Chancellor readies £6bn cuts, including IT

George Osborne this morning confirmed that £6 billion of cuts to public sector spending will be made in the coming 12 months, as the new coalition government slashes several large IT schemes.

The new chancellor was making a speech one day after an interview with Vince Cable in the Sunday Times, in which the business secretary said Labour had “hidden” £1.8 billion of IT spending commitments before the election, commitments that may be undone.

Osborne, the new chancellor under the Conservative-Liberal Democrat coalition government, said details of the £6 billion cuts - expected to include heavy cuts to public sector IT - will be made public in a week’s time. They are geared towards helping tackle the £163 billion deficit in the economy.

Announcing an emergency Budget on 22 June, Osborne promised to tackle “wasteful” spending. “The coalition has agreed that £6 billion of savings to non-front line public services should be made this financial year,” he said.

A significant part of this, the government said today, will come from cutting “lower priority programmes”. Departmental heads are devising their strategies this week.

Some details on the technology cuts are already clear. The coalition will cut the £5 billion ID cards programme, eliminate plans for a biometric passport database, and cancel the ContactPoint database of vulnerable children.

A question remains over the future of the £12.7 billion NHS National Programme for IT, under which both parties have said that centralised patient records are unnecessary. But the previous government signed renegotiated contracts with the lead suppliers shortly before the election, with terms that would reportedly make cancellation costly, and the new coalition has made no announcements on the programme.

The only detail given by Osborne today was that the Department of Health would make “savings”, alongside the Ministry of Defence and Department for International Development, and that these would be “reinvested in their front lines”.

A number of contracts were allegedly rushed through before the election, Cable said yesterday, and these are likely to be assessed for cuts. The projects include a £1.2 billion e-Borders system for immigration, and a £600 million pensions processing offshoring deal.

Before the election, the Conservatives also accused the government of attempting to rush through a £1 billion, ten-year contract for defence logistics software, as well as an £800 million communications and IT services deal for the Serious Organised Crime Agency.

"Suppliers such as HP, CSC, BT, Fujitsu and IBM will have all fingers crossed that the axe won’t fall on their contracts," said Geogina O'Toole, research director at analyst firm TechMarketView, ahead of next week's announcements of cuts. "However it appears that their coming through this period completely unscathed is highly unlikely."

Copyright © 2010 IDG Communications, Inc.

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