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11/03/05
Intellect Urges Gordon Brown to Focus on Knowledge Economy
Intellect today urges the Chancellor Gordon Brown to deliver a 2005 Budget which provides financial incentives to citizens and businesses to encourage an increase in workforce skills, innovation and to ensure digital engagement.
Intellect has asked the Chancellor, through his 2005 Budget, to:
John Higgins, Intellect Director General said, "We must accept that the UK is facing rising competition from low-cost economies using new technologies, highly educated and skilled workforces and mobile capital within a rapidly changing global market. To compete in this market we must become a knowledge driven economy, and successfully exploit knowledge for wealth creation across all industries and sectors."
He continued, "The irony is that the Chancellor is failing to incentivise the very things which will enable us to become a knowledge economy. It's true that Government has stated its commitment to the knowledge economy aim, and has increased investment in large scale science and technology initiatives. However, in my view it has failed to act quickly enough to pinpoint and incentivise the grassroots areas which will enable us to achieve this aim; namely, skills, innovation and digital engagement. The result is that we are unable to move forwards because as a nation we lack a skilled workforce, SMEs do not innovate sufficiently and large portions of the population are digitally excluded."
Incentivise investment in skills – The Chancellor has recently stated that we must make the transition from a low skilled to high skilled economy. Intellect has long stated that the UK needs a highly skilled flexible workforce, capable of leveraging the benefits of technology. However businesses, particularly SMEs, have insufficient incentive to invest in training, which means that the UK is failing to sustain its current skill levels, let alone improve it. To rectify this Intellect recommends that the 2005 Budget introduces a Skills and Training Tax Credit, which is simple to understand and simple to apply for.
Incentivise innovation – If the Chancellor is truly committed to creating the best incentive system for R&D in the world then the Budget must raise the effective tax credit rate above the 'noise level'. The effective rate for large companies is currently between 3.75% and 5%. Anything short of 10% fails to provide British companies and multi nationals with the incentives they need to invest in R&D in the UK. To compound matters tax inspectors are often woefully uninformed of technology R&D, disincentivising the R&D Tax Credit yet further. Intellect recommends the creation of a small group of specialist tax inspectors who understand technology and the development process and who speak the same language as the R&D community.
Incentivise digital inclusion – The Home Computer Initiative has been successful in increasing home PC use. However this scheme currently works best for individuals working for large organisations, not small business or those on the minimum wage. To rectify this Intellect recommends that the scheme is adapted to incentivise the section of the population which is at most risk from digital exclusion. The scheme should be simplified to make it easier for small firms to implement, and adapted so that it works better for people on low incomes.
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