Report: local government spending more on IT

July 31st, 2014 Category: Local Authority & Housing

Local government saw an increase in IT spending last year compared with the decline seen in 2012.

This is according to newly released figures from analysts at TechMarketView, which show that an increase in infrastructure outsourcing and activity on the application services side resulted in marginal growth in local government IT expenditure in 2013.

Despite the fact that central government continues to account for the bulk of IT spending in the public sector, there was a decline in expenditure for this segment last year.

The long-term view

Nevertheless, the UK public sector market for IT services and software is expected to expand 50 per cent faster than that for the private sector by 2017, TechMarketView said.

“In local government, education, health and police, the market performance was positive to varying degrees,” it explained, adding that, between 2013 and 2017, “all subsectors bar central government will be able to boast a positive CAGR [compound annual growth rate], despite continued austerity and the prospect of even tighter controls on spending.”

Cost-effective strategy

Interestingly, the report comes not long after the Local Government Association (LGA) released its strategy for helping local authorities to procure IT services and software in the most efficient way possible, with the aim of making 20 per cent annual savings over the next five years.

Simon Colvin of Pinsent Masons said on that this is indicative of local government aligning its IT strategy more closely with that of central government, which TechMarketView noted is extremely focused on driving down spending while also aiming for further digitisation of public services.

“This is to be welcomed,” he said, adding: “The government's digital agenda focuses on integrating and coordinating back office functions so as to deliver both cost savings and a better experience for the users of public services."

IT spending beneficiaries

It is also interesting that recent research by the Institute for Government – a thinktank – and Spend Network showed that IT firms appeared to reap the biggest benefits from government contracts in 2012 and 2013.

Six of the top 20 suppliers to central and local government in 2013 were IT organisations, with HP being the largest beneficiary. These 20 suppliers collectively received £10.2 billion from government that year.

“This is the first time that anyone has been able to get a detailed insight into what is being spent by both central and local government,” said Ian Makgill, managing director of Spend Network.

The researchers looked at 38 million transactions carried out by a total of 247 government entities, which included all of the departments of central government, with more than 180,000 suppliers. It took 16,000 hours of study over a period of two years to compile the final data, which is still subject to revision as the project is ongoing.

The 2015 election

It remains to be seen how the government’s drive to cut costs will tally with TechMarketView’s prediction of overall growth in public sector IT spending over the next few years.

One event that may mark a turning point is the general election in 2015 and the uncertainty over how particular IT-related policies will continue to be implemented – or be changed – by the presiding party.

"The party in power will continue to drive down ICT running costs,” TechMarketView forecasts. “All parties have also shown support for the public service digitisation; any difference is likely to be in the approach to achieving those aims."