House of Commons Hansard Written Answers for 25 Mar 1999 (pt 5)

TRADE AND INDUSTRY

Indonesia (Exports)

1. Ann Clwyd: To ask the Secretary of State for Trade and Industry if he will make a statement on current ECGD liabilities in respect of exports to Indonesia. [77033]

Mr. Wilson: ECGD's exposure on Indonesia is £1,603 million, of which £41 million is in respect of unrecovered claims.

Assisted Areas (Kent)

18. Mr. Prosser: To ask the Secretary of State for Trade and Industry what representations he has received in support of retaining assisted area status for Dover and other areas of Kent. [77052]

Mr. Wills: Under the public consultation for the assisted areas review, a joint submission was received from Kent County Council, seven District Councils and Medway Unitary Authority arguing for assisted area status for Dover and six other areas of East and North East Kent.

Hon. Members representing Kent constituencies, including my hon. Friend, local Councillors and a number of local companies, have also made representations in support of the case for these areas.

Manufacturing Industry

19. Mr. Burden: To ask the Secretary of State for Trade and Industry what action he is taking to assist the competitiveness of manufacturing industry. [77053]

Mr. Byers: Manufacturing is a vital part of the economy. Its competitiveness is assisted by my policies for promoting best practice, encouraging the development

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of efficient supply chains, promoting the application of new technology, and developing beneficial regional partnerships.

Small Businesses (Regulations)

20. Mr. Evans: To ask the Secretary of State for Trade and Industry what action he is taking to reduce the amount of management time expended by small business on dealing with Government regulations. [77054]

Mr. Wills: My right hon. Friend the Secretary of State has made clear that one of the key tasks of my Department's new Small Business Service will be to help small businesses get to grips with regulation, providing them with practical assistance to cut the burdens of compliance.

Steel and Engineering Industries

21. Helen Jackson: To ask the Secretary of State for Trade and Industry what assessment he has made of the impact of the Chancellor's Budget statement on the steel and engineering industries. [77055]

Mr. Battle: By locking in the economic stability that our policies have already achieved, such as low inflation, and through our programme of targeted tax cuts, such as the reduction in Corporation tax to the lowest rate of any major industrialised country anywhere in the world, sectors such as steel and engineering should benefit and have a stable climate in which to compete.

Fresh Meat (Supermarkets)

22. Mr. Edwards: To ask the Secretary of State for Trade and Industry if he will make a statement on the Office of Fair Trading inquiry into supermarket retailing of fresh meat. [77056]

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Dr. Howells: The Office of Fair Trading is carrying out an inquiry into the profitability of the major supermarkets in the grocery sector. I understand that the Office of Fair Trading hopes to be in a position to announce its conclusions in April.

Research and Development

23. Mr. Bennett: To ask the Secretary of State for Trade and Industry what representations he has received from business leaders on the measures announced in the Budget to encourage research and development. [77057]

Mr. Battle: The Government recognise the important role which research and development (R&D) plays in a modern knowledge-driven economy. This was the theme of the consultation document published jointly by HM Treasury and DTI on Budget Day 1998 entitled "Innovating for the Future: investing in R&D".

The findings from this review have already influenced both the planning for future Budgets and the Government's Competitiveness White Paper "Our Competitive Future--Building the Knowledge Driven Economy" published last December and its follow-up Implementation Plan (published by the Secretary of State for Trade and Industry on 10 March).

The Budget announcements on 9 March included details of the Government's intention to introduce a research and development tax credit for small and medium enterprises (SMEs) in the 2000 Budget. The Secretary of State for Trade and Industry announced on 10 March the publication of the Inland Revenue's technical paper to consult further with business on the detail of this measure. This represents a key output from the Innovating for the Future consultation which, in addition to the tax treatment of R&D, considered a range of questions looking at how best to remove barriers to innovation.

Around 200 representations were received. Of those commenting specifically on questions relating to tax credits, respondents can be divided into five main types: companies; business organisations; professional and union bodies; accountant and tax firms; and academic institutions. Individual companies gave a mixed view on tax credits from those firmly in support to those who felt such a measure might be less effective. The main business organisations also provided a variety of opinion with the CBI, for example, arguing that the feasibility of a targeted credit for SMEs should be assessed; the CBI reaffirmed their support for a specific SME measure in their Budget submission earlier this year. Professional and union bodies were almost totally in favour of tax credits (as were the majority of academic institutions) although the main accountancy, insurance and tax firms generally provided a more cautious response; a number advocating further analysis before any measures might be introduced.

A main theme to emerge from the consultation was the concern that any R&D investment measure introduced should also provide assistance to the most cash- constrained small companies in their start-up and early stages, when they are "tax exhausted" and would not immediately benefit from extra allowances to reduce their corporation tax. This message was also emphasised by the Williams Group's report to the Treasury (November 1998) analysing barriers to growth faced by high-tech

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small firms. In the light of these views, and the Government's own research and analysis, the Government announced at the Budget their intention to introduce a comprehensive R&D tax credit for SMEs, which would also involve a payable element for companies not yet in taxable profit.

In addition to this key measure other important outputs from the Innovating for the Future consultation are as follows.

Intellectual Property

Establishing a rational and less complex system for the taxation of intellectual property (IP) was an important conclusion to emerge from many respondents. IP is one of the key outputs of firms' innovation and R&D investment. The 1998 Pre-Budget Report therefore announced that the Government would consult, by the 2000 Budget, on two possible measures to reduce tax compliance costs and distortions on business decisions affecting IP transactions:

moving towards a simpler system of IP taxation, essentially following the accounting treatment for relieving expenditure on IP purchases and taxing proceeds; and;

simplifying the taxation of royalty payments which accrue to the owners of intellectual property rights.

In addition, the Competitiveness White Paper set out details of the Government's Intellectual Property Rights (IPR) action plan. This focuses on making the IPR system more affordable and accessible including a review of the impact of fees charged by the UK Patent Office. Work will also be taken forward to ensure the system is better able to keep pace with developments in new technology by, for example, agreeing EC Directives on copyright in the information society and stronger protection for software-related inventions. The action plan would also involve reform of the civil law system for IPR litigation; a push for an EC patent which is affordable and easy to enforce and work to ensure that EU harmonisation of "second tier" or "petty patents" benefits UK firms, particularly small companies.