Chancellor George Osborne dashed the hopes of many IT specialists as his austerity measures took effect in the coalition government’s first emergency Budget.
The least controversial announcement confirmed the government’s plan to drop the 50p levy on telephone landlines to fund the development of higher capacity broadband networks. When in opposition, the Conservatives succeeded in getting this measure dropped as part of the bargain to ensure passage of the April 2010 Finance Act.
For obvious reasons BT was opposed to this measure and the Tories were clear that they preferred a private sector-led investment strategy. During his Budget speech, however, Osborne said that efforts to extend high speed internet connections to rural areas would be funded in part by money previously earmarked to support the BBC’s switch to digital transmission.
The government will also repeal clauses in the Corporation Tax Act 2009 requiring companies making a claim for R&D tax relief to own the intellectual property that derives from the research on which the claim is based. The measure will be introduced in a Finance Bill to be introduced as soon as possible after the summer recess - that’ll be Finance Bill (No 3) 2010 – and will apply to accounting periods ending on or after 9 December 2009.
During his speech, the Chancellor mentioned that the government would implement the recommendations in Sir James Dyson’s pre-election review to target R&D tax credits more effectively at smaller businesses. Niki Dixon, head of technology at Grant Thornton, welcomed the intellectional property ownership amendment as “first step” towards Dyson’s goal and looked forward to further consultation on R&D tax relief announced in the Budget.
While BT relaxed and small business advisers pondered to potential for R&D tax credits, the UK’s video games industry raged about the Chancellor’s decision not to introduce Labour’s tax relief package. The proposal put forward in March would have given British developers a similar boost to reliefs enjoyed by games companies in France, but at a cost of £190m between 2011 and 2014.
Richard Wilson, chief executive of the games developers’ association TIGA accused both coalition parties of breaking pre-election pledges to introduce games tax relief and warned that the decision not to do so would undermine the UK’s leading position within the industry, costing the country millions of pounds in lost jobs and inward investment.
“The UK video games industry is export oriented, high tech, highly skilled and low carbon in output. This is an industry of the future which the government should be supporting with action, not words,” said Wilson. The reduction in Corporation Tax was welcome but did not address the specific needs of the video games sector, he added.
One of the more thoughtful responses to the Budget came from Martin Ferguson, head of policy at the public sector IT managers’ group Socitm.
Technology had a vital role to play in achieving public efficiencies by doing more for less, but the budget did not go far enough in recognising this, he argued in an article for PublicTechnology.net.