Clause 52 - Tax relief for expenditure on research and development
Finance Bill
5:30 pm
Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
I am afraid that I am not in a position to answer specifically the question posed by my hon. Friend, which is similar to the point that the hon. Member for Kingston and Surbiton made, concerning Government policy across the board in the encouragement of research and development. In the statement that my right hon. Friend the Secretary of State for Trade and Industry made last week on manufacturing, she specifically focused on aerospace as well as the pharmaceutical, chemical and car industries. The appointment of Sir Richard Evans to chair the innovation and contracts team that will advise the Department of Trade and Industry is crucial. Rolls-Royce itself may be the subject of debate in relation to some amendments.
Yesterday, I was with David Marshall at a conference in the south-west, where there are a great many aerospace companies. We should be in no doubt that the tax credit will enormously help investment into research and development in this country. As we go through the amendments, we will see how the small and medium-sized tax credit on research and development and the larger company research and development tax credit fit together.
Underpinning all companies is a 100 per cent. deduction for research and development on current and capital expenditure. That underpins everything. On top of that, the two tax credits are boosting—they are super-plus credits. For the small and medium-sized companies, there is a 50 per cent. boost; for large companies, it is 25 per cent. Without drifting into the amendments, it will come out later in the debate why they are different, and what the Government are trying to achieve.
The historic position for the United Kingdom is that investment in research and development—with the exception of pharmaceuticals, perhaps—lags behind that of other major economies. To stick with the example of aerospace, we have the second largest aerospace industry in the world. We are second only to the United States, with a complete capacity to design, develop, manufacture and deliver. That is obviously enormously important, and great strides have been made in the past, but more must be made in the future.
We have considered the position on international comparisons and what other countries are doing to give assistance to their companies for research and development. Putting in place the large company element, the value of the credit for research and development as a percentage of gross domestic product will be second only to that of Canada. That is the only G7 country that will—marginally—be ahead of us. We will be spending more, using the tax credit, than the United States or France, which have traditionally invested more than us.