§ 5. Dr. Vincent Cable (Twickenham)
What consultations he has had with business representatives on the proposed research and development tax credit. 
§ The Chancellor of the Exchequer (Mr. Gordon Brown)
In 2001, we introduced tax credits for small firms' research and development. Consultation has now closed on extending a new tax credit to larger companies and we will make our views known in the pre-Budget report. Today we are also publishing a further consultation paper on the wider reform of corporation tax, including measures for intellectual property tax relief and capital gains relief for the sale of subsidiaries. The consultation period with corporations will last until the pre-Budget report.
§ Dr. Cable
Is the Chancellor aware of the strength of feeling among companies at the cutting edge of British technology that the Government's proposals as they stand—to give tax credits to new and incremental research and development—have two profound difficulties? The first is that they introduce a great deal of additional complexity into an already complex system. The second is that they introduce major distortions into business decisions by rewarding one type of research and development with tax credits and other forms not at all. Will the Chancellor say that he is still open to representations on reforming the proposals along those lines?
§ Mr. Brown
We are still open to representations. We have put forward a number of proposals to business so that we can increase the share of research and development undertaken in Britain. In Japan and America, it averages about 3 per cent. of national income. In Britain, it is about 1.8 per cent. We have to do more. The research and development tax credit for small firms costs us £150 million a year, but that system allows small firms to finance their research, even before they make profits. We are consulting companies about whether we should proceed with a similar system or with what we may call a relief for additional research. The hon. Gentleman should point out to the House that the proposal that he 422 favours would cost several hundreds of millions of pounds more than the other proposal mooted in the document. In the Liberal Democrat manifesto, we counted 43 spending commitments that were not financed and that commitment was not in the manifesto, which brings it to 44. Somehow and sometime the Liberals will have to face up to the fact that they cannot keep promising money when they do not have it.
§ Mr. Peter Pike (Burnley)
Does my right hon. Friend accept that it is crucial to assist with research and development to secure jobs in industry in towns such as Burnley if we are to tackle the sorts of problem that we faced in that town earlier this month?
§ Mr. Brown
I agree with my hon. Friend that manufacturing industry and the renewal of industry in areas such as his are crucial and part of the Government's policy. We have not only cut corporation tax and small business corporation tax—to 10p for smaller firms with profits up to £50,000—but introduced the research and development tax credit and made permanent capital allowances for manufacturing industry for small and medium-sized businesses. He will be interested to know that in the next few months, following our permission from the European Commission, we will be setting up regional venture capital funds from which businesses developing in the regions, including the north-west, can draw. That measure is in addition to the work that has to be done—I had a conversation with him yesterday about these matters—to improve the new deal and the facilities that it offers to people who are unemployed, particularly the long-term unemployed, in some of our poorest communities. We are determined that in this Parliament we will take the additional action that is necessary so that no young person and no long-term unemployed person will go without the offer of a job.