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Research And Development

Volume 87: debated on Wednesday 27 November 1985

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asked the Secretary of State for Trade and Industry if he is satisfied that sufficient priority is given to investment in research and development.

No, I am not satisfied. In addition to a public sector expenditure of £4·2 billion last year, the Government have done a great deal to encourage a higher level of investment in industrial research and development.

Does my hon. Friend agree that adequate expenditure on research and development is essential if we are to remain competitive internationally? Does he further agree that, despite the incentives given by the Government, many of our companies have been falling behind their competitors in the United States, Japan and elsewhere? May I suggest a modest proposal, which might help to focus investment attention on the sublect? It is that companies listed on the Stock Exchange should be required by law to include in their annual report and accounts an assessment of the amount they spend on research and development expenditure as a percentage of sales.

I am interested in my hon. Friend's point. I should have thought that most companies would find it in their own interests to make such a declaration. Frankly, I am surprised that more do not. At this stage, I should not like such a disclosure to be made compulsory, but should prefer it to be encouraged as a form of best practice by bodies, such as the Confederation of British Industry. I understand that the accounting standards committee is reviewing practice at present, and in the light of its recommendations we shall consider what further action might be taken.

Why does the Minister not think it desirable to require companies to publish their research and development figures? Is he aware that Britain is almost the only country that does not offer tax credit or other tax advantages for expenditure on research and development?

I have already explained to the House why I believe that it is not necessary to force companies to declare such figures. Because research and development have a direct impact on the bottom line, if the bottom line is less good than the company would wish it to be, it is in its interests to explain to its shareholders and the City in general the impact that research and development expenditure has had on it. Regarding fiscal incentives, I remind the hon. Gentleman that virtually all current research and development expenditure now qualifies for immediate 100 per cent. relief, as does capital expenditure on scientific research. The 100 per cent. initial allowance for scientific research is being retained, as the hon. Gentleman knows.

Does my hon. Friend accept that the midlands lost a motor cycle industry in the mistaken belief that we had perfected the motor cycle, and because of an unwillingness on the part of the management and unions to invest further in research and development?

I take my hon. Friend's point. It is important for all sectors of British industry to consider new products and materials, particularly when their order books are full.

In assessing the priorities given to research, does the Minister agree that far too high a priority is given to defence-related research—more than 50 per cent. and much higher than any other OECD country? Is he aware, for example, that recently the Ministry of Defence has laid aside a further £5 million for basic computer research, provided it is matched by £5 million from the civilian research council? Does he recognise that that will further dry up research resources? Is he aware that the Pentagon is now trying to get its hands on Alvey flagship research for the SDI programme? Is he not worried about that, and what will he do about it?

The hon. Gentleman will be aware that many of the fundamental technologies that are of relevance in the defence world are also relevant in the civil sector. He seems to want to have it both ways. He is extolling the Department of Defence in the United States, almost seeming to imply that we should follow that role model. I do not know whether his constituents, who are interested in the helicopter industry, would necessarily want to support a diminution of expenditure on research and development.

Does my hon. Friend agree that unless we invest more in research and development and British microelectronics, we shall end up as a nation of assemblers of Japanese components?

I agree, and it is important that we pay due attention to examples such as Japan, where 75 per cent. of research and development is done by industry itself.

If the situation is as satisfactory as the Minister, in his complacent way, asserts, why is it that every week of this year the head of every research institution and the president of the British Association for the Advancement of Science complains so loudly about the Government's cuts in research and development budgets?

As usual, the right hon. and learned Gentleman was not doing me the courtesy of listening to what I said. My first words in answering the original question were to the effect that I was not satisfied. I dare say that all research and development establishments and directors will always believe that they could use a larger budget. We have discussed with all these people what the correct priorities might be. We must at times be prepared to do something extremely difficult in research and development, which is to be ready to terminate some programmes which may appear to have run out of steam, and to put extra priority into other programmes with potential.