Central government ambitions to slash ICT costs are hard to fulfil

Reducing the amount that central government spends on ICT has been a major focus of the efficiency and reform agenda throughout this parliament, and as a result of the squeezes on spending, the overall central government ICT market is gently declining. In 2011/12, central government organisations spent a total of £4,050.51m on ICT goods and services including ICT staff – a figure that has shrunk to £4,003.36m in 2013/14, Kable has found.

“This is a more modest decline than we were expecting,” said Jessica Figueras, Principal Analyst at Kable. “It seems that although many departments were able to reduce ICT spend substantially, a handful of the biggest departments spent more than expected.” The programmes that contributed most to higher spend were Universal Credit at the Department of Work and Pensions, the introduction of real-time information at HM Revenue and Customs, and problems with the Home Office e-borders programme.

The Kable report outlines how Whitehall ICT has been 'transformed' by new spending controls and procurement practices imposed by the Cabinet Office. There has been a drive to increase transparency and competition in the market by breaking down the size and scope of ICT contracts. There is also a desire to get a better deal from suppliers by improving civil servants’ commercial skills, and consolidating government buying power.

“In previous years it was possible to slash costs by aggressively renegotiating contracts,” says Figueras. “But this approach has natural limits – finding the next tranche of savings is a more complex challenge. For example, increasing the number of SME suppliers to government is a popular aspiration that increases choice for government buyers. But a larger number of small suppliers creates new complexity for departments, which will need to spend more on in-house staff to manage these contracts and suppliers effectively.”

“Becoming an intelligent customer is neither simple, nor is it cost-free. The Cabinet Office has set a highly ambitious agenda, and there are signs that key functions are becoming over-stretched - relationships with Whitehall departments have also been rocky.”

Kable forecasts that political uncertainty will reduce ICT spending further this year, as government buyers delay spending until after the 2015 election.