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By | Mark Ballard 27th March 2006 12:49

HCI traders fight for the right

...to PC tax breaks

Resellers wrong-footed by Gordon Brown have launched a campaign to save the Home Computing Initiative (HCI) from closure on 6 April.

They appealed to the charitable traditions of the British people to support a scheme has allowed them to undercut other computer retailers on the back of £150m of government tax-breaks for employees buying PCs.

Killing the scheme will mean job losses, poor working class families being left on the wrong side of the digital divide, and Britain falling behind in the international league of computer proficiency, say firms that sell computers through HCI.

Rob Howes, managing director of HCI trader Bizzapp, pleaded the case for his ilk when he told The Register how they worked to bring cheap computers to the poor: "All [HCI traders] started because of the opportunity to make a profit, but almost all were doing it because they felt it was doing good. These are genuinely people wanting to do good."

HCI was launched two years ago as a way of closing the digital divide, between those people who could afford home computers and those who could not. Employees who bought PCs through their wage packets effectively got a tax-free allowance of £1,500 over three years.

The scheme suddenly became quite successful, but it was of questionable value in getting computers into the homes of the most needy.

It did allow needy computer traders (who sell the computers that employers sell to their employees) to make more than double the margins they would from selling through usual channels.

Howes said the sale of a PC through retail would normally earn a three to five per cent margin. "[HCI dealers] they'll make about 10 per cent margin, but they've got more costs anyway from running the HCI administration," said Howe, who used to sell software to city traders.

The HCI Alliance, an industry lobby group, claimed in January that the number of employers offering HCI computers to their workers had risen almost four-fold to 1,250. Half a million people had taken the scheme up.

HCI Alliance director Vivien Quinn said in a statement last week: "We know the digital divide cannot be bridged by HCI alone, but we fundamentally believe it is making a real difference. The statistics speak for themselves.

“Sixty per cent of [HCI computers] have been acquired by blue collar workers and 75 per cent by employees who pay the standard rate of tax or lower."

The HCI Alliance failed to break the 75 per cent of people on "standard rate of tax or lower" down to show how many were on a standard tax rate and therefore not likely to be in need of government subsidy to buy a home computer, and those on the lower rate of tax who were more likely to be needy. Quinn has not returned our calls.

But Howes noted that 15,000 nurses had bought computers through the scheme.

What's more, there were plenty of companies set up with the sole purpose of selling HCI computers to employers. A representative of Onecall Technologies, another HCI trader, told BBC Radio 4's Money Box programme over the weekend that 2,000 people were employed by HCI traders.

Howes produces software that makes it easy for a trader to administer an HCI programme for an employer. He had invested £500,000 and signed up 80 resellers.

He took offence at a previous Register story that suggested the scheme had mostly been adopted by large employers.

Seven hundred employers with an average of 275 employees were either using or had shown an interest in doing HCI through Bizapp, Howes said.

The "SaveHCI" campaign advertised on Bizzapp's website said: "The Government's own statistics show that 9.6m employees are employed in SMBs and most of these employees will now be denied access to HCI."

Each employee who buys a HCI computer is being given £1,500 of tax breaks over three years. Employers save about £192 National Insurance Saving over the same period, according to Howe.®

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