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PRIME MINISTER Report from the e-Minister and e-Envoy - May 2003 Last November in your keynote address to the e-summit you announced the main findings of an international e-economy benchmarking report which found the UK to have a world leading environment for e-business. We are confident that the measures announced in the Budget in April will continue to drive forward the e-economy and maintain our position internationally. To meet the productivity challenge the Chancellor announced several measures which will support the technology sector and the use of information and communication technology (ICT) in business more generally. 100% first year capital allowances for ICT were extended for a year until the end of March 2004. These allowances, which enable businesses to deduct the amount of money they spend on ICT from their total taxable income for that year, should encourage up to 3.7 million small businesses to invest in ICT. The number of businesses eligible to receive allowances will be increased by the introduction of legislation later this year which changes the company law definition of a 'small' business, in line with new EU regulations. To complement allowances to promote capital investment the Chancellor also introduced measures to encourage innovation. Improvements to existing research and development (R & D) tax credits were announced for SMEs and large companies. R & D tax credits have made a significant impact in the last year, lending an estimated £150 million of support to innovative UK companies. But take up has been held back by confusion in industry about precisely what constitutes research and development investment. We welcome therefore, the announcement that a consultation will seek views on how current R & D guidelines can be improved, particularly so that new technological developments can be taken into account. Reducing the minimum expenditure threshold from £25,000 to £10,000, as well as other steps to remove barriers for SMEs, should encourage take up by smaller businesses. The ability of small businesses to access the finance they need to grow and invest will also be examined by the consultation document - 'Bridging the Finance Gap'. It will assess the scope for implementing a scheme in the UK similar to the US Small Business Investment Company (SBIC) model. SBICs have made an important contribution to entrepreneurship and the development of the venture capital sector in the US, accounting for over half of all venture capital investments in small businesses including many in the technology sector. With the Office of the e-Envoy's own focus on electronic delivery we welcome the introduction from next April of mandatory electronic payment of PAYE for large employers. From May 2005, small employers will also have financial incentives to file their end of year payroll details electronically. Electronic payment has the potential to reduce administration costs for both government and business. Two final Budget measures we would like to highlight relate to skills and training. Further steps were introduced to encourage migration as a source of skills within the UK. For example an overseas student graduating from a UK institution in technology, engineering, science or mathematics will be entitled to work in the UK for 12 months following graduation. A new training package will also be introduced for small businesses to promote the benefits of training and business development. The DTI's Small Business Service (SBS) will work in partnership with banks to deliver a web-based information service to help small businesses access the full range of advice and support available. The latter measures underline the importance of skills and training in the knowledge economy and support existing Government initiatives which recognise the link between skills and business productivity and competitiveness. A key part of the Government's strategy to improve the UK's productivity is the establishment of a network of Sector Skills Councils based on the premise that employers are best placed to identify the skills most needed by their businesses. At the beginning of April e-Skills UK was one of the first Councils to gain its five-year license from the Department for Education and Skills. It will receive up to £1million each year from the Government in core funding - and has a remit to articulate and develop the skills needs of the IT, telecoms and contact centre sectors as well as promote ICT skills across industry as a whole. It will work in partnership with Government, educators and employers to identify and tackle ICT skills gaps and shortages which, although less evident than a few years ago, still exist. The Department for Education and Skills is working closely with the DTI on the broader skills agenda and in June will deliver a Skills Strategy that will link skills with the other main drivers of productivity - innovation, enterprise, competitiveness and investment. Finally, preparations for the UK online campaign which you announced last year are almost complete. The Get Started campaign will launch next week on Monday, May 12 and aims to raise awareness of the benefits of the internet among people who are not already online. An exciting range of activity with voluntary, private and public sector partners will promote the advantages of being online and signpost new users to UK online centres. By calling 0800 77 1234 people will be able to find details of their nearest participating centre and enjoy a free introductory internet session.
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