IT gives cautious welcome to budget

IT professionals and suppliers gave a guarded welcome to chancellor Gordon Brown's budget yesterday.

IT professionals and suppliers gave a guarded welcome to chancellor Gordon Brown's budget yesterday.

Proposals to improve the tax regime for research and development and the extension of 100% tax allowances for IRT purchases were particularly welcomed.

A commitment to boost public spending also won approval, both from hard-pressed suppliers and public sector IT professionals.

However, the chancellor's pledge that the data protection commissioner would produce revised and simplified guidance on the Data Protection Act was greeted with more scepticism.

Brown announced plans to abolish or reform 40 different regulations and introduced improvements to research and development (R&D) tax credits for all companies

He extended the 100% first-year capital allowances for small businesses investing in information and communication technology investment until  March 2004, saying this would encourage up to 3.7 million businesses to invest in IT.

The chancellor also gave a potential further boost to IT investment when he raised the qualifying threshold for small and medium-sized enterprises to the European maximum of £20m to become eligible for the 40% investment allowance.

John Higgins,chief executive of Intellect, the IT suppliers' organisation, was positive about the budget.  "The R&D credits in particular are a welcome boost," he said.

Small business groups welcomed the measures to encourage investment in IT. "The extension [of the capital allowance for ICT] is good news as it incentivises small business to computerise," said a spokesman for the Federation of Small Businesses.

He also welcomed the improved R&D tax incentives, but added that there was still confusion over what investment qualifies as R&D.

David Harrington, industry adviser for the Communications Management Association, was equally pleased by the extension of tax relief, but was disappointed by the chancellor's lack of help for the communications sector.

"Communications is the great enabler, but there was little mention specifically of its contribution, apart from a throwaway comment about how the £22.5bn revenue from the [3G] spectrum auction had helped the treasury," said Harrington.

"There was also talk of encouraging the regions but no mention of the need for the expansion of broadband. It is a sad omission."

Andrew Bell, IT tax specialist at PricewaterhouseCoopers, called the budget "one of the most uneventful in terms of changes I can remember for years". The changes to the Data Protection Act were short on details, there seemed to be "nothing there" in terms of skills and training and there were no tax reliefs to help companies kitting out employees to work from home.

Simon Bragg, manufacturing IT analyst at ARC Consulting, said the 100% allowances on IT spending were a useful boost, but said, "UK manufacturing needs more.

"Government needs to link training budgets to improve skills so that manufacturers can exploit IT developments and the UK can become a high-skill manufacturing economy."

However, Derek Brownlee, a tax executive at the Institute of Directors, was less enthusiastic, calling the budget “pretty thin stuff”.

Although he welcomed the chancellor's initiatives aimed at smaller businesses, he admitted, “We’ll be cautious till we see the details."

Terry Watts, chief operating officer of  Eskills UK, the new public-private skills partnership, welcomed Brown's efforts to boost training in small businesses.

“The government is taking skills development seriously and putting support behind it. How it will pan out needs to be thought out. I hope they will build on existing programmes to meet the targets.”

Bob Griffith of The Society of IT Management, the local government IT directors' organisation, welcomed Brown's commitment to an extra £61bn a year public spending by 2006, but warned that local government should not be overlooked.

"We have to meet the 2005 targets and the effort required to change back-office procedures is significant." Existing funds would not do the job, he warned.

Ewan Davis, vice chair of the British Computer Society's Primary Health Care group, also welcomed Brown's public spending commitment.

"The money announced for the NHS IT programme now looks certain," he said.

However, he warned that promises to simplify the data protection regime were easier said than done. "Any simplification that protects the right to privacy would be very welcome, but it is not an easy balance to strike," said Davis.

Read more on IT legislation and regulation