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Last Updated: Saturday, 25 March 2006, 07:45 GMT
Budget move imperils 2,000 jobs
By Paul Lewis
BBC Radio 4's Money Box

A man on a home computer
The changes will only affect new arrangements from 6 April
Two thousand people could lose their jobs after the government pulled the plug on a scheme to help employees get a home computer.

The Home Computing Initiative was set up to help lower-paid workers afford their own PC and introduce them to information technology.

Half a million people took advantage of generous tax breaks to buy a home computer at discounts of up to 50%.

But on Wednesday the chancellor announced the project would end on 6 April, which will leave the 60 companies which supply the computers and run the schemes with no income.

Chief executive of Onecall Technologies Graeme Mitchell told BBC Radio 4's Money Box programme: "Ten days' notice we've been given and we've just lost our jobs.

"Onecall will lose 100 jobs and those indirectly related will amount to another 200.

"It's an industry of about 2000 people. How can you just pull the plug on it at 10 days notice?"

It was not just Graeme Mitchell who was taken by surprise.

The Department of Trade and Industry, which runs the scheme, had only offered a plan to its own staff on March 15, just in time to get the scheme approved.

But colleagues at the Department for Work and Pensions were not so lucky.

A spokesman confirmed to the programme it had begun to assess interest in the scheme but had now scrapped its plans as there was not time to get them finished before the 6 April deadline.

Soaring cost

The scheme began in 1999 but really took off after it was re-launched in 2003.

By paying for the computer over three years out of their wages, the scheme allowed both sides to avoid tax and national insurance on the payments.

Tax exemption is in some cases being used beyond the scope of its original intention
HM Treasury spokesman

Companies also avoided VAT by supplying the computers with some work-based software.

Although technically a loan, at the end of the scheme the employer normally allowed the staff to keep the equipment.

The scheme was so attractive, the cost to the Exchequer soared from its original estimate of 5 million to around 150 million a year.

Abuse

The Treasury told the programme it had clear evidence the tax advantages of the scheme were being abused.

"Tax exemption is in some cases being used beyond the scope of its original intention. Some HCI providers offer packages including items such as games consoles and home entertainment centres and allow employees to buy equipment rather than borrow it as intended," a spokesman said.

But Graeme Mitchell denied there is significant abuse.

"That's totally untrue," he said. "There may be cases, but if I look at my business [for example] with a huge UK retailer, all that has been sold to them is thousands of units, all PCs and laptops, all at low-end income brackets, none of them getting consoles, all PC technology. That's where the business is."

He called on the government to rethink its plans.

The Treasury told the BBC there would be no change. But the programme understands that officials may meet industry representatives in the next few days. Meanwhile a website has been launched to save the tax relief.

Existing schemes, and those where contracts are signed before will be allowed to run for their three year term.

The Treasury said it could not comment on any job losses.

It will focus its support for IT on groups with the poorest access to it. But no plans will be announced until 2007.

BBC Radio 4's Money Box will be broadcast on Saturday, 25 March, 2006, at 1204 GMT.

The programme will be repeated on Sunday, 26 March, 2006, at 2102 BST.



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SEE ALSO:
Budget blow to home computers
22 Mar 06 |  Business
PCs at home make 'better workers'
19 Jan 04 |  Technology
Britons still 'scared' of computers
03 Oct 03 |  Technology


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