Can spending on IT save the UK economy?

THE UK economy, like many others, is in dire straits. It is natural, therefore, for information technology advocates for look for ways in which IT can help to create jobs, promote business and generally prop-up the country’s ailing fortunes.

So on the surface of it, a recent report from the US-based think tank Information Technology and Innovation Forum (ITIF), which argues that investing in public IT infrastructure will help to lift the UK out of recession, should be welcomed by the
IT community.

But a closer look at the rport, which is essentially a UK-oriented version of a similar ITIF report that is believed to have influenced President Obama, raises some nagging questions.

The central proposition of ‘The UK’s Digital Road to Recovery’ is that spending
£15 billion on public IT infrastructure (split equally between broadband infrastructure, ‘intelligent transport systems’ and Smart Grid technology) would create 700,000 new jobs. And these jobs would pay more than those created by alternative public spending plans, the report claims.

Furthermore, that improved infrastructure would benefit the UK’s ability to compete in the global economy by making it more productive, as well as creating ‘positive personal and social benefits’.

But the claims are based on a number of assumptions. Chief among these is that there are 700,000 suitably skilled workers who could fill these newly created roles. Credit crunch-related redundancies may have eased the skills shortage in the UK IT sector somewhat, but there is still a significant shortfall. Adding 700,000 extra roles (about half the number the IT sector currently employs) would most likely result in a contract bonanza for the Indian IT outsourcing companies.

And if the UK did somehow invest in training people to make up for the shortfall, it would then have a surplus once the public IT projects were complete, most likely adding to unemployment.

Looking at who funds a think tank can usually throw some light on its intentions. ITIF, which describes itself as ‘non-partisan’, counts employees of Microsoft, Cisco, VeriSign and Apple among its directors.

And while for the UK economy the putative benefits of spending £15 billion of public money on IT can be debated, the US-owned IT industry would be guaranteed a boost.

Clive Holtham, professor of information management at the Cass Business School in London, says that other, cheaper government IT projects could be more beneficial

The ITIF report is an interesting US-oriented perspective on UK public policy, but it involves too many hypothetical calculations. It is relentlessly optimistic about £15 billion of publicly-funded IT investments necessarily creating 700,000 UK jobs, and it ignores the costs of funding that public investment.

A tiny fraction of this £15 billion could be spent on more cost-effective approaches. For example, a near-costless requirement that public sector bodies quickly move to open source software would lead to major and early financial benefits to the UK economy, albeit at the expense of largely US-based proprietary vendors.

Sharifah Amirah, principal analyst for ICT in Europe at Frost & Sullivan, says the report is optimistic about the job-creating capacity of public IT projects

The report is well presented academically, but I don’t think the figure of 700,000 jobs being created in the UK alone is realistic. I can see some job creation in the areas they have identified, but we could also see people being retrenched.

We know, for example, that BT now itself has at least 1,000 engineers that it doesn’t know what to do with, because they don’t have the skills that are relevant. You can’t learn these skills overnight.

And the report doesn’t mention that by automating much of the public IT and telecommunications infrastructure, you would also be destroying jobs.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media (now Bonhill Group plc) from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The...

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