The NAO report examining cost-cutting in central government found capital expenditure on IT fell by 35% to £537m in 2010-11, compared with the previous period, partly as the result of decisions to permanently halt or reduce spending on specific projects, and partly the result of action to reduce the costs of IT products and services, including through contract renegotiation.
However, it is unlikely that IT capital spending will remain at this lower level in total, given the key role of IT and online services in increasing productivity, said the NAO.
The NAO said departments took effective action in 2010-11, cutting spending in real terms by 2.3%, or £7.9bn, compared with 2009-10. However, the report warned that departments are less well-placed to make the long-term changes needed to achieve the further 19% over the four years to 2014-15, as required by the spending review.
The main reductions in spend comprised a fall in back-office spending by £1.5bn, a fall in capital spending of £1.6bn (partly the result of spending being brought forward to 2009-10) and a further net fall of some £4.8bn in other expenditure within departments’ direct control, said the NAO.
"Most departments will need to cut their spending by much more over the next four years," said Amyas Morse, head of the NAO. "This will not be possible without the recognition that short-term measures are not enough and that fundamental changes are needed.”
Departmental reductions in capital spending in IT for 2010-11 reflect the cancellation, or curtailment and delay, of some major programmes with heavy IT requirements, such as identity cards; the moratoria on IT spending and controls on major projects which require Cabinet Office approval for large new spending; and the negotiations with major cross-government suppliers, said the report.