Dear Cabinet Office, public sector austerity and economic growth are not mutually exclusive

How would you describe an organisation that is losing £164 billion every year on £585 billion revenue, and with a net position already £1.2 trillion in debt1? Of course if this was a private company, and putting it as politely as possible,...


How would you describe an organisation that is losing £164 billion every year on £585 billion revenue, and with a net position already £1.2 trillion in debt1?

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 questions as "in need of new ideas".

The UK government spends around £20 billion 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. £20 billion per year is more than we spend on2:

  • Income Support
  • The Ministry of Justice
  • The Department for Transport
  • Wales (ALL devolved spending)

It is three times what we spend on our 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, £3.5 billion each year.

The procurement process is the set of steps before we even get to the starting line, and 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, £3.5 billion 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 £20 billion?

The other noticeable feature of government IT spending in the UK is it's centralisation. A study from 20043 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 found in July this year that UK government IT is dominated by what it described as an oligopoly, the very same 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 UK 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 have spoken of 'levelling the playing field' for new technologies like open source and for SMEs. 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
  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's just a few reasons to get us started:

  1. Money. £20 billion 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 90s.
  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 into SMEs. 

This is for the simple reason that SMEs:

  • Are the main providers of employment
  • Are the main source of economic growth
  • Are the main source of innovation

So what are the barriers to the Government keeping it's word with respect to SMEs and new technologies like open source?

Any reasonable summary must include the conclusion of the PASC report4, that government IT spending is dominated by an oligopoly.

It is also clear that there is a contradiction in the heart of government between the SME policy and the conclusions of the efficiency review by Sir Philip Green. This work 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 their supply chain, which thousands of SMEs will readily confirm.

In a recent interview in the Telegraph, Crown Representative for SMEs Steven 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 it's 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 can 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 was there. The mere thought of popular outcry led to German Chancellor Angela Merkel shuttering the entire German nuclear industry overnight, and the outrage in the UK over the MP expenses scandal led to changes in practice very quickly.

A lot more money has disappeared down the government IT hole than ever disappeared into a duck pond.



(1) Figures drawn from the Treasury's 'Whole of Government' Accounts.

(2) According to 'Better for Less' from the network for the Post-Bureaucratic Age.

(3) P Dunleavy and H Magretts, Government IT Performance and the Power of the IT Industry: A Cross-National Analysis, American Political Science Association, 2004.

(4) PASC, Government and IT - "a recipe for rip-offs": time for a new approach.

"Recommended For You"

Government IT: Open Data, Open Standards and Open Source Office of Fair Trading to scrutinise Government IT outsourcing