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Budget Resolutions and Economic Situation

The current North sea oil price is not so very different from 12 months ago. We have made it clear over the past 10 years that we would of course look at the North sea oil tax regime. It is thought that there might be only 30 years-worth of oil and gas left in the North sea, but in order to maintain security of supply in this country it is in our interests that we do everything that we possibly can to continue to extract oil and gas. Last week’s announcement is not going to change but, through the hon. Gentleman, the industry will doubtless want to look at the response document that the Treasury published on the same day, and which examined the very issues that he has set out. The North sea oil and gas industry has existed for the past 36 years and, as I have said, we will do everything that we can to encourage it, but it is also important to look to the future, which is why we have doubled the science and technology budget since 1997. Indeed, more than half the Department of Trade and Industry’s budget now goes toward science and technology. Last week’s Budget provided a further rise in science spending—from £3.4 billion this year to £4.9 billion by 2010-11. That is in addition to more spending for the Department for Education and Skills, particularly on universities. We have a worldwide reputation for being good at science. We have 1 per cent. of the world’s population, but 5 per cent. of its science and some 12 per cent. of scientific citations. In the past few years, we have spent more than £3 billion building world-class laboratories, and anyone who visits universities throughout the country will see the result. Ten years ago, many scientists were working in buildings on which money had not been spent for years; now, across the country we increasingly see modern, up-to-date laboratories. Patents are up 98 per cent., and income from intellectual property is up by more than 100 per cent. In the past three years, 25 companies have emerged from universities and have floated on the stock exchange—they have been valued at £1.5 billion. University spending and research on fuel cells and nanotechnology, and in the biomedical field, also show how such spending and research can be turned into commercial opportunity. Last week, I announced a £100 million competition to bring universities and business together to lead in high-tech innovation—from medical research to environmental transport—in order to convert that scientific breakthrough into commercial success. We already fund more than 600 projects with over £430 million of Government funding. Research and development as well as innovation are keeping the UK at the cutting edge of international competition. R and D tax credits, which I understand the Conservatives now oppose, have delivered nearly £1.8 billion in support for business and have made a real difference. Large companies such as Nissan have used them to support investment in design, and smaller companies such as Wolfson Microelectronics—an Edinburgh university spin-out company that developed the technology at the heart of iPods—have used them to continue to grow and to innovate in their business. The Budget increased the amount of R and D tax credits available, and in total about 4,500 small and medium-sized companies are claiming more than £250 million a year in tax credits. Those credits are absolutely essential if we are to support the investment that will enable us to compete in the future. It is no wonder that we have attracted more R and D projects than any other country in the European Union. It is also important that we continue to invest in education and skills, which the House debated last week. Education spending has doubled since 1997. Then, funding per pupil was £2,500, but it will rise to £6,600 by 2010. It is providing us with better equipment, modern schools, more teachers and more spending on universities. Britain must also remain a competitive place to do business. In the Budget, we announced reforms to employment law that simplify procedures and cut the cost of workplace disputes. We are very conscious of the need further to reduce burdens on business. Because of the strength of Britain’s economy, the Chancellor was able to cut corporation tax again, to 28p, and it is lower than that of all our major competitors. We also believe that investment decisions should be driven by commercial, not tax, considerations. Of course, the reduction in the basic rate of income tax helps not just individuals but many small businesses. Up to 3.4 million sole traders will benefit from personal tax reforms and allowances. They will also benefit from the new annual investment allowances of up to £50,000. Those allowances show that we recognise the need to encourage that investment, as well as research and development into new products.