Memorandum submitted by the HCI Alliance
This response is on behalf of the HCI Alliance,
an alliance of BT, Intel and Microsoft, which has been working
with the government since mid 2003 on Home Computing Initiatives.
The HCI Alliance is a representative body providing the neutral
voice of the HCI industry, promoting the benefits of HCI in a
non-partisan way and continuing to work with Government to iron
out issues and challenges relating to HCI (for example salary
sacrifice). It is not a regulatory or controlling body.
The announcement in the budget that the tax
exemption that underpins the Home Computing Initiative is being
withdrawn without any consultation and with immediate effect came
as a complete shock and disappointment to the HCI Alliance and
to the country as a whole. This initiative has been viewed by
all parties as an excellent example of how the government and
private sector can work together in partnership to fulfil the
government's policy objectives.
HCI has been delivering successfully against
its targets and has been widely acclaimed by many countries outside
the UK who are adopting similar models in support of their digital
strategies. Its abolition at the stroke of a pen will wipe out
the good work that has been achieved over the last two and a half
years; and the potential that a modified HCI has to continue to
contribute to the Digital Britain of the future.
We urge the government to delay implementation
of the Budget change until a full review, assessment and consultation
can take place.
This is essential as a Regulatory Impact Assessment
was undertaken in October 2003 specifically because of the anticipated
impact on the PC market that would result from HCI. The removal
of this initiative will have a similar impact on the market as
well as the loss of jobs, livelihoods and businesses. A consultation
period will allow all the relevant facts to be put forward by
all parties and a considered view taken on the way that HCI can
be modified and improved to continue to contribute to the government's
policy objectives.
HCI has always been about much more than computers
and technology. The Office of the e-Envoy's business plan of July
2003 identified low levels of home PC penetration as a key weakness
of the broader UK e-economy, and made the correlation between
high home PC ownership and high levels of internet access. Other
policy drivers included e-Government, e-business strategy (including
work/life balance), skills and learning, and social inclusion.
HCI has successfully contributed to all of these policy areas,
demonstrating the value of an employer-provided benefit to all
employees particularly those with the poorest access to technology.
It also supports the future success of the Government's "Transformational
Government" agenda and investment.
We genuinely don't recognise the reasons given
for abolishing this initiative: that its job is done; that there
will be £300 million tax lost in fiscal year 2006-07; that
the initiative has been abused; that it is not focused on those
with the poorest access to IT. An HCI Alliance snapshot survey
in November 2005 identified that HCI is reaching its target audience.
Of the total of 477,000 people who have acquired computers through
HCI schemes in 2004 and 2005: 60% work in industries typically
seen as "blue collar"; and 75% of the take-up has been
by those who pay the standard rate of marginal tax or lower. HCI
overcomes many of the problems that inhibit access to IT: lack
of access to credit, fear, antipathy, affordability, technophobia,
relevance of computing and more; and many people taking up HCI
are doing so to get a computer for an older relative or relation
who is unemployed. The cost of PCs may have dropped over the years
but access to credit is still a problem for many low and medium
earners, and HCI offers an affordable way of acquiring a computer
for this audience.
Whilst the tax exemption has been in existence
since 1999 it has only been available to employers in any real
sense since early 2004 following the formation of the public/private
partnership between the Office of e-Envoy and the HCI Alliance,
and the subsequent introduction of the DTI's implementation guidelines
that clarified and simplified HCI implementations. As with all
new initiatives it has taken a while to get off the ground but
the last year particularly has seen HCI become the fastest growing
benefit in the UK behind company cars, pensions and private health
insurance. Evidence from employers and employees is that this
is a genuine win/win for all—bringing benefits including
increased ICT skills, individual learning opportunities and family
education, as well as opening up new opportunities for personal
and job development.
The OeE's Consultation document of 8 October
2003 acknowledged that the financial case for HCI was clear and
that the macro-economic benefits more than outweighed the lost
tax revenue. On page 10 of this document it stated ". . .
and the costs to the Exchequer are—as they were when the
legislation was introduced—offset by the potential benefits
to the wider economy" and on page 16 ". . . the reduction
in NI contributions and reduced personal income tax is effectively
offset by increases in business tax generated through growth in
the consumer PC market and productivity gains and benefits to
the wider e-economy.". These financial considerations haven't
changed today—and we would welcome the opportunity to understand
the numbers and costs put forward as part of this budget. Our
own calculations show that there are small positive tax gains
for the Exchequer even before the loss of the broader macro-economic
benefits from HCI in terms of a higher skilled and more productive
workforce.
If there is evidence of abuse, we would welcome
understanding what this is and helping to eradicate it—the
HCI Alliance has recently approached the DTI to agree with them
a revision to the eligible equipment guidelines precisely because
technology is moving so fast that the boundaries of eligible equipment
are blurring with each day and the original guidelines are open
to interpretation.
This initiative has had the unanimous and vociferous
support of industry, employers organisations and the unions. The
HCI Alliance has spent the last two and a half years working closely
with the TUC, which has been an active supporter of HCI and has
actively linked its growing union learning and skills work with
promoting HCI. Brendan Barber participated at the press launch
of the DTI's guidelines in January 2004; an HCI flyer was produced
and distributed to 250,000 union members; and numerous workshops
have been run with Union Learning Representatives all over the
UK. In a statement made in the second anniversary press release
on 19 January 2006 Brendan Barber particularly emphasised that
"experience has shown that when a business implements an
HCI scheme demand for learning services and training rises significantly".
We are committed to working with the Government
on this and will do everything possible to ensure a beneficial
outcome for all.
A review and consultation period will ensure
that the danger of "throwing the baby out with the bath water"
is minimised, and that the potential of HCI is not lost. At a
time when the Government is clearly committed to skills, education,
productivity and online access for all, HCI still has much that
it can deliver in support of the achievement of these policy aims.
If after consultation the Government remains
convinced that HCI should be abolished, then we would propose
a period of two years before the tax change is brought in. This
will allow current schemes being developed—including the
DTI and DWP schemes—to be implemented; and would allow the
HCI industry time to plan its demise in a more orderly manner.
27 March 2006
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