HISTORIC PRESS RELEASE : Dawn Primarolo launches further steps to tackle the productivity gap [January 1999]

The press release issued by HM Treasury on 8 January 1999.

Possible new tax measures to encourage corporate venturing and more business investment in R&D form part of a package set out today by the new Paymaster General Dawn Primarolo, to tackle the UK’s productivity gap.

Speaking at the fourth joint Treasury/DTI Productivity Challenge Roadshow at the Nissan car plant in Sunderland, the Paymaster said:

“The Government has shown its determination to tackle the UK’s productivity challenge using all the levers at its disposal, including the tax system.  But to do so effectively, it needs the help of business to inform the debate and design effective policies.”

“Last autumn we set out our diagnosis of the UK’s productivity gap, and our emerging ideas for policies across the four key areas of innovation and enterprise, investment, competition and skills.  Today, I am taking the debate forward on business innovation and enterprise – two of the key driving forces in improving productivity.”

The Paymaster invited business to take part in consultation with Government on:

• specific proposals, to be announced later this month, on making existing tax incentives for R&D investment more user-friendly by clarifying the definition of R&D;
• further ideas, to be announced in the next few months, for a possible new tax measure to encourage small and medium sized enterprises to invest in R&D;
• how best to stimulate corporate venturing in the UK (whereby large companies invest in and form partnerships with smaller enterprises) and what scope there could be for a measure of tax relief to kick start this activity.

These measures form part of a wider productivity agenda, announced in November’s Pre-Budget Report, which include:

• a wide ranging review of the banking sector to examine current levels of innovation, competition and efficiency;
• a review of policies on employee share ownership, to encourage more employees to take a stake in their companies;
• a coordinated look at the impact Government departments have on productivity in the wider economy by a new Productivity and Competitiveness Cabinet Committee;
• examining how best to encourage sustained entrepreneurial investment; and
•  how to encourage business innovation through simplification of the tax treatment of intellectual property.

The Government will be bringing forward further specific proposals on this agenda over the coming months.

The Paymaster said:

“On all these tax issues, we will clearly need to weigh up the cost effectiveness of specific measures. But to do so, we first need a level-headed assessment of their impact on business innovation and enterprise. That means business and Government working together throughout the policy debate.”

Trade and Industry Minister Lord Simon, who hosted the roadshow, said:

“This roadshow is a unique opportunity for Government and business to exchange ideas and discuss solutions to close the productivity gap. Holding the roadshow here in  Sunderland at the Nissan plant is ideal, as Nissan are leaders in their industry in terms of productivity.”