E-government costs will outweigh savings as the UK focuses on improving services

Report says government will have to wait until 2012 to recoup investment

Report says government will have to wait until 2012 to recoup investment.

Research released last week from analyst firm Kable predicted that the cost of e-government could outweigh any savings to the public sector over the next 10 years.

Between 2001/2002 and 2005/ 2006, e-government projects will cost UK taxpayers a massive £7.4bn (£3bn for local government and £4.4bn for central government). The savings from this figure amount to 11% (£820m), which will come largely from introducing e-procurement, customer relationship management and re-engineering service delivery.

The report also predicted that the government will have to wait until 2012 before it recoups the investment in electronic services.

But while the cost savings forecast in the report prompted questions about the real value of e-government, there was little surprise in public sector IT circles.

One public sector IT manager, attending the Government Computing Conference 2003 in London last week, said, "I am not surprised it will take 10 years. People expect financial benefits to come in one or two years but it does not work that way." He said that because of the complexity of building the systems, expectations could not be any higher.

The report also sparked a debate about the expectations riding on e-government, which range from financial returns to improved service delivery.

Industry experts said a return on investment of 11% was a respectable figure for either private or public sector IT projects.

"If the research figure of 11% is correct, then that is a real pay-back. Any company would be happy with a rate of return like that," said Iain Roxburgh of the New Local Government Network think tank.

Few would dispute that e-government has the potential to offer more effective services to the public. For example, online payment of bills and taxes removes much of the time-consuming bureaucracy that often characterises dealing with the government. The internet can also provide the public with up-to-the-minute information on everything from local waste disposal services to applying for a provisional driving licence.

Although not necessarily delivering cost savings to taxpayers, experts have highlighted the importance of e-government when it comes to improving public services. Val Shawcross, e-envoy at the Greater London Authority, said, "For most public services, the demand is greater than the supply, so if you are able to deliver services more efficiently you are able to serve more people.

"This does not produce cash savings but it does deliver more and better public services."

Shawcross also pointed to the NHS Direct information service as a good example of this approach.

Launched in 1998, NHS Direct enables members of the public to obtain health advice via the telephone and the internet. Crucially, the scheme was not introduced with the objective of reducing costs for the NHS, but to provide better health advice to the public.

Last year a report from the National Audit Office praised the project, and said there was evidence it helps to reduce the demand on local healthcare services provided outside normal working hours. Auditors also found that NHS Direct recommended more appropriate forms of care to callers during the day.

NHS Direct is a good example of the public face of the UK's e-agenda, but e-government also offers councils and government departments the opportunity to link their internal systems and business processes. For Roxburgh, this represents the perfect opportunity to overhaul existing business processes. He said, "The findings of the Kable report came as no surprise. Money must be invested in radical business process re-engineering, not just grafting e-government IT onto existing processes."

Roxburgh feels that e-government must be geared towards people's needs. "The principal purpose of e-government is to improve customer service and the responsiveness of public services to individual customer needs," he said.

Ultimately, it seems that there is a changing perception of e-government in the UK public sector.

With councils and government departments racing to meet Tony Blair's 2005 target for getting services online, many will be becoming aware that it could be many years before they receive a return on investment, if at all. Instead, the focus is on improving access to public services and making them more efficient.

For Northern Ireland e-envoy Des Vincent, who also attended the government computing conference, e-government is about much more than pound signs. He said, "This is not about delivering savings, it is about changing the relationship between the government and the governed. The civil service should serve the citizen, but this will come at a cost."

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