Chancellor Gordon Brown told Parliament in last week’s Budget speech that he had met the golden rule on government spending and investment with £11bn to spare.

He also said a combination of better use of assets, lower administration costs, efficiency savings and overall economic growth will underpin public spending commitments, including the extra money announced for defence, security and health.

Electronic delivery of government services will be a key element of Whitehall’s efficiency plans, and are expected to yield savings of £400m between 2008 and 2011, chief secretary to the Treasury Stephen Timms told Computing.

‘Of particular interest will be the arithmetic underpinning service transformation and the ambitious value for money savings that were set out in the Budget,’ he said.

In response to the recommendations of former HM Revenue & Customs (HMRC) chairman Sir David Varney’s report on service transformation published with November’s pre-Budget report, specific initiatives are already taking shape, says Timms.

* Internet services will increasingly focus on two portals: DirectGov for citizens and BusinessLink for business. HMRC is to build on its role as the main delivery channel for business by taking over BusinessLink from the Cabinet Office.

* Some 500 government web sites are to be closed, with more to follow.

* Significant volumes of transactions are expected to shift to the electronic channel, cutting delivery costs and enabling related services to be linked.

‘The ideas in David Varney’s review will be a significant element in making these reductions, and IT-enabled transformation will make a big contribution to the departmental spending reviews when they are published in the autumn,’ said Timms.

Of the £400m expected gains from e-services, 40 per cent will come from citizens shifting to the electronic channel, a third from cross-selling associated services, and one-fifth from sharing infrastructure between different services on a common technology platform, according to Treasury calculations.

A further £440m will come from streamlining and improving the performance of public sector call centres, and a new board is to be established to ensure government is making best use of its contact with citizens.

The government also expects savings from the £12bn investment in the National Programme for NHS IT (NPfIT), which includes plans for electronic bookings and prescriptions, and a national patient record system.

Despite delays in a number of different areas of the programme, the cost of the core contracts has not risen, says Timms. And there has been significant progress – 170 million X-rays are now digital, 90 per cent of GP practices can use the electronic bookings system, and eight per cent of prescriptions are electronic.

‘I am keen that it should be acknowledged when we see substantial benefits from using IT in government – as we now are from the National Programme,’ said Timms.

‘I am absolutely certain this will be transformative for the NHS over the next few years, and that we will see quite substantial savings for the health service from using these systems.’

Analyst view:

* In the context of the Chancellor’s claim of efficiency savings worth £26bn a year by 2010-11, the £400m to be released by shifting to electronic service delivery seems relatively small.

But the figure reflects the fact that the Varney Review is as much about improved service as about savings, says Eric Woods, government practice director at analyst Ovum.

‘The majority of savings have been and will continue to be about back-office reorganisation, headcount reductions and smarter procurement,’ said Woods.

Shared back-office administration systems will be increasingly important to make the necessary savings in the next spending period, from 2008-11, says Woods.

‘The low-hanging fruit of procurement and headcount savings were key in the first efficiency programme,’ he said.

‘The next stage is to find performance changes that will allow the year-on-year savings that are harder to get, from things such as staff cuts.’

Increase in research and development tax credit

Alongside commitments on public spending, the Budget's most significant news for the technology sector is increase in the research and development (R&D) tax credit scheme, expected to be worth around £100m a year.

Under the new measures, the rate will rise from 150 per cent to 175 per cent for small companies and from 125 per cent to 130 per cent for larger firms from April next year.

But while the increase for small businesses is unequivocably welcome, the rate change for their larger rivals is not enough to make a real difference, according to Tom Wills-Sandford, deputy director general of supplier trade body Intellect.

Once corporation tax rates are taken into account, even at their newly-lowered level, the actual benefit from the credit is low.

'The increase will only result in an increase of half a percentage point, which is disappointing,' said Wills-Sandford.

If the UK is to meet the target for 2.5 per cent of gross domestic product to be invested in R&D by 2014, there will need to be more significant incentives for major business to come to the UK, he says.

'We can't meet the target just through our own small firms, we have induce more multinationals to do their R&D here.'

The R&D tax credit is available to companies investment more than £10,000 in research.