Autumn Budget 2021: Chancellor accused of 'giving with one hand and taking with the other' on R&D plans

The Chancellor was accused of “giving with one hand and taking with the other” as he looked to increase research and development (R&D) investment in his Autumn Budget.

Rishi Sunak confirmed the that the UK government will maintain its target to increase R&D investment to £22 billion, telling MPs: "But in order to get there, and deliver on our other priorities, we'll reach the target in 2026-27 - spending, by the end of this Parliament, £20bn a year on R&D.”

He added: "I can confirm for the House that this £20bn is in addition to the cost of our R&D tax reliefs.

"Combined with those tax reliefs, total public investment in R&D is increasing - from 0.7 per cent of GDP in 2018 to 1.1 per cent of GDP by the end of the Parliament.”

Chancellor of the Exchequer Rishi Sunak delivering his Budget to the House of Commons.

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The Chancellor said this compared with the OECD average of 0.7 per cent. In the US, R&D spending stands at 0.7 per cent, in Germany it is 0.9 per cent while in France it stands at about 1 per cent.

Sunak said R&D tax reliefs need to be made "fit for purpose", telling the House of Commons: "I'm expanding the scope of the reliefs to include cloud computing and data costs."

He added: "The second problem is this: Companies claimed UK tax relief on £48bn of R&D spending but UK business investment was around half of that, at £26bn. We're subsidising billions of pounds of R&D that isn't even happening here in the United Kingdom."

Sunak said that from April 2023 the government will "incentivise greater investment here at home".

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Mark Tighe, chief executive of R&D tax relief specialist Catax, said: “The Chancellor’s announcement paves the way towards a UK-first approach that will bring more R&D investment back to the UK, dramatically shifting the focus of UK businesses to domestic innovation.

“This could bring short-term turbulence for some businesses, especially larger companies with overseas interests and operations, who may not be able to easily choose where their R&D takes place.

“The increased R&D spending announced in the Budget is an important step but, while the UK will ultimately emerge stronger, it was a case of giving with one hand and taking with the other.”

Joe Marshall, chief executive of the National Centre for Universities and Business (NCUB), said: “The Chancellor has taken a positive step forward by committing that annual research and development spend (R&D) will hit £20bn by 2024-2025. We also warmly welcome the news that this funding will be delivered in steady increases and not backloaded towards the end of settlement. This will give those investing in R&D confidence to invest today.

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“Although clearly a positive step, the real opportunities of this extra funding will come if it helps to drive a step change in private investment too.

“This requires a better understanding of how to improve connections between fundamental research, and the innovations that will transform the world and drive economic growth. Government, businesses and universities have a real responsibility to consider how this funding is optimised.”

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