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George Osborne's budget 2012: IT sector wish list

Kathleen Hall

IT businesses, industry experts and academics tell Computer Weekly what announcements they want to see in chancellor George Osborne’s budget to stimulate the UK’s tech sector.

Targeted investment

Adam Maurice, managing director of The Internet Group, believes the budget needs to encourage companies to invest more, rather than concentrate on personal tax levels such as the 50p tax rate.

"We cannot be seen as an economy with a tax and investment system that fails to encourage inward investment and hinders competitiveness," he said.

"We need to see solid ideas on how to get corporate finance working effectively after years of gridlock in credit and asset based finance; we need to see a macro-economic landscape that actually encourages business start-ups and not deters them; and reform of labour law and corporate tax levels that act as an incentive to business to invest more and employ more people."

Better government IT spend

A commitment to more government spending with small companies would be a welcome move, says Royce Murphy, CEO of IT infrastructure company Real Status. 

“The government is one of the country’s largest spenders on information technology, but it is extremely difficult for innovative early stage businesses in the UK to actually do business with the government. Rather than provide hand-outs or government-backed loans, why not purchase and use the products of UK-based tech start-ups? 

"We would like to see chancellor George Osborne in this week’s budget creating a positive incentive for government decision-makers to spend a portion of their budgets on home-grown technologies that provide superior value, rather than selecting suppliers based on their historical track record or the strength of their balance sheet. 

"This would be positive all round: the government utilises innovative technology to get more benefit from their IT investments; and UK-based tech start-ups grow more quickly and increase employment.”

Tax breaks

Sean Taylor, director of hosted communications provider Content Guru, believes the lowering of the 50p tax rate would benefit all businesses. “Abolishing the 50p tax rate would remove one of the biggest barriers which provide a disincentive for business owners from living in the UK,” Taylor said.

“Capital Gains Tax Entrepreneurs’ Relief should be extended to allow anyone with a share holding in a business to benefit, rather than just shareholders with more than 5%. This would help to de-risk lower level investments, making for a more open market and helping to break the cycle of stagnation in the economy,” he added.

Green technology

Mariana Mazzucato, chair in science and technology policy at the University of Sussex, believes that, although information technology is not necessarily one of the UK’s leading six sectors, Osborne could introduce a green agenda that would put IT at the forefront of change.

“Green is not just about wind turbines but allowing every sector to produce using fewer inputs and IT actually still really hasn’t exploded across the economy yet and isn’t being used at the scale it could. Focusing on how to use IT and how to green sectors through IT could have a huge impact.” 

Osborne’s role could be to provide a vision for such an agenda and put the UK at the forefront of green innovation, she says. 

“IT is under-utilised and hasn’t had a huge impact on productivity, the direction of the economy should be a green one. Up to now we've had choice, but soon we won’t.”

IT-enabled productivity

Anthony Walker, director at Intellect, says Osborne needs a long-term strategy for economic growth which includes a strong emphasis on technology-enabled productivity to optimise domestic demand.

“We are concerned about the worsening levels of productivity across the UK economy, in particular the gap between the US and UK. Over the last few years we’ve been less productive and that causes a risk to the overall economy. Given that technology plays such a strong role in productivity, we would like to see the government focus on this. 

"It’s not all about government spending but also bringing focus to this issue. We’d like to see more of this than just the details around tax breaks.”

Support for tech start-ups

David Chan, of City University London's Centre for Information Leadership, says nurturing tech start-ups ought to be the main priority. 

“I’d like to see more cutting of red tape for small start-ups maybe even capital allowances and tax breaks for people starting their own business around tech space. 

"We need growth that would not necessarily come from big companies, but from a massive number of start-ups. Of course most of those will fail, but those that remain will become the engine house for the economy. And in the interim those start-ups will soak up unemployment. 

"It’s disgraceful that 60% of graduates at the moment are in non-graduate jobs. We should be making it easier for our bright kids to start their own business, and there’s so much innovation around IT, it is an area that is about to explode.

Research and development

There should be greater scope for R&D tax credits to boost innovation, says Intellect's Walker.

“One thing we will watch closely is R&D tax credits – the UK is under constant pressure, doing all it can to attract R&D, but that applies a lot to large companies as well as small. R&D was improved for SMEs last year but we would like to see improvements for larger companies, too. 

"A lot of larger companies say they are surprised that the UK doesn’t court investment in the way other countries around Europe do."

Structured schemes

But the University of Sussex's Mazzucato believes government must introduce more structured ways of helping companies with R&D. She says only 3% of the UK economy comes under high-tech manufacturing. 

“We need a policy specific to what firms need,” she says. 

“In the US it’s structured such that they are really targeting companies interested in spending on R&D. It’s not efficient here, as we are rewarding firms for things they would have been doing anyway – of course they should be targeted, but they have different requirements from the really innovative companies.”

Innovation hubs

Martin King, director at communications company Aspect, believes the government should introduce more dedicated innovation centres.

“There is some promising discussion around Enterprise Zones, which hark back to the customer services employment grants of years, past in locations such as Newcastle and south Wales. I would hope to see this extended to regions in the UK that foster innovation and ideas, so start-ups have the same helping hand.

“The UK should be recognised as one of the world’s centres for innovation and the government should be seen to be encouraging young technology businesses, so that product development stays in the UK,” he said. 


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