Tuesday, 25 November 2008

Observations on the Pre-Budget Report

(By Richard Holway) By now you will have read so much media comment on Alistair Darling’s Pre-Budget report that you might well be sick of it.

I just want to add two points:

How it affects IT

Peter Clark of Ovum wrote a piece entitled Tougher Efficiency Programme demonstrates UK government determination. Peter makes the point that “buried deep in the detail, the Chancellor also announced: “To ensure that the government continues to deliver high-quality public services in a way that represents value for money in the next Spending Review period, the government will broaden and deepen work to drive efficiency from 2011/12 onwards.”

The conclusion – and the relevance to IT suppliers – is that HM Government is going to demand much ‘More for Less’. Rather than cutting services it wants to provide them more efficiently. In IT that might well mean even greater emphasis on the drive towards Shared Services – in particular at a Local Authority level.

I don’t see any good news in terms of extra IT spend from the Public Sector. Indeed, in many areas it is going to be under even greater pressure. But clearly there will be opportunities for those suppliers able to assist HM Govt in these efficiency drives. My fear is that politics – particularly local politics – will get in the way of achieving those savings. No Local Authority will want to see job losses in its locality – particularly in the midst of a recession.

How it affects you and me

We are clearly facing a problem of monumental proportions. As I write the US Govt has announced another $800b ‘fiscal stimulus’. In the UK, Government borrowing is forecast to hit £1 trillion by 2012. The cost of insuring UK Gilts has risen to unprecedented levels. To the point where there is talk of the UK Government defaulting - something that has never happened as far as I am aware. These are uncharted waters even for an old analyst like me.

The problem is that I don’t really believe the measures Darling has taken will have the desired effect. Most of the extra ‘fiscal stimulus’ will go on the VAT cut. I just don’t think that will have any real effect of consumer spending. The consumer (including this one) is shell-shocked. Only a return in confidence will get the credit card out again. Personally, I would have upped the personal allowances to put more cash back into people’s pockets.

Back in 2003, I (together with many other UK citizens) was totally against the invasion of Iraq. But when our troops were in Basra, my hopes and prayers were for their safety, success and quick return home.

Likewise, I could regale you with all the reasons why I believe our economy has been run very badly of late. In particular how investment in property eclipsed the need to invest in business (particularly new businesses). How policy after policy seemed to be against entrepreneurs (like me) in favour of the property speculators. We’ve been here before and should have learnt the lessons. It was a boom that was bound to bust.

But what is done is done. Right now I fear for the very safety of our whole economy and, much as it irks me, I just pray that these measures will succeed.

If they don’t, God help us all.

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