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Budget Resolutions and Economic Situation

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 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.