The new government's plans to scrap the National Identity Scheme, biometric passports and ContactPoint could be expensive if they involve prematurely cancelling contracts.
Vendors including IBM, CSC, Thales and Capgemini hold existing contracts relating to programmes like the National Identity Register (NIR), the next generation of biometric passports and the ContactPoint children's database. All are set to be cancelled by the new coalition government.
Capgemini hosts ContactPoint for the Department for Education (formerly the Department for Children, Families and Schools) under a £40m contract. A spokesperson for the provider told GC that it "remains unclear" what will happen with the deal, which runs until 2014, as talks with the new government have not yet taken place.
"We are open to whatever they want to discuss, whether that means managing a switch-off or not," the spokesperson added.
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The Liberal Democrats and Conservatives believe that dumping the schemes would save billions of pounds, but terminating the contracts midway may present some expensive hurdles.
"Despite grasping at the cost savings from reducing and cancelling the schemes, the government is likely to face implications for the lengthy contracts awarded to suppliers such as CSC for the application and enrolment of passports and identity cards and IBM for the National Biometric Identity Scheme (NBIS)," said Clare Hirst, a senior analyst at Kable.
"Although it is likely that contracts will have been negotiated with a clause for early termination of the scheme, vendors will still expect compensation of a percentage of the full cost of the total implementation. The NBIS will still remain, albeit at a reduced scale," she added.
Hirst estimates that the cost of the IBM contract will fall from £265m to £53m if it were to be cancelled, resulting in penalties for the government as IBM will have been contracted for the full scope of the project.
IBM was awarded the contract by the Home Office in May 2009, whilst CSC has a 10 year contract with the government worth £385m.
As detailed in its election manifesto, the Lib Dems believe cancelling fingerprint passports would save £1.83bn over the five financial years from 2010-11 to 2014-15, with savings from terminating ID cards coming to £550m.
That party's manifesto also said that ditching the Interception Modernisation Programme, which aims to expand data held on individuals' email, web and other internet traffic, would generate savings of £800m, whereas ContactPoint's cancellation would save £190m.
A detailed analysis of the NIS's costs for UK citizens, published by Kable in 2009, agreed that substantial savings could be made if the schemes were dropped. The report suggested that the £4.95bn cost over 10 years could be reduced by £3.08bn to £1.88bn if ID cards, the NIR and fingerprints on passports were abandoned.
During Labour's election campaign former home secretary Alan Johnson argued that getting rid of the ID card scheme at this stage would be counterproductive. "The money all comes back because we charge for ID cards. If we stop now you've wasted all the capital investment and you get no money back because we will charge for the ID card," Johnson said at the time.
Hirst said that the key areas that will be affected if the schemes were scrapped would be the card design and production — for which the contract had not been awarded — programme management, enrolment offices and customer contact centres.
During the election, Labour MP for Blaydon Dave Anderson said that hundreds of jobs at a local De La Rue Systems passport making plant would be under threat if Lib Dem proposals were implemented. A similar argument was made by Labour MP for City of Durham Roberta Blackman-Woods, where the voluntary ID cards scheme is administered.
"One thing is for sure, and that is that the national identity scheme is unlikely to leave quietly," Hirst concluded.
Talkback
Of course, the real cost should be measured in terms of our civil liberties and freedom. If the ID Card scheme had been allowed to continue, then we'd be paying a far higher price than any financial bottom line could portray.
ANCHOR
The Home Office continue successfully to anchor the debate about the National Identity Service (NIS) on a figure of £4.95 billion.
Call it £5 billion.
£5 billion is the amount of cash that would flow through the Home Office's books in the next 10 years if the NIS goes ahead.
Previously, the figure was £6 billion. It fell to £5 billion when the Home Office decided that private sector companies would collect everyone's fingerprints. With the Home Office no longer doing the job, £1 billion less would flow through their books.
That is not a saving. If the Home Office outsourced everythig to do with the NIS, that wouldn't make it free. Someone still has to pay for the fingerprinting job, whoever is doing it. You and me.
So should the anchor reallt be £6 billion instead of £5 billion?
No. The LSE looked at this and calculated a cost of between £13 billion and £19 billion for the first 10 years of operation of the NIS. They were trying to take into account the cost of every pub in the country hooking itself up to the NIS, every supermarket and bank and hospital and police station and jobcentre, and so on. These costs are excluded from the Home Office's figure as the cash wouldn't flow through their books.
So should the anchor really be £13-19 billion?
No. The LSE had to give up its attempt to calculate the figure because the Home Office actually had no idea how the NIS would be used and what would be the associated costs.
We are still in the dark, therefore, as to how much you and I would actually have to pay for the NIS. All we know is that it is unlikely to be less than £13 billion.
Cancelling NIS contracts will be expensive. Yes. But the saving should be calculated by reference to the figure of £13 billion, not £5 billion.
To continue to use £5 billion as the anchor is naively to fall for what is frankly a rather spivvy trick.
Please see http://dematerialisedid.com/BCSL/Cost.html