ABHI Budget Analysis 2010
Wednesday saw the Chancellor, Alistair Darling deliver what he had promised would be a ‘workman- like budget’. The press reaction to the budget varied, the Guardian praised the Chancellor avoiding a ‘pre-election give away’ in favour of putting his “personal stamp on a package designed to cement recovery”, the Telegraph chose to focus on the effects tax plans will have on some families.
The Conservative party argued that Mr Darling had dodged the big decisions on spending discounting the budget and claiming the real budget will be delivered by George Osborne following a general election. The Financial Times agreed that Mr Darling had avoided making heavy cuts ‘The tough decisions on public spending – largely avoided on Wednesday – will be taken in the autumn. Neither Mr Darling nor Mr Osborne have any intention of flashing the blade before the election.’
The Chancellor announced that the UK economy contracted by 6% during the recession and predicted that the economy will grow between 1% and 1.5% this year. His growth forecast for 2011 was revised from 3.5% to 3%-3.5%. Government is borrowing £167 billion (lower than previously predicted), inflation is 3%, the national debt is £799 billion and interest rates are pegged at 0.5%.
Significant for industry were Mr Darling’s announcements on the level of saving required by the NHS- £4.35bn, support for SMEs and measures to encourage investment.
Some key points from the Budget are set out below, together with ABHI actions/plans to respond.
NHS Efficiency Savings
The Department of Health and the NHS announced that they will deliver £4.35bn of savings, as part of Government’s drive to deliver £11bn of savings from efficiency by 2012/13.
The Department of Health and the NHS savings will come in a number of areas, including:
- “Up to £1.5bn will be saved by driving down the costs of procurement through securing best prices for goods and services”;
ABHI believes that the majority of savings can be made through reduction in cost to serve/acquire, rather than through simple price reduction, by taking out duplication in NHS procurement procedures. We meet on this with DH shortly.
- “£100m will be saved by taking a new approach to the National Programme for IT that offers greater choice to local hospitals; this is part of the £600m reduction in lifetime costs announced in December 2009”;
- “£60m will be saved by reducing the amount of energy the NHS uses, to deliver a 10 per cent cut in carbon emissions”;
- “Up to £555m by reducing staff sickness absence in the NHS”
Services for SMEs
UKTI and the Export Credits Guarantee Department (ECGD) will collocate to provide a one-stop shop for exporting businesses and changes to procedures will help provide a more streamlined service to UK exporters.
Procurement and SMEs
“Based on current spending levels, if the whole public sector increased the amount of procurement that went to SMEs by 15 per cent throughout the supply chain, this would mean up to an extra £15 billion of business for SMEs. The Government will deliver this change in central departments by agreeing departmental targets to increase the proportion of central government procurement spend that goes to SMEs by 15 per cent throughout the supply chain. This summer, the Government will publish for the first time the level of spend that goes to SMEs, which will be used as a baseline for these targets.”
“The increase in central government spend going to SMEs will be achieved by agreeing targets with departments and continuing to deliver on the Glover Committee's recommendations:
- requiring departments to publish contracting and sub-contracting opportunities through a single portal that suppliers will be able to access free of charge from December 2010 (an SME has been awarded the sub-contract for the portal, which will be hosted on businesslink.gov.uk);
- challenging departments to make more use of SMEs, including flagging contract opportunities as SME-friendly and increasing training to institutionalise SME-friendly procurement practices;
- providing direct support to SMEs through the free-to-use training package, Winning the Contract; and
- working with main contractors to open up supply chains to SMEs.”
ABHI will establish with DH how the targets above will be measured for the NHS and feed back to members.
“To build further on recent prompt payment success, all central government departments will now aim to pay 80 per cent of all undisputed invoices within five days and will explore the option of moving to immediate payment, in time, through electronic invoicing for all suppliers. The Government will also encourage all NHS Trusts and local authorities to publish their prompt payment performance data on data.gov.uk. In addition, to ensure the benefits of procurement and payment improvements are shared with small businesses, all central government departments will be required to include a clause in their contracts with suppliers to ensure that suppliers pay their subcontractors within 30 days.”
ABHI will press for this data to be made available for NHS Supply Chain performance.
“Following the Government's publication of a Policy through Procurement Action Plan on driving growth through public procurement, the Government is launching a consultation on a charter enlisting industry’s support for its priority policies. Suppliers will be encouraged to engage voluntarily with the commitments, creating a collaborative approach which will contribute towards growth in the economy.”
” To further support the agenda set out in Building Britain's Future: New Industry, New Jobs, the Government is launching a set of 10 key Procurement for Growth principles, calling for effective industry engagement before procurement, to better enable suppliers to meet government's forward demands. Procurers’ take-up of the principles will help level the playing field to enable UK companies to bid successfully where they are able to offer value for money."
The above are new and ABHI will seek a realistic involvement for the medical device industry.
The UK as a centre for research and innovation: encouraging investment
“The future success of UK companies in winning business in global markets will depend on their ability to innovate and to take advantage of the UK's world-class research base. The Budget also announces measures to support universities and encourage innovation, to facilitate the commercialisation of research and intellectual property, and to improve skills in the key jobs and industries that will drive the UK's future growth.”
ABHI members interested in further details of this should contact the secretariat
'Patent Box’
In order to ensure the UK remains an attractive location to ‘invest in and exploit innovation’ the budget puts in place the patent box announced in the Pre-Budget Report. This patent box will mean 10 per cent corporation tax rate to income from patents from April 2013. The Government intend to work with business to find practical regime to support this measure.
Further detail on what will be covered by the patent box-
- Income from patents granted but non-commercialised when legislation is passed in 2011 will be eligible.
- Income from patents granted overseas or in Europe as well as the UK will be eligible.
- Embedded royalties (as well as pure royalties) will be eligible.
- Income from acquired (as well as self-developed) patents will be eligible.
The Government will consult with business over the summer. This will consider how the above elements will work in practice i.e. how to include patents not yet commercialised, how the regime will apply to equivalent overseas patents held by UK companies, how to identify and value embedded patent income, and how to give relief to acquired patents.
Full budget details can be found online at:
http://www.hm-treasury.gov.uk/budget2010_documents.htm
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