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David Cairns: I am grateful to my right hon. Friend for saying that, and for the action that the Government are taking, but does he share my concern that in the frontier technologies, in biotech and software development—a growth market—with its high-value, high-paid and high-skilled jobs, Europe still lags well behind the United States? With specific reference to the electronics sector, what message can I take back to my constituents, many of whom are employed in that sector, to show that the Government are aware of the issue and are addressing the need for research and development in the frontier technologies?

Mr. Boateng: One of the reasons why we have been considering the definition of research and development is precisely to ensure that the tax system recognises the very fast pace of development in the area to which my hon. Friend refers. A few months ago, I visited a company in Scotland that was looking at lasers and crystal technology. One of the messages that it gave to me—I have received the same message from others working in the area, not least in technologies that have been developed as a result of space research—was that continuing dialogue is vital. I know that my right hon. Friend the Paymaster General is anxious about developing dialogue between the Inland Revenue and industry, as well as with academia, to ensure that we get the definition right. My message to my hon. Friend's constituents is that we are absolutely determined to do just that.

The Bill seeks to build on the steps that we have already taken and on the messages delivered to us by business, which said that it wanted the minimum spending requirement to be reduced from £25,000 to £10,000 to help small firms to qualify. Business also wanted us to simplify the rules for apportioning staff costs to ensure that staff doing small amounts of R and D are not excluded, and to extend coverage to agency staff, as smaller companies may need to buy in expertise to take them to the next stage. We wanted to ensure that that issue was recognised in the tax credits that are available, as it is very important for projects of limited duration.

Mr. Butterfill: The right hon. Gentleman has been most generous in giving way. By way of recompense for

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his giving way to me now and on another occasion, may I congratulate him on the extension of taper relief to unincorporated traders? The anomaly was long overdue for correction and that move is very welcome. However, will he say something about the justification for excluding the same level of taper relief in respect of quoted companies, many of which are smaller than some relatively large unquoted companies and some unincorporated traders?

Mr. Boateng: One of the greatest challenges facing any Chancellor in coming to a judgment on such issues is considering the balance across the whole tax system. As those of us who have form in respect of the Finance Bill—I am afraid that I do, as has the hon. Gentleman in his time—know, getting that balance right is important; indeed, my right hon. Friend the Paymaster General is constantly extolling its virtues. The judgment has to be made and my right hon. Friend the Chancellor has made it. I have no doubt that, given the opportunity, others would arrive at a different judgment, but on balance I think that he has got it right, and hon. Members would not expect me to say anything else.

All the reforms have been designed for business and with business. We have listened to businesses of all sizes and in all sectors, and to the CBI, the Institute of Directors, the British Chambers of Commerce and the TUC, which has been at the forefront in calling for improvements to the R and D system. All those organisations have made their voice known and have had an important contribution to make—a contribution that has been reflected in the Budget.

I should like to say a few words about public services. Economic dynamism goes hand in hand with social justice. The Budget and the Finance Bill take forward our policies for enterprise and innovation, but not at the price of fairness. They take forward the agenda that we are promulgating, but underwrite it with fairness. To reduce the cost to business of locating and investing in disadvantaged areas, and to support the regeneration of brownfield sites, we announced in the Budget the removal of stamp duty from all non-residential property transactions in the 2,000 enterprise areas. That measure, which is covered by clause 57, is part of a package of measures to encourage business investment in our most disadvantaged communities—measures to encourage enterprise that complement, not conflict with, our priorities of full employment, tackling child and pensioner poverty and delivering high-quality public services through investment and reform. The 2002 spending review set out our plans for an extra £61 billion of spending on public services by 2005–06, with three quarters of the additional spending going towards health, education, transport, housing and the fight against crime.

The hon. Member for Arundel and South Downs (Mr. Flight), who is in his place, urged us to cut that investment by 20 per cent.—a call that was never denied and that was confirmed by the Leader of the Opposition.

Mr. Andrew Love (Edmonton): Is my right hon. Friend aware that in the Budget debate the right hon.

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Member for Wokingham (Mr. Redwood) called not only for a 20 per cent. cut, but for a cut of up to 100 per cent.?

Mr. Boateng: That is a very alarming prospect, but nothing surprises me in relation to the right hon. Member for Wokingham.

Mr. Redwood: The hon. Member for Edmonton (Mr. Love) might have said that I was talking about cutting 100 per cent. of waste and unnecessary expenditure in order to spend more on teachers, nurses and doctors.

Mr. Boateng: That is a lot of paperclips.

Several hon. Members rose—

Mr. Boateng: We have touched a raw nerve.

Mr. Andrew Turner (Isle of Wight): My right hon. Friend was talking about the fact that there are more hospital administrators than beds.

Mr. Boateng: I have here a quote from the Leader of the Opposition, which makes it clear that Conservative Members were not talking about cutting hospital administrators, but about cutting costs across the board, rejecting extra NHS staff who do not deliver and so-called wasted expenditure on consultants. We look forward to hearing about more areas where they are going to make those 20 per cent. cuts.

Roger Casale (Wimbledon): Does my right hon. Friend agree that the 20 per cent. cut in public expenditure would not only be a mean and misguided policy, but would bring about the demise of public services? Just as 200 years ago doctors thought that they had to bleed all the blood out of people to make them well, cutting that amount of money from the health service would bring about the death of the whole system. We must absolutely reject that ridiculous option offered by the Conservatives.

Mr. Boateng: My hon. Friend is absolutely right. The cuts would mean losing £13.6 billion from the NHS budget.

Mr. David Cameron (Witney): Can the right hon. Gentleman confirm that since 1997, when his party came to office, the cost of running central Government has increased by £3.5 billion; and can he tell us what percentage increase that represents?

Mr. Boateng: The hon. Gentleman would not expect me to accept his figures. He knows that it is grossly irresponsible for Conservative Members to call for cuts of 20 per cent. and maintain that no doctors, nurses or police officers would consequently lose their jobs. That would be the effect of the Flight plan.

Kevin Brennan (Cardiff, West): Has my right hon. Friend noticed that although many Conservative Members have leaped to their feet to change the subject, the hon. Member for Arundel and South Downs (Mr. Flight) has not been tempted from his seat? Should

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he not defend himself against the accusation of proposing cuts of 20 per cent. instead of simply sitting there?

Mr. Boateng: I suspect that he will defend himself at some length, not only here but Upstairs in Committee. However, he will not deny his words:

It was later confirmed that that would apply across the board. The hon. Gentleman went further and became more specific about the NHS. He said:

Charges and cuts are Conservative Members' prescriptions. They cannot deny that because I have their words in black and white, and such a policy would be implemented it they were ever given stewardship of the economy again.

Kali Mountford: I point out that I was a civil servant when civil service jobs were perceived as throwaway items and unemployment rose to 3 million. I also want to endorse my right hon. Friend's point about investing in areas of social exclusion. At Moor End high school in my constituency, only 28 per cent. of pupils achieved five GCSEs at grades A to C. The figure has now increased to 58 per cent. Does not that show the true price of investing in public services? It makes things better for people.

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