Does it make sense to spend more on government IT than on Wales?

How would you describe an organisation losing £164bn every year on £585bn revenue with a net position already £1.2tn in debt? If this were a private company, the polite answer would be "no longer trading". But this is the state of affairs faced by the UK government.

How would you describe an organisation that is losing £164bn every year on £585bn revenue, and with a net position already £1.2tn in debt?

Of course if this was a private company - and putting it as politely as possible - the answer would be "no longer trading". You have probably guessed by now that I am describing no company, but the UK government. It is rare for a sovereign state to go spectacularly bust, as the slow-death option of printing more money is always to hand.

As this is the case, we will confine ourselves to describing the organisation in question as "in need of new ideas".

The UK government spends around £20bn every year on IT, as far as anyone - the government included - can tell. Of course this amount of money is almost inconceivable, so let's put it into perspective. £20bn per year is more than we spend on income support, the Ministry of Justice, the Department for Transport and all of Wales. It is also three times what we spend on the British Army.

Even if you are one of the vanishingly small minority that believe this money is better spent on government IT projects than on supporting our jobless, on justice, on transport, on national security or on Wales, consider what is spent on just the procurement process itself - £3.5bn each year.

The procurement process is the set of steps before we even get to the starting line. The cost of procurement of IT in government is second only to the cost of procurement for defence, which one could argue has strategic merit.

Again, to put this sum in perspective, £3.5bn per year is more than we spend on the Foreign Office. Does anyone genuinely hold the belief that IT procurement warrants more resource than our international standing?

Where would you choose to spend £20bn?

The other noticeable feature of government IT spending in the UK is its centralisation. A study from 2004 found that in The Netherlands, the top five IT suppliers had 20% of the government market. In the US, this figure is 48%. In the UK, it is 80%.

The situation has not improved in recent years, indeed the Public Administration Select Committee (PASC) found in July this year that government IT is dominated by what it described as an oligopoly - the very term used by Cabinet Office minister Francis Maude in describing the state of affairs that currently exists in government IT.

In taking in these facts you will be struck, as I was, quite how much truth there is - in assertions in the press and in a whole string of studies on government IT - that we are wasting obscene amounts of money with an oligopoly that delivers very poor value.

Since entering government a year and a half ago, the Coalition has spoken of "levelling the playing field" for new technologies, such as open source, and for SME suppliers. The Cabinet Office is charged with taking the lead on this programme.

Talk of levelling the playing field is proof positive of a number of things:

1) It is not level now.

2) Talking about "levelling" is the best proof it is not.

3) Talking about "we can't do positive discrimination" is the best proof there is no real commitment to change, since nobody is asking for "positive discrimination", we are simply asking for the restrictive practices to stop.

Why should the government just get on and do what it has promised in levelling the playing field for SMEs and for new technologies like open source? Here are just a few reasons to get us started:

1) Money: £20bn is too much taxpayer money to spend on IT. Spend it on frontline services and getting us back to economic growth please.

2) Innovation in government services: Right now, to anybody with the slightest recent experience, they look like they fell out of a time warp from the 1990s.

3) Economic development: The consensus view of economists is that what we really need is economic growth in addition to public-sector austerity. For that, the government should be keeping its promise to put more business with SMEs. This is for the simple reason that SMEs are the main providers of employment, the main source of economic growth and the main source of innovation

So what are the barriers to the government keeping its word with respect to SMEs and open source?

Any reasonable summary must include the conclusion of the PASC report, that government IT spending is dominated by an oligopoly.

It is also clear there is a contradiction in the heart of government between the SME policy and the conclusions of the Efficiency Review by Sir Philip Green. Green's report is pushing government in the direction of more centralisation with fewer contracts with fewer and larger suppliers - the tension between this and the recently re-labelled "aspirations" around SMEs is clear.

More to the point, the reality of the situation is that government is systematically removing SMEs from its supply chain, as thousands of SMEs will readily confirm.

In a recent interview in the Telegraph, Crown Representative for SMEs Stephen Allott stated it would be two years before government stopped excluding SMEs from procurement. Two years is of course a long time in politics, and with a coalition one-and-a-half years into its term already, one has to ask whether there is any chance whatsoever for SMEs or whether this is another sensible policy running aground on the rocks of Whitehall.

So how could this change?

Unless there is a renewed political imperative, and the excuses and technocratic fiddling stops, it is hard to see that it will. There is no doubt this could be resolved if the political will were there - the mere thought of popular outcry led to German Chancellor Angela Merkel closing the entire German nuclear industry overnight, and the outrage in the UK over the MPs' expenses scandal led to changes in practice very quickly.

A lot more money has disappeared down the government IT hole than ever disappeared into an MP's duck pond.

Mark Taylor leads the Cabinet Office "New Suppliers to Government" working group, and is chief executive of open source specialist Sirius. You can follow him on Twitter as @Mark_Antony.

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