The costs of e-government is set to outweigh the financial savings it provides over the next decade, according to research from leading public sector IT analyst Kable. The e-Government Cost Savings Report forecasts that savings from placing central and local government services online are likely to be around £289m for the 2005-06 financial year – by the end of which the Government wants all services online – against a spend of £1.2bn in that year alone.
The forecast, commissioned for the Government Computing Conference and Exhibition 2003, casts doubt on claims that e-government will bring significant savings for the public sector. It is likely to take nearly 10 years before it will begin to yield such results.
"Plotting the e-investment against the increase in savings over the coming years shows, that on an annual basis, the savings may match the costs only by financial year 2012," says Karen Swinden, Kable's Head of Forecasting.
"Even this projection could prove to be optimistic. Unlike the private sector, the public sector cannot maximise savings from digitisation by dramatically cutting physical access to services and staff numbers, as it has a duty to ensure equal access those on the wrong side of the 'digital divide'.
"This means that in many cases parallel physical and digital processes have to be maintained, to a far greater extent than in private sector areas such as insurance or banking. And this is costly. "
The report estimates that between 2001-02 and 2005-06 e-government (see definition below) will cost UK taxpayers £7.4bn. Local government will spend just under £3bn, while central government will spend £4.4bn. On an annual basis, spending will peak in 2003-04 at £1.8bn, falling to £1.2bn in 2005-06.
Much of this investment will come from central funds. Central government departments and agencies will receive £4.2bn of funding between 2001-06, allocated through the 2000 and 2002 government spending reviews. This means that only a small part of their e-government investment will come from internal budgets.
This is not the case for local government. Nearly 78% of its £3.0bn investment in e-government will come from individual local authority budgets. Only £675m will come from centralised funding allocated through the Office of the Deputy Prime Minister.
Kable estimates that public administration (central and local government) savings from e-government will start to come through from the current year, 2003-04, though costs have been incurred since 2001-02. On average, savings of £165m per annum are expected. The majority of these savings come from the following:
- Price reductions on external purchases and savings on administration resulting from e-procurement.
- Reductions in staff costs and office accommodation due to the introduction of customer relationship management systems. These reduce the number of staff needed for routine interaction with the public in person or on the telephone. Better CRM should also provide for more efficient follow-up.
- Reductions in service delivery staff and office accommodation due to the digitisation of standard processes. This should provide savings on paperwork, checking, storage, retrieval and payment, and reduce the duplication of effort.
While investment in e-government should fall dramatically after the 2005 target date for electronic service delivery, savings produced by this investment will continue long after. Even so, annual expenditure on e-government will be greater than savings made right up to financial year 2012.
The line up of conference speakers includes many of the key policy makers and executives implementing a radical shake-up in the way public services operate.
- Christopher Leslie MP, Parliamentary Under Secretary of State, Office of the Deputy Prime Minister
- Anwar Choudhury, Director of e-Government Markets, Technologies and Innovation, Office of the e-Envoy
- Peter Gershon, Chief Executive, Office of Government Commerce
- Richard Granger, Director General NHS IT, Department of Health
- Mike Pitt, President of the Society of Local Authority Chief Executives and Chief Executive of Kent County Council
- Peter Handcock, Chief Executive, The Court Service
- John Taylor, Director General Information, Ministry of Defence
- Huw Rees, Director, Communications-Electronics Service Group
- Richard Thomas, Information Commissioner
It is still possible to turn up and register on the day for the conference and exhibition.
Quelle: Kablenet
