Finance (No. 2) Bill (Third sitting)

Alison Thewliss Excerpts

Thursday 11th January 2018 Public Bill Committees

[Mel Stride]

The hon. Gentleman is shaking his head; I am pleased, because there will be many opportunities as we go forward. Of course, one of the reasons why the question of impacts is difficult and challenging is that, at this stage, we do not know exactly where the negotiation will land, exactly what the treaty arrangements will be between us and the European Union after our exit, and what our customs arrangements and new trading arrangements with the rest of the world will be, and so on. We await those details.

Returning to the Bill, the amount of R and D expenditure supported through the tax credits doubled to £23 billion between 2010 and 2015-16. At the autumn Budget 2017, the Government announced a further £2.3 billion of additional direct R and D spending in 2021-22. That is on top of the record investment of £4.7 billion by the national productivity investment fund in R and D that was announced in the autumn statement 2016. Taken together, total Government support for R and D will increase by a third from 2015-16 to 2021-22. I am clear that the change in this Bill, along with the wider support that the Government are providing, will give valuable help to businesses investing in R and D in the period in which we will leave the EU. The change reaffirms our ambition to increase total UK investment in R and D to 2.4% of GDP.

[Alison Thewliss (Glasgow Central) (SNP)]

The briefing from the Chartered Institution of Taxation points out that there may be merit in expanding R and D relief to product commercialisation, because we do lots of development in the UK but not necessarily all the commercialisation, and some of that benefit goes overseas. Will the Minister explore whether that might be possible?

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[Kirsty Blackman]

I agree with the hon. Gentleman. We have had many benefits from the EU, and just one of them is the level of innovation. As a result of the level of free movement that we have had, we have been able to get excellent people in to improve our research and development, and to collaborate with places overseas. Our universities, companies and hubs of expertise have been an incredible success story in recent years in terms of the research that they have been able to do. There is a brilliant hub around Edinburgh that is involved in robotics. It is hugely important to take those steps.

The Government need to ensure that they continue to foster that culture. Leaving the EU is a big problem, in terms of us not being able to bring those people here. The Government need to not only increase the research and development expenditure credit by 1%, but make changes so that the UK can be a nation that welcomes scientists and encourages them to come here and make a positive economic contribution, as they already do. We do not want to lose those people.

[Alison Thewliss]

The point about not losing what we have is absolutely crucial. The Strathclyde Technology and Innovation Centre at the University of Strathclyde in my constituency has had £89 million, including money from the European regional development fund, to set up cutting-edge industries. Anything that loses that or puts it at risk will have a hugely detrimental effect on Glasgow and Scotland’s wider economy.

[Kirsty Blackman]

I very much agree with my hon. Friend. A lot of these projects have been brought to fruition because of the benefits of EU money. The UK Government have not committed to filling the EU funding gap that there will be, particularly for universities and for the research and development of vital products that UK companies can sell on.

It is welcome that the Government are putting some focus on research and development expenditure. That is a positive thing. However, it is not in any way the end of the story. To simply stand still, the Government need to make significantly more commitments. We would appreciate the Westminster Government being much more positive about the innovation culture. They need to put their money where their mouth is and make sure they fund these things more appropriately.

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[Mel Stride]

I am sure you will be entirely obliging. This has been a wide-ranging debate, covering just about everything. We have had an absence of the biblical references and classical quotations that normally enliven our discussions at this time of the day.

We all agree about the essential role that productivity plays, and, in turn, the essential role that R and D plays in driving productivity. Paul Krugman is entirely right that, in the long run, productivity is almost everything, because if we do not get a rise in productivity we do not get a rise in real wages, living standards and all the things that Governments ensure happen. It is not just our country that has had a productivity challenge since the crash in 2008. The productivity rates of most of our competitor countries are all well down on where they were prior to that point. We certainly have a particular challenge in the United Kingdom, which is why we are doing so much in the productivity space. R and D tax credits are but one element of that. We have now set an R and D target: as I said earlier, 2.4% of GDP will be R and D expense by 2027.

It is useful to note that much was made of how this Government are performing relative to the past, as if in the past we were doing incredibly well with R and D. The reality is that over the past 30 years there has never been a single year in which R and D expenditure as a proportion of GDP has exceeded 2%. That is a simple fact. That goes for this Government, the coalition Government and the Labour Governments who preceded them, so in a sense we are all in the same boat.

I do not accept that we are not doing enough in this area. R and D tax credits are but one example. The amount going in since 2012-13 has doubled to £2.9 billion. In 2016, we announced direct R and D expenditure of £2.3 billion by 2020 to 22. We have had major announcements on infrastructure and roads and rail. As I said in my opening remarks, in the previous Budget we expanded the national productivity investment fund to £31 billion.

On the specific issue that the hon. Member for Aberdeen North—and others, by way of intervention—raised, we totally accept that support for our universities is absolutely critical. That is why we are doing things on the immigration side. We are seeking to get the balance right to attract the right kind of talent. Equally, we are underwriting the Horizon 2020 programme, such that any Horizon 2020 projects agreed by the European Union prior to our departure will be underwritten by the UK Government, irrespective of whether that money is being spent at the time that we exit.

[Alison Thewliss]

Some of the money for Strathclyde University is coming through the European Regional Development Fund, rather than Horizon 2020. Will ERDF money also be guaranteed?

[Mel Stride]

The hon. Lady knows that we are reviewing that specific point in the context of the negotiations. Those are decisions, among others, that we will have to take in future. My point is about that critical flagship programme, Horizon 2020. The hon. Member for Bootle suggested that we have not treated universities in the way that we have the agricultural sector, to which guarantees have been provided, but this is a clear example in the universities sector of where we are doing precisely that.

I will not dwell on those matters; I am aware that they are more directly related to R and D tax credits, but the patient capital review is a commitment that we put a lot of money, effort and research and development into. The intellectual property issue was mentioned in the debate. There is the patent box, which provides a lower rate of taxation for those businesses that develop intellectual property, so that we make sure that that is developed and exploited in this country.

The hon. Member for Aberdeen North quite rightly mentioned the North sea, which is absolutely critical to her part of the United Kingdom. There are measures in the Bill that we will come to shortly that further ease tax pressures in that sector, and certainly there were measures in the last Finance Bill, when she and I both served on the Committee.