The Association of the British Pharmaceutical Industry has welcomed the actions laid out by chancellor George Osborne in the coalition’s government emergency Budget, but the BioIndustry Association has raised concerns over their impact on innovation in the UK.
The ABPI has applauded the chancellor for sticking by the Office for Life Science’s proposed ‘patent box’ scheme – which would apply a lower 10% rate of corporation tax to UK-based patent income from April 2013 – in order to encourage investment in innovation in the UK.
“We are delighted that the chancellor has decided to retain this important initiative as we believe it will make a significant contribution to the UK’s ability to retain its world-leading position in an increasingly competitive global environment,” explained Dr Richard Barker, the ABPI’s director-general.
Furthermore, the group has also welcomed the cut in corporation tax to 27% next year and by a further 1% a year over the subsequent three, which will increase the UK’s competitiveness for pharmaceutical manufacturing, as well as the reduction in the small business profits rate to 20% to help stimulate smaller businesses.
However, according to the BIA, the Budget “falls short of helping to develop an economy based on innovative business such as those in the UK’s bioscience sector”.
For one, it claims the increase in capital gains tax to 28% for higher rate tax payers will actually discourage investment in the small- and medium-sized companies pegged to propel the UK economy’s future growth.
Furthermore, it says the decision to raise Entrepreneurs’ Relief from £2 million to £5 million will in reality be “of little value” for investors in bioscience companies, because more often than not they do not hold the minimum 5% stake in the enterprise required for this relief.
On the flip side, the BIA said it is encouraged by the chancellor’s plans to consult with business to review the taxation of intellectual property and the support R&D tax credits provide for innovation, as well as the proposals laid out in the Dyson Review.
Commenting on the Budget overall, Nigel Gaymond, Chief Executive of the BIA, said: “On the surface of it, this is a missed opportunity from a Coalition Government that spoke strongly about an innovation driven economy prior to the election. However, the BIA is committed to working with the Government to ensure that they understand the specific needs of the bioscience community”.
Challenge for NHS
According to the NHS Confederation, the figures unveiled in the Budget reiterate the scale of the financial challenge facing the National Health Service, which has been called upon to make efficiency savings of £15-£20 billion over the next few years.
While the two-year pay freeze for public sector workers will play some role in helping to achieve these savings, the effect will be countered by the increase in VAT to 20%, making goods and equipment more expensive.
“Although the NHS budget has been largely protected, it is likely that over the next five years cuts to other areas, such as local authorities, may impact on health expenditure. So although health spending will continue to rise year on year, all NHS trusts will find they are challenged to do more for the money they have,” noted Nigel Edwards, acting chief executive of the Confederation.
