HC Deb 19 June 1996 vol 279 cc872-3
18. Dr. Lynne Jones

To ask the President of the Board of Trade what assessment he has made of the effectiveness of the Government's policies in encouraging British businesses to increase their investment in research and development. [32127]

Mr. Ian Taylor

Evaluations of past research and development support show that it enhanced the amount and scope of the R and D undertaken and enabled firms to complete projects earlier. Support for collaborative R and D has improved interaction between industry and the science base. The recent "forward look" publication shows business expenditure on research and development is increasing in real terms.

Dr. Jones

If Britain is to become the enterprise centre of Europe, does the Minister agree that it must improve its performance in research and development—which, with the honourable exceptions mentioned earlier, lags way behind that of more successful economies? Last week's White Paper showed that, while dividend pay-outs have inexorably risen, investment in R and D is not even back to the pre-recession level. Will the Government stop dismissing the importance of fiscal incentives to encourage profit retention for investment over dividend pay-outs?

Mr. Taylor

The trouble with the Labour party is that it is increasingly giving the impression that it opposes dividends, which shows a fundamental lack of understanding of how financial systems work in this country. Dividends are a vital part of growth in the value of pensions. However, I accept—as I have done earlier today—that British companies should pay more attention to the percentage of their sales spent on research and development. That is a matter of considerable importance, and I shall say more about it when the latest research and development scoreboard from the DTI is published next week.

Mr. Nicholas Winterton

I am grateful to my hon. Friend for that response, in which he implied that we are not investing enough in research and development—as we are not investing enough in industry generally. Will my hon. Friend make further proposals to the Chancellor of the Exchequer and to the Treasury to enhance investment, not least in research and development, using fiscal measures that encourage success?

Mr. Taylor

My hon. Friend, who is a great champion of manufacturing industry, knows that investment plans in industry are best prepared against a background of low inflation, low interest rates and stable economic management. We are delivering those things, which is why we are increasingly receiving the enthusiastic support of inward investors and of UK industry. However, I am always on the lookout for measures that might stimulate research and development.

I repeat that there is absolutely no way in which British companies will be able to compete into the next millennium if a much greater effort is not made in research and development by British companies in relation to the best companies worldwide. More chief executives should pay attention to the rate of change of innovation and the rate of change in how products are introduced to the market.