Chancellor Gordon Brown's Budget last week placed IT at the
heart of government efforts to modernise public services and help
achieve billions of pounds in efficiency savings.
He also highlighted the importance of IT investment at the heart of
the UK economy and announced measures to encourage more research
and development.
The type of expenditure qualifying for research and development tax
relief will be expanded to cover software, and the Department of
Trade and Industry has published new guidance to clarify the
definition of R&D. These measures received a cautious welcome
from IT professionals and suppliers.
Capital allowances for small and medium-sized enterprises investing
in equipment, including software and hardware, were also extended
from 40% to 50%.
Turning to Whitehall, Brown announced a merger between the Inland
Revenue and Customs and Excise. The success of the project will
depend heavily on the ability of two departments with a troubled
history of IT projects being able to merge their systems.
The findings of a year-long efficiency review led by Peter Gershon,
former head of the Treasury's Office of Government Commerce, into
how new technology can make government procurement more efficient,
will be revealed in the government's spending review in the summer,
according to the chancellor.
Philip Virgo, strategic adviser to the Institute for the Management
of Information Systems, said Brown's reference to the Gershon
review in the statement was a turning point for the role of IT
within UK government and the economy.
"This is the first Budget where the whole of the delivery is
critically dependent on IT," he said. "The rest of the stuff is
small beer."
Andrew Bell, technology industry leader at professional services
firm Pricewaterhouse-Coopers, said changes to the definition of
R&D would help company IT investment qualify for tax
relief.
"The new R&D definition said software enhancements do not have
to be earth shattering, but do have to show an advancement," he
said. "In our experience, lots of companies, particularly the
smaller ones, have been put off claiming for R&D tax
relief."
But Brown's tax incentives were dismissed as too cautious by others
in the IT industry.
Intellect, the trade association for the UK IT, telecoms and
electronics industry, expressed its disappointment that the
chancellor had failed to increase the effective R&D tax credit
rate and said that it still failed to act as a real
incentive.
"This Budget has left us seriously concerned about the outlook for
the UK as a base for research, development and innovation," said
Tom Wills-Sandford, Intellect's director of campaigns.
However, Intellect welcomed the chancellor's plan to produce
improved guidance in support of the tax credits.