What am I looking for in the Budget today?

The Chancellor has very little room for manoeuvre but there are a number of areas where ring-fenced tax breaks would greatly boost the UK ICT sectors and those knowledge industries dependent on its health, generating more revenue, even in the short term, than they cost.

I have three main items in my shopping list: net cost 0, 0 and 0.

1) Tax free training and re-skilling

In 1995 I was asked to present the findings of the 1995 IDPM IT Skills Trends Report, with its forecast of an impending Y2K IT skills boom followed by a bust and the need for tax breaks to encourage update training to professional standards to handle the changing technologies, to the then Shadow Chancellor of the Exchequer. He requested details to show how this could indeed be made fiscally neutral. These was contained in the 1996 IT Skills Trends report (click here for a synopsis or e-mail me for a copy of the full text.

The core was full or partial exemption from PAYE and National Insurance for those following professionally recognised (BCS, IET, IMIS etc.) training and reskilling programmes paid for by their employer and for all expenses born by individuals paying for their own training to be fully tax deductible. Provided the training is undertaken in the UK, the taxable revenue generated from the increased provision of the time, content and practice intensive training methods favoured by employers exceeds the cost of the tax break for the time spend under training. It also enables mentoring and supervised experience, the missing components of most current UK training and reskilling programmes, to be organised and funded.

The Chancellor’s subsequent insistance on industry-strength quality control for the £40 million “Bug-busters” programme – intensive short courses in PC maintenance and upgrade skills, including to handle the Y2K upgrades – was strongly resisted by the traditional DfES suppliers but was a condition of the ring-fenced Treasury funding. The result was one of the most successful single training programmes the UK has had since World War 2.

The idea of ring-fenced tax incentives was also due to be piloted in a number of local sector skills councils, as recommended in the 1996 report. But the pilots were not well publicised, beyond an announcement in the small print of the budget (can’t rembver off-hand which year), and the results have never, to my knowledge, been reported.

2) 100% Capital Allowances for investment in Communications Infrastructure, including to greatly improve resilience.

In 2001 an outline study was funded by three corporate members of EURIM who were also leading members of the Broadband Stakeholders Group and presented to a Treasury Minister who was interested but non-commital. This indicated that 100% capital allowances to encourage investment in Broadband could not only greatly expedite the roll-out of globally competitive access networks but that the tax take from the construction contractors and workers (provided the bulk of high-added value components were sourced from within the UK) would mean very rapid pay back to the Treasury – especially if lead customers were allowed/encouraged to take out 3 year up-front contracts to help reduce the financing cost.

3) Funding for the Police E-Crime Central Co-ordinating Unit and enabling the Information Commissioner’s enforcement operations to be funded from the proceeds of crime.

The tax lost to the Treasury as a result of recent extortion attacks on the on-line Gaming Industry alone is almost certainly several times greater than the request to the Home Office to help fund a national co-ordination unit. Meanwhile there are multi-million data theft businesses running with immunity because a million pound prosecution led to non-custodial sentences, derisory fines and no attempt to seize the assets bought with the proceeds. It is impossible to calculate the benefit to Treasury from co-ordinated and effective action against computer crime because it is impossible to calculate what is being lost. But those units which are jointly funded by police and the Mobile Phone, Insurance and Credit Card Companies all appear to have paid for themselves inside the year.

The common need is for joined up, cross-departmentals business cases which link spend to tax revenues. I have just spent most of the past two day at an excellent event which brought together those responsible for the Transformation of Government and their suppliers. A common thread was the need for joined up and innovative thinking.

None of the above ideas is innovative. Some of them have been around for twenty years. They have not been tried because of the previous impossibility of organising co-operation, from joined up business case through delivery to performance monitoring.

WIth the first budget of a new Chancellor reporting to a new Prime Minister I would like to think that the time has come to remove the barriers to deliveriing solutions, like those above, which may be zero cost but require co-operation across government not only to deliver results but also to prevent the inefficiencies and abuse that could, all too easily, make zero cost as expesnive as individual learning credits .