With the election in full swing and reaching a key point this week with the eagerly awaited manifesto launches, we look at what the Labour and Conservative parties has on offer when it comes to innovation.
Both parties have a clear commitment to innovation and its vital role in driving economic prosperity. We can expect more detailed plans in the first 100 days of a new government. For now, here is what we can take from the manifestos:
What does it mean for R&D tax relief?
Following a period of significant change from the current government, it is no surprise to see, in black and white (bold in fact!), the commitment to retain the R&D tax relief system as it currently stands. Interestingly, Labour do not specifically mention R&D tax relief but do signal a more sector focused approach which is likely to impact how the scheme currently works. There is also a tone that Labour wants to ensure they support small businesses and start ups with access to funding which is likely to include R&D tax incentives. Conversely, the Conservatives make it clear that they believe bigger payback on investment comes from larger bets from larger businesses.
Which sectors do the Conservative and Labour parties want to back?
Conservatives name the Advanced Manufacturing Plan; this covers Automotive, Aerospace, Life Science and Clean Energy (including carbon capture). There is a separate carve out under the defence budget for R&D. Farming is also mentioned, specifically innovation around fertiliser and vertical farming. It is not clear how these priorities will align, complement, or conflict with the Department for Science, Innovation and Technology’s (DSIT) existing critical technologies AI, engineering biology, future telecommunications, semiconductors, and quantum technologies.
Labour is clear on backing sectors, signalling key areas such as Research Institutions, Professional Services, Advanced Manufacturing, Automotive and Life Science. They further commit to investing in the future of the steel industry as well as AI. With commitments around green energy being a predominant feature, it seems likely that future investment into specific sectors will correspond with the drive for the energy security agenda.
Main party alignment on the creative industries
Both parties agree on the importance and value of the Creative sector. They make clear their commitment to – invest and so that this continues to be a key part of the UK economy with global appeal.
What structures do the Conservatives and Labour parties want to put in place to support innovation?
DSIT is not mentioned by the Conservatives so it is likely they will continue with the current structure. They also reaffirm the commitment to the catapult networks.
Labour, on the other hand, have committed to two aspects of control and regulation that may be quite different. First, a new Industrial Strategy; they cite the previous failed attempts of the Conservatives, whereas they plan to have a longer-term commitment governed by a separate Industrial Strategy Council. This is further supported by the commitment to longer term, 10-year funding packages for institutional research. Second, the creation of the Regulatory Innovation Office with a focus in ensuring regulation and policy is fit for future innovation and adoption of technologies such as AI. Whilst not directly addressing the subject of front-line innovation, it may answer the call from the most recent consultation on tax advice regulation. Specifically thinking about R&D and Patent Box, a cross government group may be best to take up the call for regulation.
With tax being at the forefront of the election debate, it is no surprise that fiscal incentives have not featured heavily for either party. If the polls are to be believed, it is likely there will be more to come at the next budget.
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