HM Treasury 2 - 9 November 1999

MAKING BRITAIN A MORE ENTREPRENEURIAL SOCIETY

Further steps aimed at raising Britain's productivity faster than our competitors by making Britain more entrepreneurial and opening enterprise to all were set out today by the Chancellor in his Pre-Budget Report.

The measures aim to:

  • create the right environment and incentives for entrepreneurs;
  • ensure that young people learn the skills to take advantage of a more entrepreneurial Britain;
  • promote business and growth in deprived areas;
  • ensure Britain is the best place to trade electronically by 2002;
  • ensure UK research helps produce wealth-creating enterprises; and
  • improve competition in the UK economy.

The Chancellor said:

"Raising productivity is one of the key conditions for meeting the Government's objective of high and stable levels of growth and employment and delivering sustained increases in living standards."

Further detailed announcements will be made tomorrow by the Secretary of State for Trade and Industry.

The measures include:

Enterprise Management Incentives

The Chancellor has confirmed that a new Enterprise Management Incentives (EMI) scheme will be included in the Finance Bill 2000. EMIs will encourage high quality managers to join small higher-risk companies, by offering access to tax-advantaged share options. Under this scheme, such companies will be able to offer up to 10 key employees options over shares worth up to £100,000 (at time of option grant), which will be taxed under a favourable capital gains tax regime on sale of the shares, rather than taxed as income at exercise of the options.

Employee Share Ownership Scheme

The Government is introducing the most tax-advantaged all-employee share scheme ever seen in the UK. It is a comprehensive scheme to support firms' own efforts to foster a more enterprising productive relationship with their employees.

Corporate Venturing Tax Incentive

The Chancellor will be introducing a tax incentive in next year's Finance Bill to encourage UK companies to undertake corporate venturing. Companies that make corporate venturing investments in small higher risk trading companies will receive an up-front corporation tax relief at 20 per cent. Corporate venturers who reinvest gains in new ventures will be able to defer payment of tax on these gains.

Making Enterprise open to all

The Chancellor announced a £30 million programme to promote better access to business support amongst disadvantaged groups and in deprived areas. The package will help ensure that the opportunities from a more entrepreneurial Britain are open to all, and includes:

A new enterprise development fund to promote innovative enterprise support for business growth and creation, such as incubator units;

New funding for Community Finance Initiatives (CFIs), which help to get finance and training to entrepreneurs in deprived groups, running a challenge fund to help resource CFIs, and provide loan guarantees to help co-finance commercial lending to CFIs; and

Improving enterprise in schools

To ensure that young people acquire both the skills and the attitudes necessary to have successful careers in a more enterprising economy, the Chancellor announced:

  • a £10 million package in 2000-01 to boost enterprise skills in primary and secondary schools; and
  • that he is supporting next year's National Campaign for Enterprise including the publication of an "Enterprise for All" book.

MIT and Cambridge University partnership

The Chancellor announced yesterday that MIT has agreed to locate its European partnership in the UK. Jointly with Cambridge University, it will set up an Institute in the UK that will bring a new dimension to education and research. The Institute will build on the 8 centres of enterprise that will be created in the UK universities that won the Government's Science Enterprise Challenge. The Institute will also:

  • undertake education and research designed to improve the UK's entrepreneurship and competitiveness;
  • develop a research programme in fields likely to have a substantial impact on the future evolution of technology; and
  • stimulate the development of technology based business out of the academic base.


E-commerce

The Chancellor announced measures to help the Government meet its aim to make Britain the best place to trade electronically by 2002:

  • using £230 million from the Invest to Save Budget to fund new innovative ways of delivering government services - many exploiting the potential of the Internet; and
  • providing £1.1 million from the Capital Modernisation Fund to develop electronic procurement systems across government, which could save over £10 million a year.


Clusters

The Government wants to encourage the growth of clusters of innovative firms. The Deputy Prime Minister will today be announcing changes to the planning system that will ensure for the first time that the growth and development of clusters is recognised and supported.

R&D tax credit

The Government will introduce an R&D tax credit, targeted on small and medium-sized businesses, from April 2000. The tax credit will increase the 100 per cent relief for R&D to 150 per cent. When added to the existing relief, the cost of R&D to a company benefiting from the small companies rate will be reduced by 30 per cent.

For companies not yet in taxable profit, the proposed credit will reduce the immediate cash cost of R&D by up to 24 per cent. By making the new tax credit payable to companies not yet in taxable profit, the new tax relief recognises the greater cash constraints that innovative, early-stage companies face and the extra assistance that they need.

Baker Report - commercialisation of Government science

The Government today welcomed the recent Baker report into the commercialisation of science conducted in Government laboratories (PSREs) and accepted the thrust of its recommendations. The Government will announce more details in the new year. But today the Chancellor announced that:

there will be a much stronger drive to exploit PSRE research - with more freedoms for PSREs;

government scientists will be allowed new incentives and rewards, subject to safeguards, for participating in exploitation - with changes to be made to civil service conduct rules;

the risk-avoidance culture in the PSREs will be tackled. The Government welcomes the statement issued today affirming that the National Audit Office will adopt an open-minded and supportive approach to commercialisation by PSREs;

address the need of PSREs for advice to help them commercialise their discoveries and inventions; the Government will consult on options, including a role for Partnerships UK - the new public private partnership which the Government is creating to replace the Treasury Taskforce.

Improving Competition

The new Competition Act comes into force in March 2000 and will revolutionise the enforcement of competition policy by enhancing the powers of the Office of Fair Trading to tackle anti-competitive practices.

NOTES TO EDITORS

1. Further details on the Government's plans to open enterprise to all see HM Treasury news release 5.

2. Further details on:

Enterprise Management Incentive scheme;

Employee Share Ownership Scheme;

Corporate Venturing; and

R & D tax credits

will be announced by the Secretary of State for Trade and Industry tomorrow.

3. Details on the MIT-Cambridge University partnership were announced by the Chancellor on Monday 8 November. Please refer to Treasury news release 186/99.

4. Further details on the Government's strategy on clusters will be announced by Lord Sainsbury, Minister for Science and Innovation at the DTI on 18 November.

 

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