The Annuality Agenda

The financial year end is nearly upon us. In a couple of weeks’ time, government departments are expected to draw a line under many of their existing procurement contracts and move to a new budget year. As always, there’s a flurry of small, last-minute procurements as they spot a few thousand pounds here and there that have to be used up otherwise they’ll be lost from next year’s allowance.

In a normal year, this would be followed by the release of the purse-strings on larger pieces of work that have been awaiting the new budget, but this year we will be in the grip of an election, and some of these will inevitably be delayed; others will (allegedly) be rushed through to ensure that the current government gets its spending plans under way before May. After that, it’s anyone’s guess what might happen: all that we know for sure is that there will be a lot less money in 2010 than there was in 2009.

The principle of annuality in public sector budgets is a perverse one. Whilst it obviously makes sense to take a snapshot of expenditure, and to ensure that out-of-control projects don’t have access to more funds than have been allocated for a given period, it also makes it impossible for public authorities to ‘save up’ for major new procurements, since any success at saving money is rewarded by having the savings taken away, not just now, but in future years’ budgets as well. The taxpayer is hit with shocking and unexpected bills for systems that could have been foreseen, and budgeted for, many years in advance.

I grew up in the home computing revolution. When I was 13, I managed to persuade my father to part with the price of a home computer, which at the time cost about twice the price of a good racing bike. I wanted a BBC Micro, he wanted to pay for a ZX Spectrum, we compromised on a Dragon 32. That came as a shock to his wallet. At 18, I needed to upgrade to a new machine, and once again without warning put in for the price of a PC; he recovered from the shock, the haggling began and I ended up with an Atari 1040ST. On each occasion I felt aggrieved that he was unhappy with me requesting an out-of-the-blue purchase that cost the equivalent of a few years’ pocket money. He was unhappy that his son kept pitching up demanding new equipment, and then the price kept rising to cover peripherals and software. That’s not a particularly good way to budget for your domestic IT needs, and I recognise how fortunate I was that there was enough money to still be able to get a new computer.

The thing is, that’s how we run much of our public-sector procurement, and authorities are only just waking up to the fact that the money’s gone. The recession has scuppered these budgets, and we’ll be paying for it for many years to come. Public authorities can no longer expect to present a business case for a major IT procurement and get it approved. It’s time that they’re given a mechanism that allows them to save for their needs, and that their accounting procedures are updated to force them to do so. If a system is anticipated to have a 10-year lifespan, then that’s a 10-year period to save up for its replacement. Teenagers around the country are discovering that there’s no longer enough money in the household budget to pay random IT purchases, and public authorities will have to do the same. The Conservatives have discussed the principle of scrapping annuality in certain areas of public budgets, and that has to be a good thing if those authorities are to be held accountable for responsible and prudent spend on IT.

In the meantime, I’m swamped with finishing Privacy Impact Assessments for two central government agencies and chasing around for the next round of spend that will hopefully be released in the coming weeks. I’ll be blogging more frequently once this silly season – which for the sake of the UK economy I hope is the last one – is over…