Take a tax break?

The budget offered some assistance to science community with increased funding with research centres to develop the R&D base.  Of more immediate benefit for innovative companies is the increased tax break for R&D, broadly defined. This announcement was aimed at SMEs who do not make a profit in an attempt to increase R&D to drive new manufacturing. 

 

There are also other R&D tax breaks available for large companies.  These incentives were introduced by the labour government and have been in place in one form or another for a decade.  But it seems that the Chancellor doesn’t believe they work as he couched his announcements with scepticism:

“If Britain isn’t leading the world in science and technology and engineering, then we are condemning our country to fall behind. So we will establish new centres for doctoral training, for Cell Therapy and for Graphene – a great British discovery that we should break the habit of a lifetime with and commercially develop in Britain.”

There may be examples of failures to capitalise on research developments but there are also success and ironically the last Conservative government, run by a scientist, did as much to decimate the science base as traditional manufacturing by encouraging short-term investment. Jobs for Laser researchers were as scares as mines in my home town by the Nineties. 

However, the new policy is to encourage investment in research but are the tax breaks working?  In Scotland the BERD spend has stubbornly stayed at 0.6% of GDP over the last decade and is dwarfed by the public funding of R&D.

So the world class research undertaken in Scotland does not seem to translate to products or the development of a business and enterprise research base.  However such stimuli take time to reap rewards and the large companies, particularly in pharmaceuticals, will dominate the BERD figures. Indeed, the National statistics on innovation showed Scotland as having more robust spin-outs. So are the tax breaks encouraging research in companies? 

This question is crucial as the Finance Secretary John Swinney will be considering the policy in the future.  In setting out plans on a yes vote, he said:

“Careful and targeted use of tax credits and allowances in an independent Scotland could make a difference and break down the barriers which limit private investment in R&D and harness more effectively the research in our universities.”

With a promise of more devolved powers even in the event of a no vote, he could be considering the best ways to promote research in industry and this may impact on tech companies and spin-outs.

Dr Tony Axon is Director of Positive Spin and can get your views on this and other policies to the decision makers and politicians.