requested. The future of The National Programme for IT remains uncertain and the emphasis is on IT to find efficiency savings for the police who saw a 14% budget cut. The ContactPoint database of children and ID cards have already been abolished.

On a positive, £650 million has been promised to fund staff and technology to battle cybercrime; this follows news earlier this week that the National Security Council has sighted this as one of the four highest priority risks. £530 million will also be invested in broadband.

It’s also good news for IT contractors working in the transport and infrastructure, renewable, nuclear and offshore sectors (including offshore wind) as they are likely to benefit from projects worth over £30bn over the next five years.