Research and Development: Policy (Hansard, 14 June 1988)

§ The Secretary of State for Trade and Industry (Lord Young of Graffham)
My Lords, the Government consider that advances in science and technology, and the early exploitation of those advances, are essential to national success. We are encouraging cooperation between companies and the academic science base, in particular through LINK, and I am pleased to announce a new LINK programme in personal communications today.

§ Lord Dormand of Easington
My Lords, is the Secretary of State aware that research and development in the private sector as distinct from the public sector, is well below the national average? As we are constantly told how well our industry is performing, what measures more specific than those given by the Secretary of State a moment ago, are the Government taking to encourage increased spending in the private sector? Matching our international competitors in this field is absolutely crucial, as the Secretary of State implies in his Answer.

§ Lord Young of Graffham
My Lords, I am aware that compared with most other industrial nations, British industry funds R&D at a lower percentage of GDP than most major countries other than France. From the figures for 1985 there is evidence that the figures have been improving. In particular the Government welcome the decision of the Accounting Standards Committee to recommend the adoption of a standard that would require public limited companies to disclose expenditure on research and development in their annual accounts. If, as I hope, this recommendation is acted upon, then there will be no need for legislation on the subject and in future the company accounts of plcs will be able to show the shareholders how much the company spends on R&D.

§ Lord Boyd-Carpenter
My Lords, is not one of the best ways of encouraging this useful expenditure to do what the Government are doing and which comes into effect today; that is, to lower the burden of taxation?

§ Lord Young of Graffham
My Lords, as company taxation has been reduced and personal taxation will be, I believe we are finding increased spending on R&D. I hope that industry will spend on R&D more wisely than perhaps governments have in the past.

§ Lord Rochester
My Lords, have the Government considered offering tax rebates as regards the expenditure incurred by companies for research and development?

§ Lord Young of Graffham
My Lords, expenditure on R&D is normally allowable for companies in the course of their business. The Government feel and I believe that it has been shown to be universally popular that the more simple the tax system the lower we can make the rate and the better off we shall all be.

§ Lord Peston
My Lords, can the Minister comment upon one aspect of a report in today's issue of the Independent as regards the question of disclosure? I shall quote the exact sentence, because it is rather worrying: Some companies are also concerned that the short-term outlook in the City would mean that share prices would suffer if they"— that is, companies— revealed spending on long-term research projects. Does that not indicate the very basis of the problem for R&D and the very basis of our problem as regards long-term development; namely, that there is a lack of harmony of interest between this short-term outlook of the City and the industrial needs of our nation?

§ Lord Young of Graffham
My Lords, I fear that for once the report in the dependent may not be absolutely accurate. As regards the opinions of the City, that is a matter for those in the City. We have welcomed today the decision of the Accounting Standards Committee, which, provided it is adopted and acted upon, will ensure that companies will be reporting the amount of money they spend on R&D. If they do, we hope that the City will take it as a good sign and a sign of investment for the future, provided it is properly spent.

§ Lord Barnett
My Lords, will the Minister comment further upon the point he made about fiscal equality and simplicity in tax system? Does it mean that he is personally in favour of improving the personal tax system in terms of fiscal equality in the same way as the Chancellor has done with company taxation?

§ Lord Young of Graffham
My Lords, the Question before us relates to research and development. The noble Lord, Lord Barnett, knows full well that, if he wishes to put down a Question on that matter, I shall be more than happy to answer it.

§ Lord Dormand of Easington
My Lords, in his reply to me the Secretary of State mentioned 1985 and said that expenditure in the private sector had increased since that date. Can he give the percentage of GDP at the latest available date?

§ Lord Young of Graffham
No, my Lords, but I shall find out the latest figures available. I shall write to the noble Lord and place the figures in the Library.