The press release issued by HM Treasury on 26 March 2002.

PRODUCTIVITY HIGH ON THE AGENDA FOR GOVERNMENT, BUSINESS AND UNIONS

“If you are starting up, growing a business, investing, taking people on, seeking new capital or working your way up in business – we are on your side” said Chancellor Gordon Brown today at a CBI/TUC productivity seminar at No 11 Downing Street.

Hosting the seminar alongside Trade and Industry Secretary Patricia Hewitt and Paymaster General Dawn Primarolo, the Chancellor confirmed the Government’s intention to go ahead with tax measures to support large companies, as set out in the Pre-Budget Report.

He said:

“In our first term we put stability and employment creation first.

In our second term, as we prepare for the sixth Budget we are able to build on this platform of stability and employment creation and our energies must now be directed to raising our country’s productivity.

Trade and Industry Secretary Patricia Hewitt and I want to create for the first time, a truly entrepreneurial culture that is not confined to the few but open to all: one where, in every community, people with ideas and initiative have the chance to start and succeed in business.

The new Britain of enterprise for all cannot be built on inadequate investment, low skills, boardroom complacency, workplace resistance to change, or on cartels or restrictive practices from whatever quarter they arise.

So Britain needs radical reform and modernisation of our product, capital and labour markets.

The Government is today publishing its Enterprise Bill which will open up competition, creating independent competition authorities and introducing criminal penalties for cartels.

In addition to opening up competition, we are today sending a message to the entrepreneurial, the innovative and dynamic: if you are starting up, growing a business, investing, taking people on, seeking new capital or working your way up in business – we are on your side.

A tax credit is already boosting research and development and encouraging innovation among smaller firms. And following extensive consultation with business, the Government is today publishing draft clauses for a new volume-based research and development tax credit for larger firms from 1 April. As supported overwhelmingly by business the credit will follow the simplest, most efficient design, based on a company’s total r&d spending – benefiting over £11 billion in expenditure carried out by the 1,500 large companies operating in the UK. Final details of the credit will be announced in the Budget.

And today I am publishing our proposals for large company tax reform: From 1 April capital gains and losses on substantial shareholdings will be exempt from corporation tax so that important business decisions on restructuring and reinvestment are made for commercial, rather than tax, reasons. In response to our consultation with business, I am today publishing draft legislation that extends the scope of our proposal to exempt even more shareholdings from tax – cutting tax for business by £150 million a year – benefiting some 5000 companies in the UK.

And today I am also announcing the introduction, from 1 April, of a tax relief for intellectual property, goodwill and other intangible assets to help business take advantage of new opportunities in the knowledge based economy. This relief will be worth £200 million a year to business rising to £350 million in the longer term – some 300,000 businesses are expected to benefit.

For large companies we have already cut corporation tax from 33p to 30p, the lowest rate of corporation tax in our history.

Our approach is one based on a broad base and low tax rates, that is stable and transparent, reflecting our belief in fair tax competition – and our opposition to harmful tax competition and niche regimes – so that companies make decisions to exploit real business opportunities, all reflecting our goal to make and keep the UK as the best place for international business.

And for entrepreneurs we have cut capital gains tax from 40p to 10p, overall a regime that is more favourable to enterprise than that of the US.

So the tax system promotes investment and helps business access the capital they need to thrive and grow, making the UK one of the most attractive locations for quality, long-term investment.

And together we are determined to enhance our productivity as a nation.”