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Analsys: Mixed response to Osborne's Budget

The word was "unavoidable" and the results were tax cuts and the occasion was last week's emergency budget delivered by the Chancellor George Osborne.

It was never going to be easy clawing back the deficit and through a series of media interviews we were all braced for the worst and the cuts are going to be deep and taxes, VAT being chief among them, are going to rise to bring more money into the government coffers.

But from a business point of view the reaction was mixed with some describing it as a victory for SMEs and others viewing it as a nail in the coffin of Digital Britain.

For those business groups that were looking for a strong statement of economic intent the budget was welcomed.

The CBI director-general Richard Lambert said that the budget had set out a credible plan to put the country's finances back in order.

"There was clear recognition in the Budget of the role that business needs to play in getting the economy back into shape, and generating the jobs and wealth needed to sustain economic recovery," he said.

"This budget is the UK's first important step on the long journey back to economic health. The autumn spending review, and there-engineering of public services, will be equally challenging," he added.

Also on the positive side the Recruitment and Employment Confederation (REC) said that it welcomed talk of the private sector driving the recovery and described the budget as one that had been good for jobs.

"It is clear that the private sector will need to grow jobs as the public sector sheds them, and this Budget sets the framework for this to happen," said Kevin Green, chief executive of REC.

What supported his view were the increase in national insurance thresholds, reductions in corporation tax and changes to the benefits system which will encourage more people to get jobs.

There were also smiles from the Forum of Private Business with its chief executive Phil Orford viewing the budget as one that had been a positive for SMEs.

"Not only did the Chancellor make all the right noises about supporting enterprise and smaller businesses, he backed it up with concrete,tangible policies," he said.

He had to concede that the VAT rise was going to have a hit on some small businesses as it goes up from 4 January 2011 from 17.5% to 20%.

For some observers this move was seen as potentially having a damaging impact on consumer spending

"There are fears that higher VAT could drive people away from making major purchases and tip the UK economy into a second recession," said Quentin Pain, founder of software vendor Accountz.

"According to one report from shopping comparison site, Kelkoo, the rise could cost UK households an extra £1.16 a day, or £425 a year, reducing consumer's spending power by an average 1.25% a year," he added.

The previous government had proposed a landline tax of 50p a month for all users of a fixed phone line in the UK to pay for the expansion of rural broadband as well as to improve speeds of the network. But with that measure being scrapped yesterday there are concerns that private companies will not fill the gap.

Although criticising the previous plans Barry Murphy, UK technology leader at PricewaterhouseCoopers LLP, said that the situation that had been left by the decisions of the emergency budget were not positive for extending web coverage across the UK.

"It does not solve the issue of rural broadband, which without some form of subsidisation will remain in the dark ages, whereas urban broadband is and will attract investment and competition," he added.

Having absorbed the information set out by the Chancellor the channel inevitably started to think about how the Budget could impact future spending patterns.

Although early days the consensus that emerged almost instantly was that there would be a real opportunity for more flexible technology solutions, mainly around the cloud.

"With huge budget cuts across the board, public sector organisations need to utilise cloud based services to cut costs and deliver efficiencies to the bottom line," said Dave Baldwin, managing director of Getronics.

Along with the cloud there is also going to be a role for technology that lifts the lid on the way that businesses and departments work and the growth in business intelligence is set to continue.

"Managers need to ensure their departments are making accurate, cost-effective decisions to ensure significant savings are made. By exploiting the benefits of public-facing business intelligence, taxpayers can gain a greater visibility into these spending decisions, providing them with easy access to information," said Peter Walker, country manager at InformationBuilders UK.

With more details of the cuts expected in the autumn spending review the coverage of the impact of the government's decisions to trim the deficit are far from over.


This was first published in June 2010

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