VARs urged to brace as public spending review looms

Counting the pennies: details of departmental cuts will be unveiled in the Autumn Spending Review

Yesterday's budget provided no nasty surprises in terms of departmental budgets, but public-sector focused resellers have been urged to prepare for bad news in the Autumn Spending Review.

Chancellor of the exchequer George Osborne unveiled departmental spending plans that are nigh-on identical to those proposed by Labour in Alistair Darling's budget in March. There are no further cuts beyond the £6.2bn savings identified prior to the budget.

The Budget document says: "[There will be] no further cuts in public spending…in order to protect the most productive public sector investment."

For 2010/11, a total spend of about £700bn will allocate £196bn to social protection, £122bn to health, £89bn to education, £40bn to defence and £36bn to public order and safety. Personal social services will get £33bn, with £27bn going to housing and the environment, £22bn to transport and £20bn to industry, agriculture and employment. Debt interest will account for £43bn and £74bn will be spent on other initiatives.

In four years' time the government hopes to have put measures in place that will facilitate spending savings of £32bn a year. A net reduction of £99bn is planned by 2015/16.

Room for review
It was announced yesterday that detailed spending plans covering the next four years will be revealed in the Autumn Spending Review on 20 October. Swingeing cuts are expected, but budgets for areas including health, education, overseas aid and defence could be ring-fenced. Unprotected departments could be faced with reducing spending by a quarter. Prior to the review, opinions will be canvassed from citizens and public sector workers.

Many education specialists in the channel had been keeping an ear out for news of the Building Schools for the Future (BSF) initiative in yesterday's budget. None was forthcoming.

Shortly after assuming power, the coalition government revealed the £55bn scheme's future was up in the air.

On 18 May, the Department for Education issued this statement: "The Department has not taken any decisions on the BSF programme. The Department is reviewing BSF to ensure that, when we build schools for the future, we do so in a more cost-effective and efficient fashion."

Cause for concern
Georgina O'Toole, research director at analyst TechMarketView, claimed that public sector technology suppliers should prepare for the worst. Writing on the market watcher's website, she claimed that October 20 would be a red-letter day for channel firms.

"Regardless of the outcome [of the review], there are tough times ahead," she said. "All ICT suppliers to UK government will be worried, and with good reason."

Alan Ball, UK and Ireland managing director for office products wholesaler Spicers, claimed the public spending cuts, coupled with the VAT increase, would give resellers "more than their fair share of pain".

"[There will be] spend restrictions across all departments and office supplies is a profit and loss category that is usually first on the list to be reduced," he said. "Add to this the increase in VAT and manufacturers increases and you have a demand for a reduction on spend further reduced. That reduction means lower turnover and, ultimately, lower profits."

A private matter
But the budget document maintains that the measures it contains will fuel econo mic growth through stimulation of the private sector.

"The British economy has become unbalanced," it says. "It has become too reliant on growth from a limited number of sectors and regions. Overcoming these challenges will require a new model of economic growth built on saving investment and enterprise, instead of debt. This budget is the first step in transforming the economy and paving the way for sustainable, private sector-led growth, balanced across regions and industries."