Subsidies? All UK chip industry needs is tax, rule tweaks, claims rightwing thinktank

A report by the Centre for Policy Studies (CPS) claims the UK can support a local chip industry without engaging in a "subsidy arms race" with other nations and proposes measures government should instead be taking. While the US and the EU are moving forward with plans to pump tens of billions of investment into boosting …

[Andy 73]

Good grief

So here is a report that you tell us is welcomed by people in the industry, and that (quite accurately) points out that we're not in a position to play subsidy races - and yet The Register devotes the first third of the article to political conspiracy theories about the people who produced it?

If there are factual inaccuracies, or ideas that people who actually work in the industry suggest are bad, perhaps The Register could report on those rather than objecting to the fact that a political think tank was founded by someone who died ten years ago?

[rg287]

Re: Good grief

and yet The Register devotes the first third of the article to political conspiracy theories about the people who produced it?

No conspiracy theories.

CPS are based at 57 Tufton Street, and are closely aligned with the Koch-Brother backed shills in 55 Tufton Street. They were extremely keen for us to know how very clever the Truss/Kwarteng budget was. Right up until it wasn't.

Frankly, the only reason to give these people a platform is so that you can treat them with the contempt they deserve. Their "papers" and "reports" aren't worth reporting on in any sort of serious platform. Unfortunately, the current Tory government are somewhat in bed with them - hence our current economic malais, and hence why it is important to properly scrutinise the people who are "advising" our dear "leaders".

Look at these fawning sycophants: IEA: Who is Liz Truss

It is entirely reasonable to take their proposals with more than a pinch of salt. It was former IEA spokes-cretin Richard Wellings who made the - apparently serious proposal last year that:

One solution to the energy crisis is to suspend smoke control zones and other red tape - so that freezing pensioners could burn wood, old books etc. to stay warm this winter. But in reality they don't want people to have alternative, low-cost options.

Evidently Wellings has never tried to actually burn a book (they don't burn so much as smoulder). But we should all be very concerned about Austrians* proposing book-burning.

*Austrian Economists that is.

So here is a report that you tell us is welcomed by people in the industry

Well, it was vaguely welcomed by one person in the industry. And then another person pointed out that the proposals were actually just table stakes, and that whilst the government wasn't even doing that right now, the whole thing was lacking in ambition and could we please for the love of god have a fucking industrial strategy in this country. Hardly a ringing endorsement.

[Andy 73]

Re: Good grief

Oh bless.

If we're going to ad. hom. away anything that doesn't fit our political leanings, I guess we should stop pretending this is a technology site.

On the report - are you going to claim that subsidies are a strategy the UK should be pursuing, or should we go over the disastrous history of the Siemens plant in Tyneside? Or perhaps discuss how the Germans, having offered subsidies to attract chip manufacturers, are now seeing demands for ever expanding support before a single brick is laid?

Meanwhile the AstraZeneca move to Ireland has been specifically attributed to high taxation in the UK.

It is completely irrelevant whether these people like Liz Truss, were founded by Thatcher or are personal friends with Putin - are the suggested policies (ones the UK is singluarly failing to pursue) worth campaigning for? I'd suggest that they are, and that the alternative (throw money at a selected set of 'winners') has demonstrably and consistently failed to improve technological leadership in the UK in the past. I can only assume that some contributors here are completely unaware of well documented historical precedents in the car industry, besides the evidence of the UK tech sector itself.

[Adair]

Re: Good grief

Who ever is talking it always pays to do 'due diligence' and find out what kind of a track record they have, and what their underlying agenda (or that of their paymasters) is likely to be.

The 'plan' may even make sense, but that doesn't mean that those putting it forward aren't going to use it as a trojan horse for the plan they always have: taking as much loot as possible, as quickly as possible, and to hell with the consequences for everyone else.

So, by all means judge 'the plan' at face value, but then go away and ask the hard questions, like: how likely are we to be screwed over; and, what can we do to minimise that probability, because 'the plan' (given appropriate safeguards) actually makes sense?

Then if they start wriggling you know it was a trojan horse all along.

[Andy 73]

Re: Good grief

Sure - due diligence can be done by saying, in one line "a report by the right leaning think-tank known to favour low tax solutions" - that's literally all that is needed, not chapter and verse about who founded the organisation three decades ago.

As for trojan horses, are you really suggesting a sound economic strategy should be discredited because maybe the current lot will balls it up? I'm reasonably confident that they're not going to be in charge much longer, so perhaps - just perhaps - debating what policies we think the next lot should pursue would be a good idea.

I've not yet experienced a government (of any flavour) that hasn't messed up plans and taken every opportunity to service their personal needs over those of the country. That's pretty much a given, so it makes sense to consider the overall approach being taken and look at concrete evidence for possible success. Without failure, assuming a policy is good or bad because of the political leaning of the originator is guaranteed to lead to bad decisions.

[JassMan]

Re: Good grief

"While the US and the EU are moving forward with plans to pump tens of billions of investment into boosting semiconductor design and fabrication facilities within their regions, the UK should play to its strengths and support the industry with market-led measures, a report by the think tank suggests."

When you see a quote like that from a politician, it means "we are going to give any money we have spare to our chums so they can squirrel it away", rather than give any subsidies to companies who know everything about the business they are in but find it cheaper to manufacture in the far east.

[MachDiamond]

Re: Good grief

"rather than give any subsidies to companies who know everything about the business they are in but find it cheaper to manufacture in the far east."

It's not necessarily cheaper in the far east, but there can be, paradoxically, less red tape. There's little point to building a new fab that isn't using the latest tech. If a government is going to tell that company they can't export their product and have to submit for permission for each of their customers/orders to be approved, it's better to be elsewhere that doesn't have those restrictions. Making semiconductors isn't labor intensive so the cost of labor isn't a factor. Sand is pretty cheap and processing that sand into really pure sand is a well known process and also highly automated. Cost of materials isn't a factor. It's a matter of energy costs, access and regulation. What's the point in spending taxpayer money to bribe companies to locate in the country when that money would just go towards paying for higher energy costs, compliance and government induced delays? Cure the disease rather than treating the symptoms is my advice.

[rg287]

Re: Good grief

If we're going to ad. hom. away anything that doesn't fit our political leanings, I guess we should stop pretending this is a technology site.

It's not an ad hom to call them cretins - that's just based on previous poor performance. A few years back, the then IEA Deputy Director Richard Wellings turned up to a House of Lords Select Committee to "give evidence" as an "expert" and spent a significant amount of time slating HS2. He finished - when challenged with a quite reasonable question - with:

"I do not know any of the details of what HS2 would actually look like"

Indicating that he hadn't actually read the f-ing report they were there to debate! Which included a map... and a description of the project...

"Something something ... I'm very important and have an opinion so you should listen to me..."

Call me underwhelmed by the quality of their research...

If a child has blatantly plagiarised two of their last three pieces of homework... then you check the rest of their work all the more carefully (without giving the others a free pass either).

It is completely irrelevant whether these people like Liz Truss, were founded by Thatcher or are personal friends with Putin

Well... it is and it isn't. The first rule in reading any sort of document - historical, policy or research is to ask Who wrote it, Who commissioned/funded it, and Who was it written for? You don't believe everything you read in vendor marketing bumpf do you?

If it was written by an organisation which recently backed obviously-bad policies that tanked the markets, who do not like to reveal their secretive financial backers, and who are writing for a government with an extremely poor economic track record... then it is entirely reasonable to ask those questions and retain some scepticism when reading.

This is how Tufton Street operates. One logo puts out a report. Other logos declare it "exciting" or "innovative" or put out some "independent" study which comes to broadly the same conclusions. It's like a Russian propaganda campaign, with a half-dozen apparently-unconnected fake news sites which re-report each other's stories and build a fake web-of-trust. Once you know, it's obvious. But the average punter doesn't know that when the Taxpayer's Alliance put out a "study" and BBC News get someone on from the IEA to talk about it... they're one and the same.

As it is, they don't seem to be arguing for any sort of actual industrial strategy - mostly just lower taxes. For a specific sector mind you - but then next week they can copy-and-paste a different sector in, stick an IEA logo on the front and release a "new" report advising them to lower taxes for a different sector. And eventually that's just a general veneer of "lower taxes for all our mates".

They also argue against any sort of investment, rolling out the old trope of "the UK's severe fiscal constraints.", perpetuating this idea that the UK is somehow broke and cannot aspire to much at all. Investment doesn't have to mean picking winners or subsidies though, more like creating conditions for business to do well, clustering of skills and suchlike - and that tends to be a semi-proactive endeavour to develop those communities of private enterprise.

So this report is a nothing-report. It basically says "Don't do anything, don't invest, just do some tax credits for the companies who don't want to come here anyway because of Brexit, but who might register an office so they can launder some revenue through the UK and get that rebate."

This is all backed up by the guy from Gartner, who concludes:

Gartner vice president for semiconductors and electronics Richard Gordon said of the report that the incentives mentioned – taxation credits/reliefs, lowering barriers to skilled immigration, and cutting planning red tape – were "table stakes." He added: "They should be doing this anyway for any industry they want to encourage."

...

He went on to say: "I get the impression that they want to be able to say that they are supporting 'a semiconductor industry' in the UK, which is true but very narrowly scoped and targeted."

He's saying "Your industrial strategy is non-existent, this report doesn't say anything new - you should be doing it for everything. But the people in power don't actually GAF anyway, it's mostly for show".

Refer back to my comment on Who wrote it, Who commissioned it and for Whom to read.

A low-tax, right-wing advocacy group wrote a report that said "do as little as possible" for a government whose central policy is to do as little as possible. Call me shocked.

[Anonymous Coward]

Re: Good grief

Thanks for the posts.

I was not aware of the relationship of the Tax Payers Alliance and IEA etc.

Every organisations funding should be transparent, so we at least can make that judgement,

I'm off to burn some books to keep warm. That will be the Microsoft MCSE ones....

[Anonymous Coward]

Re: Good grief

"I was not aware of the relationship of the Tax Payers Alliance and IEA etc."

Who did you think it was that convinced the government that Trussonomics was a brilliant strategy. 55 Tufton Street is the birthplace of all schemes designed to rip off the tax-payer in exchange for a small percentage returned to Converrsative party coffers.

[Anonymous Coward]

I thought we left the EU to allow us to subsidise 'winners'

One of the prime arguments by the ERG (at home at 55 Tufton Street) was that EU rules prevented us subsidising these new technologies to build world beating industries in the UK. Now we are out subsidies are bad and we must on;y use tax incentives. The recent failure of British Volt is a prime example, the initial investors lhundreds of millions into the pre build phase of the factory to be left with nothing, another investor will now come along and pick up this work for a song, take it tot he next phase and sell on the stock. The plant may never be built but along the way hedge fund managers will user various iterations as a sell of equity sales of course this all happens within a cabal of linked 'financial wizards' in the end the final failure will be some poor chump outside that little group or, more likely. the UK government. Don't forget the unwritten rule this cabal of thieves operate by - privatise profits, socialise losses.

[Andy 73]

Re: Good grief

I'd suggest that they're proposing measures that this government is failing to implement, not proposing "do as little as possible". When AZ specifically raised the issue of high taxation, suggesting tax incentives is anathema to the current lot.

If you want to get political, we're witnessing a deep division within the Tory party - between a low tax, small state side (that, yes, does owe a lot to Thatcher), and the 'wet socialist' policies embodied by Sunak in a (very poor) attempt to occupy the ground Labour want to be in. Reports like this are very much part of the battle.

You can of course argue that Sunak's policies are the best direction (really?), on the basis that the banks essentially pulled the rug on any significant economic reform after the financial excesses of Covid. Most of the Tory party are in fear after Truss' disastrous showing, and the party as a whole is paralysed.

You point out that these are things that should be done anyway - that's the whole point, that they should be *but they aren't*. Your argument seems to veer between suggesting that the report wants to "do nothing", that it wants to do inherently bad things (because Truss) and that it want to do things that should be done but simply aren't. Which is it?

Of course this is no longer a discussion about how to best support the chip and technology industry in the UK - it's just a political debate over who should be in charge. I'm willing to bet that since everyone wants to focus on who's steering the ship, we'll continue to ignore the course that is being taken, and the UK chip industry will go precisely nowhere.

[gandalfcn]

Re: Good grief

"I'd suggest that they're proposing measures that this government is failing to implement, not proposing "do as little as possible". When AZ specifically raised the issue of high taxation, suggesting tax incentives is anathema to the current lot." The decision wass made 3 yuears ago,

"Of course this is no longer a discussion about how to best support the chip and technology industry in the UK - it's just a political debate over who should be in charge." Don't be daft.

[Anonymous Coward]

Re: Good grief

"the UK chip industry will go precisely nowhere"

What UK chip industry?

[PM from Hell]

Re: Good grief

We have a centre of chip excellence in our village, they also make very nice pies

[Androgynous Cupboard]

Re: Good grief

I'm firmly of the left, but the proposals as summed up in this article sound, on the surface reasonable.

However I categorically agree that anything originating from the Tufton Street wingnuts needs very, very careful assessment for the reasons rg287 spelled out. Taking economic advice from the theorists behind the biggest act of self harm to the UK economy since.... well, the last one they got behind (Brexit) needs to be done very, very carefully. For some reason Shakespeares springs to mind.

QUEEN ELIZABETH: "Shall I be tempted of the devil thus?"

RICHARD III: "Ay, if the devil tempt you to do good."

[gandalfcn]

Re: Good grief

"Meanwhile the AstraZeneca move to Ireland has been specifically attributed to high taxation in the UK." But the real reason was Brexit as UK tax when all the loopholes etc. are factored in are less than Eire.

"AstraZeneca to invest $360m in advanced manufacturing facility in Ireland

PUBLISHED

21 September 2021"

The decision was not recent as people are trying to claim. When the decision was initially announced it was all about supply chains and " requiring next generation technologies and capabilities that can respond quickly and nimbly to rapidly-changing clinical and commercial needs".

[gandalfcn]

Re: Good grief

"It is completely irrelevant whether these people like Liz Truss, were founded by Thatcher or are personal friends with Putin - are the suggested policies (ones the UK is singluarly failing to pursue)" LOIL. Do you realise how you totally destroyed yourself there?

[codejunky]

Re: Good grief

@rg287

"Unfortunately, the current Tory government are somewhat in bed with them - hence our current economic malais, and hence why it is important to properly scrutinise the people who are "advising" our dear "leaders"."

Assuming you mean the current Tories are in bed with what seems to be a free market group I think you are nuts. The current tories like the ones before Truss are high tax, high spend and started by undoing the pro market changes Truss planned.

[Anonymous Coward]

Re: Good grief

A Tufton Bufton writes ...

[Anonymous Coward]

"Successive governments have failed here"

I guess this is the sort of position they laid out in front of Astra-Zeneca. So A-Z have gone to Ireland.

I suppose it just a continuation of the "shoot yourself in the foot and blame everyone else" strategy.

[Yet Another Anonymous coward]

Re: "Successive governments have failed here"

Well for the last 12years the Tories have been trying their best to undo the legacy of the Corbyn government

[JassMan]

Re: "Successive governments have failed here"

Well for the last 12years the Tories have been trying their best to undo the legacy of the Corbyn government do everything to help the rich get richer.

FTFY - or were you just suffering from the lack of a <sarcasm> </sarcasm> tag.

[Jedit]

"FTFY"

Er... you are aware that there never was a Corbyn government, and that Corbyn was not even leader of the Labour Party for most of the last 12 years? A sarcasm tag is not required.

[BebopWeBop]

Re: "FTFY"

Whoosh

[elsergiovolador]

Incentive

We have plenty of incentives:

IR35, one of the highest income taxes in the world, Twitter police (burglary? don't even bother calling), health care for patient people not patients (long wait lists), poor infrastructure (train ticket across the country costs the same as all inclusive holiday somewhere warm). Oh and your business claimed R&D and you are not a member of WEF? Tax inspector is already on you.

So if you want to lower income tax for semiconductor worker, that is going to play nicely with workers from other sectors during cost of living crisis.

I think that think tank, probably has much more to do with tanks than thinking.

[HPCJohn]

Re: Incentive

Indeed. "make it easier for highly skilled workers to come to the U" Well incentives were one of the reasons I went to work in the semiconductor industry - for ASML in Eindhoven.

The Dutch have the 30% rule for tax on highly skilled workers.

The Eindhoven region also actively encourages high tech workers to come and visit there.

Sadly I now live back in Blightly with 10% inflation.

[Yet Another Anonymous coward]

Re: Incentive

But at least you have sovereignty

[elsergiovolador]

Re: Incentive

Nope, we ceded control from Brussels to Davos.

[Yet Another Anonymous coward]

Re: Incentive

No, facilities for the disabled would be better if we were ruled by Davros

[Paul Crawford]

Sadly I can think of many UK companies that were bought out by overseas firms and then closed, with any products that are still made coming from China, etc.

Also many good & useful product dumped as they were either not profitable enough, or they didn't fit whatever goal the new owner was going for. All causing end-users a headache or to have to cancel whole product lines.

But wait! Our glorious leaders and now trying to bribe with public money encourage Softbank to IPO ARM in London as well as NY, that will make all the difference!

[cream wobbly]

remember transputers?

If Thatcher's policies hadn't sold off Thompson for cheap the UK wouldn't have to be attracting chip fabs.

[Anonymous Coward]

Re: remember transputers?

It was INMOS that they sold off and it was Thorn-EMI who were the buyer. SGS-THOMSON only came into the picture a few years later when Thorn realized how expensive running a chip company was (or maybe it was because INMOS turned out not to be Intel which the Thorn CEO at the initial press announcement memorably announced they were buying before correcting himself)

[Howard Sway]

Tory think tank proposes solution to problem <X> : tax cuts

Seeing as that's the exact same "solution" they propose for every problem, and has been for 40 years or more, maybe they might want to do a bit of actual thinking in their tank for a change and see if they can possibly come up with a new thought.

[Yet Another Anonymous coward]

Re: Tory think tank proposes solution to problem <X> : tax cuts

This is cleverer though it let's them right off all non-R&D stuff as well.

So Mega corp could move their HQ to London and write off everything as R&D and pay no tax. Except they can't because then they can't sell in Europe and a company from any country with a functioning legal system would get hit by their own tax guys.

So the only people I can imagine benefitting would be Lord Snooty hedge fund who would declare that because they had a laptop they were a tech company and pay no tax. Except of course they don't pay tax anyway

[Dr Fidget]

Surely there's a 'chum' somewhere

I thought the Tory way of handling things like this was to find a 'chum' (Eton old-boy, neighbour down the road, somebody I met at the golf club, ...) who may make a decent donation to the party (or the PM of the day) and bung them a few £millions, no questions asked.

[pimppetgaeghsr]

We have plenty of IP companies that can neutrally sell to anywhere in the midst of a trade war except we decided to pick sides so a few US corporations would open some offices in the UK and only hire imported talent to keep costs down.

Let the Americans and Chinese fight over the semiconductor gold rush and lets just sell them shovels.

[R Soul]

lets just sell them shovels

We certainly can't make the tools and machinery to make semiconductors.

Come to think of it, selling actual shovels might well a bit of a stretch for our fucked economy.

[John H Woods]

Low tax, small state

It would be good if the proponents of low tax, small state economies could point to any place in the world or any point in time where these have actually worked. As in worked for those states, rather than a powerful minority of people within them.

Adam Smith wrote Wealth of Nations, not Wealth of Individuals. Free market capitalism was intended to (and does) quite effectively solve efficiency problems within specified constraints. When you let capitalists themselves set (or, more usually, remove) those constraints, it stops working. Smith was well aware of the problems that would occur with insufficient regulation of the market. Unfortunately, today's self-styled Adam Smith aficionados have read far too little Smith and far too much Rand. I suppose teen-fiction pulp is easier to read than the elegant, well-considered and (most importantly) still entirely relevant, writings of the 18th century thinker.

The performance of China; the two principle Western capitalist success stories (UK post WWII rebuild and US New Deal); the relative underperformance of the West since Reagan/Thatcher trickledown neoliberalism kicked off in the 1980s; and the growing climate crisis surely show that, in the modern world, states need to be actively interventionist.

How much longer are we going to give these failed neoliberal policies to work? Another forty years? Have we even got that long?

[J.G.Harston]

Re: Low tax, small state

"It would be good if the proponents of low tax, small state economies could point to any place in the world or any point in time where these have actually worked. "

Hong Kong. Singapore. Taiwan. Japan. South Korea.

[John H Woods]

Re: Low tax, small state

You might want to read your list again.

Singapore is particularly funny... It's an authoritarian technocrary, the very opposite of a small state.

[Yet Another Anonymous coward]

Re: Low tax, small state

>Singapore is particularly funny... It's an authoritarian technocrary, the very opposite of a small state.

Where everyone lives in a council house

[Kev99]

The reactionaries continually cry out get the government out of our lives, but then turn around and suck and public teat and demand the government force their beliefs onto everyone else. When companies like Intel (what an oxymoron) throw off upwards of thirty billion dollars in cash they no more need subsidies than Big Ben needs a Timex.

[amanfromMars 1]

The Dunning-Kruger Effect Meets Hubris on Steroids and Goes All In with Mental Overdose Drive

On tax and investment, the government should offer a bespoke R&D tax credit for companies operating within identified areas of opportunity for the UK, as well as establishing an Emerging Technologies Strategic Investment Fund to attract international capital to the UK's emerging technology industries.

:-) LOL. How do they, those numbskulls in self-serving siloed Cabinet compartmented government masquerading as democratically publicly elected leaderships, expect to attract any international capital/foreign and alien investment, whenever at any time of their choosing, and/or at the behest of an Unsavoury Stranger, they can decide to freeze and seize from investing foreigners all banked deposits and personalised assets. For anyone to think the UK is an attractive place to do any sort of world-leading business whenever that is the favourite immediate default facility if ever entering into the support of adverse war in a remote foreign locality, has them surely accurately tagged as being totally unfit for any publicly funded office which does not require madness and stupidity in similar large measures.

What emerging technology industries do foreign governments, and an Emerging Technologies Strategic Investment Fund, imagine the UK has that is attractive to buyers of markets-leading product? Is Vapourware now a solid investment grade thing, for that is all that has suddenly appeared out of nowhere safe and secure to be oven-ready for sale?

On the 0-10 BullShit Sale Scale of Difficulty is Vapourware an easy 11++, so who's going to be surprised any entering for a browse around in that Dragon's Den declare ... No Way. I'm outta here. .... which is nowhere near the same as ..... No Way I'm outta here.

And one would almost think that the UK has no money of its own to invest in itself whilst there are apparently unaccounted for billions available for giving away to supply others with other things. How very weird and vulnerable is that wondrous fact.

[amanfromMars 1]

Re: The Dunning-Kruger Effect Meets Hubris on Steroids and Goes All In with Mental Overdose Drive

Biden slush fund money [$27,000,000,000] is now looking for a home. A battle is on over who gets to waste it... ........ https://www.zerohedge.com/political/biden-administration-ready-unleash-27-billion-green-slush-fund

Get your FCUKing ACT together, Dishy. Follow Sleepy Joe's Grand Master Plan for Growth and Prosperity in the Promised Land. How hard can it be to trash the past .... although one does have to recognise and admit that such coincidentally crashing and crushing the future is a wholly unavoidable cost incurred with such a wondrous activity, and thus is most certainly extremely crazy at least, and also self-destructive.

Either there is a supply money to give to pet programs and competing warring projects or there isn't such money provision, and all is just convenient ethereal credit, accounted for as compound interest attracting trading deficit to be added to an ever expanding and never to be paid national debt bill.

That might be a simplification of the workings of government[s] but there's no way that it can be sanely argued to be inaccurate and a fabrication rather than honest and hostile truthful fact.

[BebopWeBop]

The Centre for Policy Studies - a little like the 'European Research Group' - and know just as less.

[Anonymous Coward]

Are they, by chance, based in Tufton Street?