Budget 2011: Osborne budget meets mixed reaction from IT industry

News Analysis

Budget 2011: Osborne budget meets mixed reaction from IT industry

Cliff Saran

Mixed messages are coming out of the IT industry in the wake of Chancellor George Osborne's 2011 Budget.

The chancellor has announced measures that could help businesses build new datacentres. In the budget, Chancellor George Osborne said he would streamline the system for planning applications and introduce new fast-track planning for major infrastructure. These may streamline the development of future datacentres.

Kevin Quinlan, director of KPMG's government IT team, says the budget offers some good things for business services. "The enterprise zones will be great for start-ups, with superfast broadband and low tax, and will be good for job generation," he said.

"Technology, business and professional services companies are at the forefront of innovation through research and development and many of them are global in nature," he said. "We welcome the chancellor's efforts to make the UK the most competitive economy in the G20 by easing the regulatory burden, simplifying the tax system, reducing taxes and stimulating innovation through, for example, the creation of the patent box (reduced 10% corporate tax for profits derived from patents) and changes to controlled foreign corporation rules to deal with competition from companies based overseas."

David Clarke, MBE, chief executive officer of BCS, The Chartered Institute for IT, said: "I welcome the government's ambition to make Britain the place in the EU to start, finance and grow businesses. This focus on entrepreneurship, innovation, research and development provides a real opportunity for IT professionals. IT is a key enabler of business, innovation and efficiency."

But the term "technology" was only used in the space sector, says Graeme Swan, a partner at Ernst & Young. "There was no mention of an innovation fund." Graeme Swan said the government would have to put aside some money if it is really serious about making the UK a centre for software development: "The policy to re-develop the east end of London will need money behind it. There is no IT or technology innovation in the budget. It would be nice to see this government encourage tech entrepreneurs."

Swan also noted that there was no mention of teleworking, telehealth, or (remote) policing from the office.

Tom Wills-Sandford, Intellect's deputy director general, said: "We were surprised that IT was not acknowledged as one of the key drivers of growth and urge the government to recognise that technology underpins all the growth industries named in the budget."

"Today's budget announcement should ensure that the pool of smaller suppliers able to take a slice of the public sector pie will become even deeper, which perhaps signals a commitment from the government towards a rise in multi-sourcing," said Andy Rogers and Bharat Vagadia of the National Outsourcing Association (NOA).

"With this in mind, perhaps it is a surprise that we have seen no pledge from the government in terms of training those in the public sector to deal with this rise? Very few workers in the public sector will have any experience of how to manage a number of different suppliers."

As Computer Weekly has reported, the chancellor's move to encourage apprenticeships may do little to plug the IT skills gap.

The chancellor will also have to deal with a major IT undertaking if the tax and national insurance systems at the HMRC are to be linked.

R&D tax break

Niki Dixon, tax partner at Grant Thornton, says George Osborne moved faster and further then expected.

"It is a comprehensive list of improvements. The speed at which he is doing it and the range of what he is doing is a pleasant surprise," she says.

Subject to approval from the European Union, businesses will also be able claim back more money from the Treasury for R&D spending, based on the size of their payroll.

"For those businesses that can claim, it is a welcome source of additional finance. Given that it is linked to salaries, it is essentially subsidising employment," she says.

"IT is a key sector in the UK, providing employment for skilled staff and stimulating innovation to the benefit of the wider economy. The changes announced should help to support the creation of new businesses and the R&D that underpins the future of the sector in the UK."

For more on the 2011 Budget, click here >>

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