Mixed news for pharma in UK’s Autumn budget

Chancellor George Osborne’s promise in his Autumn Statement to extend the R&D tax credit scheme has been welcomed by the pharma industry, although other proposals have raised concerns.

Osborne hiked the R&D tax credit for small and medium companies to 230 per cent and the credit for large firms to 11 per cent, saying: “We want to help British businesses do more research and development – this is crucial to our productivity.”

That was welcomed by the Association of the British Pharmaceutical Industry (ABPI), which said the move would “have a beneficial impact on business investment in the UK”.

“The pharmaceutical industry is a key contributor to the UK economy and a leading manufacturing sector,” said the ABPI’s chief executive Stephen Whitehead. “Our industry employs 73,000 people directly in the UK and invests £11.5 million per day on R&D.”

The CEO of Innovate UK, Iain Gray, also welcomed the news, saying the tax credits and continued relief on business rates for SMEs allows them to “concentrate on what they went into business for, rather than worrying about the tax man”.

Others, however, seemed less impressed and suggested the small increase from the current 225 per cent rate, would have little additional impact on R&D spending. The R&D tax credit system has a real awareness problem, according to KPMG Enterprise, which noted that only 5 per cent of companies actually make use of it, with others suggesting the rate may actually be below 1 per cent.

Patent box undermined

The ABPI has said it is “deeply concerned” by proposed changes to the patent box – a tax incentive for intellectual property (IP) that has caused friction between the UK and Germany – that was detailed in a ministerial statement issued on 2 December.

The German government has been arguing that the incentive – which allows companies to pay just 10 per cent tax on income from the commercialisation of IP – was encouraging companies to artificially shift profits from other EU countries to the UK. Now, the tax break will be restricted to IP-generating work carried out within the UK only.

The statement – drawn up by Financial Secretary to the Treasury David Gauke – claims the proposed amendments to the regime will “continue to incentivise innovation and its commercialisation in the UK” but avoid the risk that the patent box will be deemed “harmful” under international tax regulations.

Accountancy firm Deloitte welcomed the compromise and said it now seems likely that the regime will be approved by the Organisation for Economic Co-operation and Development (OECD), which had expressed concerns about its prior format.

£2 billion for NHS

Osborne confirmed earlier reports of a £2 billion cash boost for the “frontline of NHS” and the use of £1.2 billion in foreign exchange fines paid by banks that would be used to support GP services.

The ABPI welcomed that initiative too, saying that it was “acutely aware of the funding issues facing the NHS” and claiming that the pharmaceutical industry had done its part by underwriting the medicines bill within agreed boundaries under the Pharmaceutical Price Regulation Scheme (PPRS).

Once again there is dissension, however, with National Health Action Party co-leader Clive Peedell describing Osborne’s £2 billion promise as a “pre-election NHS bribe using recycled NHS money and dodgy bankers’ fines”.

“£2 billion is too little to save the public from an NHS crisis and too late to save the Tories from an election crisis‎,” he said.

Meanwhile, the Chancellor also announced other measures to bolster the UK’s science base, including making £10,000 loans available to students taking post-graduate degrees, and said in his speech that “the next step is the allocation of the £6 billion on the biggest ever sustained programme of investment in the research facilities of our scientific community”.

“This includes money for major new scientific challenges from the search for advanced materials, to the ground-breaking work on ageing, to the exploration of the universe,” he continued.


Extra billions will only ‘keep the wolf from the door’ for NHS


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