Clause 53 - Tax relief for expenditure on vaccine research etc
Finance Bill
9:30 am
Mr Paul Boateng (Financial Secretary, HM Treasury; Brent South, Labour)
I can give the right hon. Gentleman a very simple explanation of our thinking. It has been informed by the work that we are doing with DFID and the pharmaceutical industry. The companies involved are the first to tell us that they have two concerns. First, they have shareholders whom they must satisfy and to whom they have certain fiduciary responsibilities. Secondly, they see themselves, as health providers, as having a moral purpose and a degree of corporate responsibility. They recognise that they have skills and an infrastructure for research and development, but—they are very upfront about it—there is no market because the developing world does not have the resource base available to it either to put in place the infrastructure or to fund the research and to buy its product. Having been involved in creating the structure of the credit, they are looking to us to prompt and assist the research and development by putting that incentive in place. But of course—this is where the hon. Member for Arundel and South Downs (Mr. Flight) is so wrong—we do that in co-operation with DFID.
The notion that the Treasury is seeking to take powers unto itself could not be further from the truth. The further away that Conservative Members are from any return to the Treasury, the more sceptical they become about its taking powers unto itself—hence the state of extreme scepticism that the hon. Gentleman lumbers in when he makes that sort of point. I know where he is coming from, but I hope that my explanation has set his mind at rest. Given that a fifth of the world's population—1.2 billion people—survive on less than a dollar a day, if we are to stimulate a market in that sort of health provision, we have a responsibility to take the action that we are taking.
That was the thinking behind the measure. Companies undertaking or sponsoring such research will be entitled to deduct from their corporation tax profits an additional 50 per cent. of their own expenditure or the cost of subcontracting such research to other companies or institutions. They will also receive relief in full on contributions to independent research into the target diseases by universities, charities or scientific research organisations—that has been particularly welcomed by those organisations and institutions. The relief will be on top of either the new R and D tax credit for larger companies detailed in clause 52 or the R and D relief for small and medium-sized companies introduced in the Finance Act 2000. Small and medium-sized enterprises and companies with insufficient profits to offset the relief in full will be able to claim a vaccines tax credit equivalent to 24 per cent. of the cash cost of qualifying research.
I hope that the clause and its schedules will find favour with the Committee.