Brown's boost for innovation

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COMPANIES are to be given tax breaks for research and development in a drive to create a new generation of entrepreneurs, writes Rachel Sylvester.

Gordon Brown, the Chancellor, will announce in his pre-Budget report on Tuesday that the Government intends to change the rules to give financial incentives to businesses that invest in innovations.

Under the proposals, companies will be allowed to set the cost of researching new products against their tax bill. Mr Brown is convinced that this will create hundreds of jobs and help generate wealth by encouraging small innovative companies to start up.

Ministers are concerned that British productivity falls way behind that of other countries. Mr Brown will announce that the Government intends to make tackling the "productivity gap" a priority. Research published last week estimated that there was a gap of 40 per cent with the US and 20 per cent with France and Germany. "It's not about people working harder," a Treasury source said. "It's about people working better."

In his speech to the Commons on Tuesday, the Chancellor will also confirm details of the Treasury's revised growth forecast for next year. This is expected to be down from 1.75 to 2.25 per cent, announced at the time of last year's Budget, to around one per cent.