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Aid Effectiveness (Independent Evaluation)

Mr. Stephen Crabb accordingly presented a Bill to require the Secretary of State, when reporting on departmental expenditure, to publish an independent evaluation and measurement of the effectiveness of United Kingdom bilateral aid projects in reducing poverty and a comparison of the effectiveness of different projects and forms of aid in reducing poverty; to require the Secretary of State to redirect resources towards the most effective projects and forms of aid; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 16 June, and to be printed [Bill 157].

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Orders of the Day


Order read for resuming adjourned debate on Question [22 March.]


Motion made, and Question proposed,

      (a)   for zero-rating or exempting a supply, acquisition or importation;

      (b)   for refunding an amount of tax;

      (c)   for any relief, other than a relief that—

      (i)   so far as it is applicable to goods, applies to goods of every description, and

      (ii)   so far as it is applicable to services, applies to services of every description.—[Mr. Gordon Brown.]

Question again proposed.

Budget Resolutions and Economic Situation

4.13 pm

The Secretary of State for Trade and Industry (Alan Johnson): This year's Budget equips British business to meet the challenges of globalisation—[Interruption.]

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. May I ask anyone who has a cell phone still switched on please to switch it off? It is causing disturbance.

Alan Johnson: The Budget enhances Britain's strong economy, entrenches stability and widens opportunity. Today, there are 105,000 more self-employed people, 575,000 more businesses and 2.4 million more people in work than there were in 1997. Crucial sectors such as the pharmaceutical, aerospace and financial services sectors are thriving. Our scientists are leading the way in areas such as stem cell research and nanotechnology. Last year, our economy grew faster than those of France, Germany and the eurozone as a whole. The Budget builds on that success while meeting the growing challenges of globalisation, including, in particular, the phenomenal growth of China and India.

Raising productivity is central to meeting the challenge. We are now in the longest period of sustained productivity growth since the 1960s. We have closed the productivity gap with Germany, overtaken Japan and halved the gap with France. Britain is the only G7 country to have kept up with US rates of productivity growth, in stark contrast with France and Germany.

Our success is all the more remarkable for having been achieved at the same time as an increase of 2.3 million in      jobs. Achieving productivity growth and high employment at once is not an easy trick because one often rises at the expense of the other, but it is the formula for
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national wealth. We know that we still have further to go to raise Britain's productivity. The Budget enhances the drivers of productivity—innovation, investment, skills, competition, enterprise and investment.

Since 1997, we have invested unprecedented sums in Britain's science base. Funding levels are now double what they were. We also introduced the research and development tax credit and put in place a target to increase the share of national income that we spend on R and D from 1.8 per cent. to 2.5 per cent. by 2014. Today, there are 750,000 more science, engineering and technology graduates than there were in 1997, and the share of firms bringing new products to market is up by 50 per cent. Our world-beating proportion of scientific papers and citations has increased. In addition, the number of university spin-outs has trebled, and they now run at an average of 200 a year. In the past two years, 18 spin-out companies—with a combined value of more than £600 million today—gained listing on the London stock exchange.

The Budget builds on that record and advances the goals of the 10-year science and innovation framework to ensure that we maximise the impact of science funding. Raising levels of business R and D is key to raising productivity. Since 1997, business R and D investment has increased by 20 per cent. in real terms, and the R and D tax credit is driving the new investment that we need. So far, £1.5 billion of support has been claimed, and Deloitte has assessed the UK's R and D tax credit as being among the world's most attractive regimes.

The Budget sets out our intention to extend the higher rate of the R and D tax credit to companies with between 250 and 500 employees. Business lobbied for such a measure and Sir George Cox recommended it in his review of creativity in business. We will also widen the remit of the technology strategy board to stimulate innovation in the areas that offer the greatest scope for productivity improvements. I am delighted to announce today the latest £80 million competition for the collaboration R and D fund under the technology programme. It will help to fund new collaborative research in vital areas underpinning our technology strategy, such as low-carbon energy technologies and innovative manufacturing processes.

To improve productivity, the links between science and innovation are crucial. We have set out plans for a radically simplified allocation of the £1.5 billion a year that we invest in scientific discovery to make the best use of that investment.

Mr. Henry Bellingham (North-West Norfolk) (Con): Am I right in saying that business investment has fallen to its lowest level for the past 10 years? Does it worry the right hon. Gentleman, as a former higher education Minister, that various university science and chemistry departments have closed recently?

Alan Johnson: Business investment has grown on average by 5 per cent. a year since 1997, compared with a growth of 3.4 per cent. in the previous 10 years. It was worth £77 billion in 1996, but is now worth £113 billion, and it will rise to £126 billion by 2008. Yes, I am concerned about the closure of chemistry departments—I think that that happened at Sussex—but the hon. Gentleman and
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I   know that universities are independent. If he looks around the university world, he will see good stories from other universities throughout the country.

Mr. Phil Willis (Harrogate and Knaresborough) (LD): I apologise for arriving just after the right hon. Gentleman started his speech. On research and development and, especially, pulling what I call the basic research out of universities and into wealth creation, why did the Chancellor not examine in his Budget statement putting solid third-stream funding into the research councils and making that available to industry? Without that, surely we will start robbing Peter to pay Paul by taking out basic research money and applying it to knowledge-transfer and third-stream funding systems.

Alan Johnson: I am coming on to announcements in the Budget on R and D, particularly in the health service, but in terms of our total science base, doubling the amount of money available for science, operating through both the Higher Education Funding Council and the research councils, is the right way forward. We are always willing to consider more investment. It is crucial to get science and innovation into the same place.

The Budget also announced the creation of a single budget—this is pertinent to the hon. Gentleman's comments—for the Medical Research Council and NHS health research, worth at least £1 billion a year. That will ensure a more coherent framework for health research and development. We will now look at the best institutional arrangements to achieve that. We have also decided that the Harwell site, which includes the Rutherford Appleton laboratory, and the Daresbury site should become the Harwell and Daresbury science and innovation campuses respectively. We will develop those campuses to ensure that their facilities are internationally competitive, support world-class science and maximise opportunities for knowledge transfer.

As well as a strong science base, we need to invest in the scientists of tomorrow. Since 1997, the number of new science teachers has increased by 30 per cent., but we must do more, and the Budget includes incentives for more physics and chemistry graduates to move into teaching. We are also giving pupils a right to study three separate sciences at GCSE and increasing funding for after-school science clubs.

We need to improve mechanisms to turn our great science base into greater wealth. Over the next two years, we will put £100 million into the enterprise capital funds scheme to help high-risk, high-growth companies bridge the equity gap—the funding problem that they experience when they are too big to finance from their own resources, but too small to be of interest to venture capitalists. We will also launch a scholarship scheme to help UK science, engineering and technology graduates develop entrepreneurial skills by spending six months in the US with leading universities and enterprises. The scheme will be administered by the National Council for Graduate Entrepreneurship and the Ewing Marion Kauffman Foundation in the United States.

Tackling regulation is vital to the success of enterprise—another key driver of productivity. At the Department of Trade and Industry, we have
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demonstrated that we are serious, with our £1 billion regulatory simplification plan, which will produce a significant cut in business burdens. The Budget includes further measures, with a commitment to cut the time business spends filling in tax forms and returns, as well as cutting the administrative burdens of tax audits and inspections. We are also putting the recommendations of the Hampton review into law, as well as ensuring more risk-based targeted enforcement at local authority level. That will release the vast majority of honest and compliant businesses from unnecessary and time-consuming interventions.

A number of schemes are in place to support enterprise. We need to ensure that they are accessible, focused and well targeted. At the DTI, we have already reduced more than 100 business support products to fewer than 10, so they are better tailored to customer needs. The Budget extends that principle and aims to reduce the number of business support schemes from 3,000 to 100 by 2010. More than £2 billion a year is spent on business support. The review will ensure that we get value for money.

It is also vital that we examine the effectiveness and efficiency of our regional structures. The regional development agencies were created as a response to global pressures, where local action is often the right response. Our review will ensure that the RDAs have the links, incentive and powers they need to drive economic growth regionally.

We must also improve the way in which we market our strengths abroad and help British business to meet the challenges of globalisation. The new chief executive of UK Trade and Investment, Andrew Cahn, shares that ambition. Before the summer, we will publish a new five-year strategy for UKTI. It will aim to deliver maximum value for business and the taxpayer. We are intensifying our efforts to expand UK trade into India and China. We are also putting £9 million of new investment into a global R and D strategy to attract more business R and D to the UK, and to promote Britain's innovative firms abroad.

Another major challenge identified in the Budget is gender inequality at work, which, according to the women and work commission, costs Britain £23 billion a year in lost gross domestic product and prevents the economy from reaching its full productive potential. Since 1997, a combination of tax credits, the minimum wage and the new deal has made work pay and boosted employment, particularly among women, so that a record 70 per cent. of women are in work and our overall employment rate of nearly 75 per cent. is among the highest in the world. Our aim is to increase it to 80 per cent.—higher than any major economy has ever achieved—so helping more women back to work will play a vital role. The Work and Families Bill, which is proceeding through the House, will help everyone better to balance their work and family responsibilities.

The Budget boosted child care. Today, there are 1.2 million more child care places than in 1997—an increase of 90 per cent. All parents are entitled to help with child care, either through tax credits or vouchers. The Budget helped employers to support parents with child care, both through the tax system and through capital grants to help small and medium-sized employers to establish workplace nurseries. Further help is available for low-skilled women who find it
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difficult to access the job market and move up the skills ladder. Those and other measures will help to address the issues highlighted by the women and work commission, and they follow last week's announcement of an increase in the national minimum wage to £5.35, which will benefit 1.3 million workers, two thirds of whom are women.

A growing economy depends on safe and sustainable energy supplies, but climate change endangers the very future of our planet. Today, I have published our microgeneration strategy alongside the climate change review. It sets out what more we can do to boost the use of decentralised energy in our homes, schools and businesses, thus taking forward the Budget announcement of an initial extra £50 million for microgeneration technologies, which is additional to the £30 million that has already been announced.

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