| Ladies and Gentlemen, it gives me great pleasure to be here this afternoon to talk to members of the Cambridge Network and the Greater Cambridge Partnership about the prospects for Cambridge. One of the things that makes me confident about these prospects is the existence of both your organisations.
Cambridge Network has been hugely successful in promoting interaction between companies in the Cambridge cluster. The fact that in its short life, the Network has recruited now 1000 members speak for itself. The Greater Cambridge Partnership provides an extremely effective forum for dialogue between public organisations and the business community on what each needs to do to enable Cambridge to achieve its potential.
The Government recognises the importance of Cambridge as a vital national asset. The University continues to be an international benchmark of academic excellence. It ranked ahead of all other UK universities in the latest Research Assessment exercise with 30 Departments being awarded the maximum five star rating. The Cambridge high-tech cluster now contains over 500 companies accounting for 70% of national hi-tech employment. Hermann Hauser has already spoken this afternoon about some of the world-beating companies such as Autonomy, ARM, CAT, Virata and Celltech. Who would have thought ten or even five years ago that in 2002 Cambridge would have five companies generating sales of more than a billion dollars a year? We need many more companies like these to maximise the value out of the science base.
I would like in my remarks to you to describe some of the main ways in which Government is helping Cambridge to achieve its potential. I intend to focus on three things:
- what we are doing in support of clusters and particularly for the businesses in the Cambridge high-tech cluster
- what we are doing to support scientific and technological research nationally and specifically for Cambridge University
- and what steps are being taken ensure that transport, housing and social infrastructure constraints do not prevent Cambridge from developing in the future.
Government Policy towards Clusters
Here in Cambridge you have the best example of a successful UK business cluster.
It was back in 1998 that the DTI's Competitiveness White Paper first highlighted the potential contribution that clusters can make to the competitive advantage of specific regions and locations. I was asked to head a team to look at what could be done to support biotechnology clusters and we produced a report setting out the factors necessary for success. This led to the setting up a high-level Clusters Policy Steering Group to identify barriers to the development and growth of clusters and to recommend appropriate new policy initiatives.
Government cannot create clusters but what it can do is remove the barriers to growth, provide the right fiscal and regulatory framework, and listen to high-tech businesses. The Government has recently acted upon several issues which business leaders in the Cambridge cluster have made clear are important to them. Three prime examples are :
- Share Incentive Schemes
- Tax Credits for Research and Development, and
- land use planning regulations.
Share incentives
My first example of a regulatory issue impacting on the cluster is the tax treatment of share incentives. There have been a number of reports from working groups highlighting the need for small dynamic business to attract and retain key employees. The Government recognises that by creating the right environment for innovative smaller firms, we will be building a new enterprise economy open to all. Therefore the Government is allowing certain kinds of small higher risk trading companies the opportunity to grant tax-free options to a limited number of key employees. This will help the companies to attract and retain people with the right skills and to grow their business to the next stage of development.
R & D tax credit
A second matter on which people in the cluster came to Government was the tax treatment of R&D expenditure . In April 2000 Research and Development Tax Credits were introduced, targeted at small and medium sized businesses. We recognise that research and development is a long-term investment which small and medium sized businesses may find particularly difficult to finance. We want to help and encourage businesses and have therefore lowered the minimum threshold on spending to qualify for tax credits from £50,000 to £25,000 a year, raised the maximum turnover limit from £11.2million to £25 million per year and made credits available to companies who have not yet started trading. Also, as the Chancellor of the Exchequer recently announced, we will extend that tax credit to larger companies.
Planning Green Paper
A third area in which Government regulation impacts on the cluster is land-use planning controls. Having listened to business, the Government has been persuaded that the planning system at present does not operate effectively in areas of high development pressure, such as Cambridge. It takes too long to adopt development plans and too long to gain planning permission. Government therefore has through the planning green paper put forward radical proposals for a planning system that delivers good development in an open and fair manner, which commands public confidence, and comes to robust decisions in sensible time frames. The Government has also published a consultation paper on the future of planning obligations (S106 agreements) proposing a tariff-based system.
Support for Science and Technology
I would like now to turn to the Government's role in supporting scientific and technological research and in promoting its use in industry.
The Government recognises that it has three central roles to play in maximising the contribution that the science and engineering base makes to wealth creation.
First, the Government has a key role in funding basic and strategic research. This is a public good which cannot be provided by the private sector. It also makes financial sense. Today, commercial success often flows directly from basic research. We've just done a study looking at the interaction between Higher Education Institutions and businesses. This shows that most university spin-offs are generated from those universities which are carrying out world-class research.
Secondly, the Government has a crucial role to play in encouraging the exploitation of knowledge and new technologies. We are determined to provide the mechanisms and resources to exploit successful breakthroughs. That is why we have introduced such schemes as University Challenge (which puts seed corn money into Universities), Science Enterprise Centres (which give access to management techniques for all undergraduates in science and technology) and Higher Education Innovation Fund (for university-industry collaboration), and dramatically increased the number of Faraday Partnerships (transferring knowledge from the science base to business). We are now beginning to see the results. In 1999/2000 we had 199 spin-off companies from British universities, which compares with 70 per year on average in the previous 5 years. The number of spin-offs we get from £1m funding on research is now better than the US.
Government's third key role in relation to science and technology is to help the consumer. Our task is to ensure that people can be confident about the new products that science can deliver. Confident about the way that risks are assessed and managed. Confident that scientific progress always takes account of their views and values.
Investing in the science base and key technologies is a high priority if the UK is to remain a world leader in scientific research. The 1998 Comprehensive Spending Review increased the science budget by 15% over three years. This was the highest increase on spending on any area in government at that time. And in July last year, the Government continued its programme of investment. The 2000 Spending Review added £725 million to the Science Budget over three years including specific funding (£250m) to boost research in key new areas – genomics, e-science, and basic technologies – that will shape life in the 21st Century. To give you a scale of that funding, from 2001 to 2004, the Science Budget will increase by 7% per year in real terms. After a generation in which we have seen a brain drain we are seeing the first signs of a brain gain.
While we are pleased with the progress already made, we are always looking at ways of improving the funding of science in the UK. I am leading a second Science and Research cross-cutting review as part of the 2002 spending review. We have taken stock of all the studies commissioned since the last Spending Review. We have reviewed current funding mechanisms with a view to maximising the impact of available resources for science. The results will feed into the 2002 Spending Review. Unfortunately I don't have time to discuss the impact on Cambridge but will just mention the planning issue.
Support for Infrastructure
This is the third key role for Government in helping Cambridge to achieve its potential. We are working with the local authorities the East of England Development Agency and the business community to ensure that Cambridge has the transport, housing and social infrastructure which it needs as a 21st Century City and as a base for high technology business and a world-class university.
The success of the Cambridge Phenomenon has brought with it pressures. As we have heard this afternoon, you need to do in Cambridge in 15 years what Milton Keynes did in 25 years.
Government in partnership with Cambridgeshire County Council and East of England Development Agency, commissioned the Cambridge Implementation Study to advise on how the higher levels of growth required by the regional planning guidance could be met. The Study's proposals are highly innovative and include:
As regards transport, the Government has already endorsed the proposals in the Cambridge/Huntingdon Multi Modal Study. We have asked the County Council to take forward the proposals for a guided bus to link Cambridge and Huntingdon. We have asked the Highways Agency to progress the A14 improvements.
There is still an enormous amount to do both locally and in making sure that different Government departments work together. I have been asked by the Secretary of State for Trade and Industry to work with Cambridge to ensure that we get that co-ordination.
I believe it is essential for the economic success of the country that both the Cambridge high-tech cluster and Cambridge University maintain and strengthen their leading national and international positions in their respective fields. I do not underestimate those challenges.
I have described to you the ways in which the Government is also helping Cambridge to its potential. Whilst I cannot promise you unlimited financial support, I can assure you of the Government's commitment to work with the regional and local authorities and the business community to ensure that Cambridge continues to be the symbol of innovation and excellence that it is today.
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