The government is withdrawing financial subsidies that have encouraged the take-up of home computers by UK employees.
In his budget speech on Wednesday, Chancellor Gordon Brown announced that the tax exemptions offered within the Home Computing Initiative would be withdrawn next month. A similar tax exemption for firms who supply more than one phone to an employee is also being dropped.
"Many employees have benefited from the tax exemption to get a computer into their homes, but the Government now wishes to focus support on groups with the poorest access to technology, to meet the goals set out in the Digital Strategy," said Brown in the Budget report published on Wednesday afternoon.
"As a result, the Govenment [sic] has decided to remove the current tax exemptions for employer-provided computer equipment, from 6 April 2006. The tax exemption for mobile phones is also being refocused to ensure it delivers on its objectives."
The Home Computing Initiative allow employers to loan computing equipment to their employees for personal use at home as a tax-free benefit. Under the terms of the schemes, staff are able to lease new PCs with a fee deducted from their salary each month.
The Initiative, introduced in 1999, was meant to increase the take-up of PCs by the UK population, by making it cheaper to own one. Although its initial take-up was disappointing, it did improve recently — just last week BT said it had loaned 30,000 PCs to its staff.
Ian Hopkinson, partner at accountancy firm KPMG, said that the removal of the tax exemption was unexpected, difficult to understand and would bring real practical problems for employers.
"It also applies to the provision of more than one mobile phone, signalling an end to employers offering both a mobile and a Blackberry to staff. In future, companies are likely to force staff to use just one mobile device. This will clearly have a knock-on effect for handset providers," said Hopkinson.
"April is a popular time for employers to launch flexible benefits arrangements. This means that they will now have been through employee elections and possibly finalised contracts for the provision of computer equipment. The removal of the exemption is for computers not made available before 6 April and, as it is highly unlikely that physical delivery of kit can be made before then, it puts employees and employers in an uncertain and potentially expensive predicament".
Intellect, the high-tech industry association, was also upset by the abolition of the Home Computing Initiative.
"Intellect is dismayed by the announcement in today's budget. The Treasury should have taken the opportunity to engage in a formal consultation process to fully assess the benefits of this scheme," said Tom Wills-Sandford, deputy director general of Intellect, in a statement.
"The Home Computing Initiative is one of a series of important measures in place under the banner of the Government's Digital Strategy, which helps tackle the digital divide for employees on lower incomes. To date, the initiative has successfully driven uptake of home computers and has played a useful role in widening digital inclusion," Wills-Stanford added.
Talkback
This is ill-though through and will now result in many job losses across the HCI Sector, so much for a vote winner for Brown’s budget.
Let him try and earn a real living.
This is just great. I have committed to this scheme for the next three years but it doesn't kick in until 1st April and I have little chance of getting the machine in 5 days. Looks like I would have been better off buying a machine on interest free credit.
I suspect Gordon Brown came up with the idea in the shower this morning.
I run a HCI business which helped the government to reach its digital Britain strategy. As the chancellor has now removed this tax exemption with almost immediate effect I will have to lay off my 5 staff today - I am sure they will not be voting labour in the next election. People that are already in a HCI scheme before 6th April 2006 (determined by the date on the hire agreement) will not face any taxable benefit. My advice to other employees is sign your agreement before 6th April but don't do it after this!
Fair enough, it has benefitted many and there are few homes without a computer.
Seems to me this now brings everybody back to a level playing field when buying a computer. If anything he would have been better by removing VAT on computers and monitors for a year, then everyone would have had the opportunity.
Its crazy. As a small company it was initially difficult to find a suitable provider. Now they are finally available he has withdrawn it. We are waiting the 6 weeks for our licence so despite getting a high percentage of employees interested the licence is stopping us getting in before April 6.
What a crap decision!
I work for an HCI Provider too. It's a Government Initiative. If they decide to scrap it to pay for a war in Iraq, or to help Gordon Brown's PM credentials, then there's nothing we can do about it. This whole thing stinks. I, along with many hundres of others, may very well be out of a job thanks to Gordon, And it doesn't stop there. Companies like HP, Dell, Fujitsu Siemens, Lenovo etc will all make cutbacks in light of this news.
Thanks for nothing Gordy!
Gordon's budget will cost hundreds of people their jobs.
By scrapping HCI (Home Computing Initiative - www.dti.gov.uk/hci) without warning or consultation, he has just wrecked the businesses and jobs of hundreds of those working in this area. The hundreds of thousands of those who took advantage of HCI to obtain low cost computer equipment - which was targeted at the low paid and until today was tax free - have now been betrayed and will have to pay the tax they previously did not.
Is it any wonder people don't trust politicians?
Apart from staff saving National insurance, tax and VAT through buying a pc through their gross salary; companies saved up to £192 over 3 years in National Insurance through a reduced gross salary bill.
Gordon in his many ways of making ends meet has decided £64 a year companies would have saved by offering their staff a fantastic benefit, improving IT skills, staff morale, motivation etc. is outweighed by the fact he could have...
up to £64 per year x number of PAYE staff in UK that take part in a HCI scheme in his back pocket...
...doesn't really seem like a surefire way to increase his budget kitty does it?
Education and schools is so important in this budget Brown has decided pc's play no part in education, homework and a computer literate nation. No £64 is too much for a company to be saving in National Insurance.
17th of March 2005 HCI gets a major boost from the Government, 23 March 2006 Government pull the plug,As someone who works within the Hci with Charities and Not for profit companies this is a major blow.
Its crazy. As a small company it was initially difficult to find a suitable provider. Now they are finally available he has withdrawn it. We are waiting the 6 weeks for our licence so despite getting a high percentage of employees interested the licence is stopping us getting in before April 6.
What a crap decision!
I run the rewards and benefits dept for a major menswear company.
In December last year, I passed this by the board of directors, who wanted to go ahead with HCI, as a benefit for those who didn't have children (so didn't benefit from childcare vouchers).
I had to wait until April 06 as we work to a strict annual budget .
So forget it.
Approximately 6 months work on behalf of my team, and several potential providers.
I am just preparing an e mail to all staff, informing them to disregard all the exciting news they had through March........
Thanks Gordy!!!
The HCI was a great idea in it's simplicity!!
Now it's gone...
I'll have tyo go back to researching dry bumming on google for a living now....
There was a song once called "Gordon is a Moron", i can't remember who sang it but it sure sums up this decision, that he tried to sneak through in the budget, more or less as nothing more than a paragraph burried in the reams of papers...
Mr Brown is obviously oblivious to the suffering this decision will cause to the hundreds of people who have found a living working in the HCI space, many companies have sprung up around HCI as specialists in delivering what was a very valuable scheme to those participating.
He cites a reason of HCI not addressing those on lower incomes, this was more a case of people not being allowed to reduce their salary below minimum wage thresholds, even though they would have had to sign an agreement to do so, but no the government nanny would not allow that, dont forget nanny always knows best! how untrue.
With the simple ability in relaxing a regulation surrounding the minimum wage, allowing variance by agreemnet of the employee, HCI would have addressed the very people that Mr Brown is now claiming the scheme was aimed at.
What now Mr Brown? lower literacy? IT Incompetence, increase in the digital divide and a less than average lifestyle than our european counterparts?
RETHINK Mr Brown, you have caused untod pain to many famillies today, I have been a card carrying Labour member for many years and active in the TUC, today i am disgusted with New Labour, you are a poor shadow of the leaders we used to call great.
By the way i used to work in HCI so i am feeling th effects ...
Where I work, we have all just signed up for this. Hundreds of people were just getting ready to go and collect their shiny new PCs when the certificates arrived. I can't imagine what the department right in the middle of arranging all this is going through right now!. I can understand pulling the plug, but doing it without warning right at the time when everyone is halfway through the process, well that's just nonsense!
I've always thought that the HCI initiative was ill conceived as a way to address the digital divide between lower income groups and others and welcome the rethink.
The cruel irony of the HCI scheme was that those on, or just above minimum wage could not take advantage of it (as it would have pushed their gross income before tax below minimum wage) Hopefully we will see something come into place that addresses this in place of HCI.