Chancellor provides boost for tech R&D

The IT industry has welcomed tax cuts on research and development expenditure introduced by the chancellor, Gordon Brown, in his budget on Wednesday.

But there has been criticism of the size of the cut as well as the lack of incentives for companies trying to implement "green" data-centre strategies.

The chancellor announced on Wednesday that the tax credit SMEs receive for R&D would be increased from 150 percent to 175 percent from April, and the credit for large companies would increase from 125 percent to 130 percent.

Critics argue that the chancellor has given with one hand but taken away with the other. SMEs that have burst through to profit will find that the increase in corporation tax, from 18 to 22 percent, will more than cancel out the benefit of the R&D expenditure cut.

Intellect, the trade association for the IT, telecoms and electronics industries in the UK, believes any increase given in the budget "is insufficient to have a real impact, and will not help the UK catch up with competitor nations in terms of R&D spend".

Tom Wills-Sandford, deputy director general of Intellect, said: "R&D is fundamental to the success of the UK's knowledge economy and the UK has lagged behind its international competitors".

Intellect pointed out that the chancellor has set a target for R&D expenditure of 2.5 percent of GDP by 2014. "When we consider that R&D spend has either fallen or been flat over the past few years, this target becomes even more challenging," Intellect said in a statement.

According to David Elwen, director at IT consultancy DMW, the chancellor is not staying true to his intention of using taxation to force organisations into better energy management, particularly in areas such as the data centre. "Despite Gordon Brown's 'polluter pays' principle, the budget's 'inflation-only' increase in the Climate Change Levy [CCL] on businesses will fall short of enabling the UK to meet its target of reducing carbon emissions by 60 percent before 2050," he said. Elwen continued: "Considering the CCL was introduced to encourage businesses to reduce their contribution to carbon emissions, it is surprising that there is a lack of hard-hitting action to encourage businesses to adopt green policies in the budget."

Data centres are an "often overlooked and poorly understood energy consumer", said Elwen. "Research shows that IT is responsible for up to 40 percent of a typical large UK enterprise's carbon footprint," he said. "With near exponential growth in IT hardware sales predicted, this footprint will only increase."