Where would a hung parliament leave bank plans to offshore IT?

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The more the election campaigns of the political parties drag on, the more I feel the next government will have a small majority or you never know there could be a hung parliament.

No matter what mess Labour get themselves in the Tories can't seem to take full advantage.

I wonder where a hung parliament would leave the banks. And more specifically their cost cutting measures such as offshoring IT.

I had an interesting conversation with an IT professional this week. He used to work at RBS so I asked him whether he thought the bank's current financial woes would lead to more offshoring. RBS which is over 80% owned by taxpayers lost £3.6bn in the last year.

He told me that the bank is gradually sending more jobs overseas to RBS India.

But surely RBS is not alone in moving IT offshore. Most banks face severe pressure to cut costs.

Perhaps the only finger in the dam stopping a flood of offshoring is the government's predicament. An election is close and the government is unpopular enough without sending UK jobs overseas.

One lawyer I spoke to says he is not seeing any major offshoring deals being signed by banks at the moment. The government has more influence over the banks now than ever before and no bank CEO would risk offshoring on mass.

But if the Tories win the a workable majority at the election, which I thought was a dead cert until recently with a hung parliament looking a possibility, will the finger in the dam be removed?

The  Tories have said that the management of banks is a matter for bank management teams and not Ministers. Also Labour will always be blamed for the banking crisis so more offshoring might not hurt the new government as much as it would the incumbent.

But a hung parliament will give a voice to more people which inevitable means decisions are harder to reach. Consensus politics is democratic but can lead to political stagnation. Look at Italy.



2 Comments

Don't you have to look at which banks you mean? Clearly RBS and Northern Rock are the two institutions in relation to which the UK government will have greatest influence. Even so, will offshoring be a main manifesto item for any of the main parties? Now it really would be interesting if either the Tories or Labour had to depend on the Lib Dems and there were a divergence of policy about offshoring between coalition parties. But there is no sign of that -yet. Would we in the UK expect to see Obama-style rhetoric and proposed disincentives to offshoring in the run-up to the General Election? Somehow doubt it, even at that stage. Labour has taken a benign view of offshoring, including intra-company transfers. Is there any real reason to assume the Tories would take a less benign view (even allowing for a bit of musing on the subject of ICT right now)? Not as far as I can see. It's possible that the Lib Dems could take a very different view, as they have done in other areas of economic and fiscal policy. Which takes us back to the question: what would that mean if there were a hung Parliament? Would offshoring be so important as to destroy the prospects of a coalition (allowing for the Lib Dems saying that they aren't interested in one)? I don't see it. What do others think?

Thanks for your comment Mark.

Yes the Liberal Democrats do tend to take a different line to the main parties on many issues. But I question whether this would be the case if they were in power. As we all know it is easy to be in opposition.

Karl

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This page contains a single entry by Karl Flinders published on February 25, 2010 11:09 AM.

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