System Recovery

The Role of ICT in Local Government During the Downturn

Local government and the third sector are facing increasing pressures on service delivery across Scotland and Information and Communication Technology (ICT) budgets are frequently cited as ripe for trimming.  Local and central government are right to review public sector ICT spending but joining up spending could realise significant cost savings and improve service delivery.

 The Scottish Perspective

Over the last decade, public sector spending on ICT in Scotland has increased substantially as governments have sought efficiency and service innovation through adoption of new technologies.  In 2008, spending had risen to just over £1.6 billion representing more than double the expenditure in 1998.  In comparison, spending by the rest of the economy has risen by just 11.8% over the same period.

Businesses have been quicker than the public sector in adopting new technologies and the slow growth of ICT spending in the private sector reflects businesses reducing ICT costs and replacing rather than supplementing processes and systems.  This may explain why consultants have focused heavily on public sector clients in recent years and why spending is under greater scrutiny.  Audit Scotland recently stated that government needs to make better use of consultants where the majority of spending has been on ICT.

Benchmarking Scotland

International benchmarking frequently shows Sweden, Norway, Netherlands, Denmark and Finland as leaders in e-government.  However, the share of public sector spending on ICT in these countries is generally much lower than Scotland.  Only Denmark spends a marginally higher share of operating costs on ICT (12.1%) compared to Scotland (11.9%).  The European Commission singled out Scotland for praise stating it has one of the most advanced implementations of e-procurement in Europe. But further cost savings in service delivery will only be realised with an integrated back-office, collaborative working across agencies, and business process streamlining (not just putting existing administrative procedures online), service-orientated architectures, standards and interoperability. 

The Scottish Government is seeking to further strengthen its position through the Central Government Centre of Procurement Expertise (CGCoPE) but people and hardware are not the only supply side levers that need to be pulled.  Cost savings could also be realised through ICT procurement and agency infrastructure consolidation.  It would be worthwhile reviewing whether it is sensible for the public service providers to own as much infrastructure.

Costs & Savings

The ability of many Nordic countries to deliver e-government is helped significantly by the high levels of computer literacy across society, availability of technology and telecommunications and joined up procurement and delivery.  Attempts to create collaborative or shared ICT facilities in Scotland have largely failed to emerge over the past five years.  This is partly due to the imposition of VAT on billed or notional revenues or funding contributions.  Recent changes to the VAT regime and the introduction of scrappage schemes for old cars and boilers suggest it is feasible to look at similar incentives for local government on ICT projects in the face of the downturn.  This may be particularly useful to encourage joined up procurement and delivery.

Another important reason for failure is the prospect of loss of identity and in-house ICT empires. Similarly, there are apocryphal stories of local authorities politicians claiming the uniqueness of their organisation makes it difficult or impractical for the creation of shared services and that the management governance model would be too complicated. 

Potential cost savings are significant.  If the share of public sector operating costs accounted for by ICT in Scotland were lowered to meet those of the Netherlands, Finland or Sweden then annual public sector ICT spending in Scotland would fall by £820 million, £753 million or £685 million respectively.  The challenges in securing joined up public sector ICT projects in Scotland are huge but outstripped by the potential rewards, which could counteract local spending cuts.

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