Tata’s £600m pension deal could be put on hold

The £600m outsourcing agreement between the previous government and Tata Consultancy Services (TCS) could be put on hold while the new government looks at the options for cutting the budget deficit. The government will next week announce its plans to make £6bn spending cuts this year.

The £600m outsourcing agreement between the previous government and Tata Consultancy Services (TCS) could be put on hold while the new government looks at the options for cutting the budget deficit.

The government will next week announce its plans to make £6bn spending cuts this year.

According to a Times Online report the coalition government has revealed billions of pounds of spending commitments that were previously hidden. These include IT projects such as TCS' deal with the government to administer the National Employment Savings Trust pension scheme.

The pension, which was designed for low- and middle-income citizens, was set up by the Personal Accounts Delivery Authority, which was created by the government to administer pension schemes.

The Times reports that this week the government could call a temporary halt to some IT contracts that were recently signed.

Mark Lewis, partner and head of outsourcing at law firm Berwin Leighton Paisner, said there could be a lot of contracts that are "mid-process" abandoned and City analysts are already expecting suppliers to be affected. "There is a whole batch of new projects that people have been expecting that are now in doubt. There has been an impact on share prices of the suppliers that focus on the UK public sector."

Robert Morgan, director at consultancy Burnt-Oak Partners, said cancelling or putting contracts on hold will have a cost.

"All procurements have been put through the process and the contract obligations mean that the government will have to pay some form of compensation. There can be huge penalties so the government will not get off scot-free."

He said suppliers will already have considerable costs associated with these projects.

Morgan said the government might try and talk about future projects to make the suppliers more willing to take a hit. "This may reduce the government liability."

But he warned that while the Indian suppliers might be willing to compromise, some of the US giants such as IBM and HP will try and get as much as possible.

Suppliers such as Capita, Steria and Fujitsu are examples of businesses that might suffer if projects are cut.

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