Osborne disappoints tech lobby

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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.

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About John Stokdyk

John Stokdyk is the global editor of AccountingWEB UK and AccountingWEB.com.


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By 0098087
24th Jun 2010 12:59


The private sector will not sort out broadband for the users in rural areas. It won't happen. BT was forced by Labour to drop the wholesale price for net access in 2001 and this caused a much bigger take up.


And why is it an emergency budget. Every government that comes into power has a budget so why is this different? 

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24th Jun 2010 13:10


To many in the tech sector this is of far more interest, hidden in para 1.69 of the Red Book that accompanied the budget:

"The Government remains committed to a review of IR35 and small business tax and will release further details shortly"

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By 0098087
24th Jun 2010 13:16

Other words

In other words, nothing will be done..cause it would reduce revenue 

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25th Jun 2010 12:54

I agree - IT has a huge amount to contribute to Public Sector co

Way back when the Tories were in power last time I did a lot of work under the Competiveness Fund and other government funded initiatives looking at the use of multimedia and "information superhighways" as they were called then, in Education.  I co-authored a number of funded reports specifically looking at this area....  Frankly, though there are some shining exceptions to what I am about to say, the overall progress since then in the UK has been woeful.

Ultra high-speed broadband links (by this I mean around 200 megabits per second for high-speed two-way video-quality) were around back then - and being used in Education projects with enormously exciting results (like beaming live video of operations being performed to teaching hospitals across London!)....  But the reality is that, 15 years later, we still aren't exploiting this technology in any kind of large-scale way.

If you want to cut the cost of Education without affecting the quality - then cut the cost of delivering Education.  I studied Nuclear Physics at University and I learnt far more about Quantum Mechanics by watching the late Robert Feynman's lectures on videotape than I ever learnt from my own lecturers at University.  Why can't Universities share and pool resources? - The best lecturers available over ultra high-speed broadband links allowing those less able communicators to concentrate on their research!

But even with currently widely available technologies - how many local authorities have a policy of using videoconferencing whenever possible?  How many Colleges use virtual classrooms to provide outreach training to adults in their local community - let alone nationally??  How much investment is going in to developing 'games-like' simulations for education and training purposes?  If you want to pump-prime the videogames industry then provide support in exchange for the industry providing open access to development tools for Education and training purposes....

No, I'm sorry, we just lack the imagination and the bold leadership necessary to be the future world-beaters in this area.  Take a look at Singapore - or even developing nations in Africa - or in India - and you will see far more vision - albeit driven out of necessity - on how to cut costs of public services using technology.

We have some of the very best software engineers and designers in the world right here in the UK - yet we can't implement a large-scale government database project to save our lives - or our identities!  Something's very wrong somewhere.  I agree with Martin Ferguson - Much more should have been done in the budget to make something very different happen.


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