NZ Herald on Labour

May 24th, 2011 at 2:00 pm by David Farrar

The editorial:

The Party’s annual congress held at the weekend should have seen some interesting new ideas. The party has been out of power for the best part of three years and another election is six months away. Polls put well adrift of National, which is another reason to expect some bold thinking. has little to lose.

But there were not enough interesting or innovative ideas from the party at the weekend, though the word innovative was heard frequently. Labour proposes to encourage research and development with a 12.5 per cent tax break. Leader Phil Goff reckoned this would increase private investment in R&D by $1.5 billion a year, especially in high-tech industries that would create jobs and exports.

How often have we heard this? This country has encouraged company research and development at public expense for years. One of the ways Mr Goff proposes to pay for his tax break is by cancelling the present Government’s incentive, worth $70 million a year.

So there are two parts to Labour’s policy. One is to increase the amount the Government spends on subsidising R&D, and the other is to change the way it is funded. National basically has a system where it picks “winners” who apply for grants or subsidies. Labour proposes a 12.5% tax credit than any company that spends over $20,000 can gain.

So both parties are saying they see a role for the Government in encourgaing R&D, but disagree on the level of funding and the method.

The latest to beat this drum is one of the country’s top scientists, Sir Paul Callaghan, who has been attacking the Budget delivered last week for its lack of high-tech investment. His prescription for economic success is very precise. It is not tourism, “a classic low wage activity”, not wine, “nice lifestyle but frankly the revenue per job is poor”. The future lay in technology. “If you look at the profile of high-tech companies in New Zealand you see some surprising strength,” he says. “We have the capacity of growing this sector significantly.”

But it is not clear what the Government should do beyond ensuring the country is equipped with up-to-date infrastructure for high-tech providers to use. There are fears that even in financing an ultra-fast broadband network the National Party might be exceeding its competence.

I agree with Sir Paul, that one of our industries for the future is and should remain high tech. The fibe to 75% of NZ programme should help that industry.

The best governments can do is maintain a reasonable public research budget balanced against all other calls on their revenue, and allow tax write-offs for the development of exportable products. To pretend that research and development assistance is the answer to the nation’s economic needs is not credible. It is an admission of a lack of better ideas.

I quite like the idea that maybe you tie tax credits to R&D which is used in developing exportable products. That would stop tens of thousands of companies reclassifying expenditure as R&D just to gain tax credits. If you had to link it to an export product, then fewer would qualify.

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15 Responses to “NZ Herald on Labour”

  1. oob (194 comments) says:

    I agree with Sir Paul, that one of our industries for the future is and should remain high tech. The fibe to 75% of NZ programme should help that industry.

    Nope. Despite that which Marshall McLuhan and DPF might think, it’s the message, not the medium, that matters.

    It doesn’t matter that the medium is fibre when National has allowed Telecom to offer the message at paltry dial-up speeds.

    The UFB deal is a disaster for New Zealand’s network infrastructure and by extension, the New Zealand economy. It simply hasn’t occured to the bufoons of National (like the bufoons of Labour before them) that modern network infraastructure might be worthwhile in the most geographically isolated country on Earth.

    Unbelievable (and unconscionable) that National has supported Telecom’s monopoly maintenance at the expense of the national interests of New Zealand.

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  2. GPT1 (2,087 comments) says:

    For those who have given it any attention I suspect the Congress will be remembered for Labour wanting another government department. Great use of the media space.

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  3. Rural Connect (10 comments) says:

    The government’s way of supporting R&D is I believe, counter-productive. Because they require the IP to be made available, there are many firms that could use R&D funding support but choose not to because of issues over who owns the IP. It is the country that prospers less because of this.

    Sir Paul Callaghan’s analysis went beyond what the Herald and you report on. His presentation has been repeated in a number of forums now but too few seem to be taking his simple message on board. His vision is for New Zealand to be “a place where talent chooses to live”. Not just the cities where the UFB will be rolled out. But anywhere and wherever talent chooses to live. Including rural areas.

    When you push the line above (“The fibe to 75% of NZ programme should help that industry.”) you again choose to forget about the 25% of people who live in rural areas, the same areas where around 65% of our productive exports come from, the areas that actually represent the greatest potential for lifting NZ’s prosperity.

    If you want to leave your city office and city-centric ideas behind, come to Tuakau and see what our rural areas have to offer. Come and see why more and more people are choosing to live rural lifestyles. If that is, we could offer them city-style broadband!

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  4. tvb (4,197 comments) says:

    The $15/hour is the really cynical promise. It s unlikely they will ever be asked to implement it. They certainly didn’t when they had the ability to do so. So they make this fake promise knowing they will not have to implement it hoping to score some votes of the low paid.

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  5. flipper (3,537 comments) says:

    DPF… (And S P Callaghan et al) … planned economies DO NOT WORK.
    The ultimate planned economy was that operated by the Sovs.
    The “erks” and ‘crats lied to the Politbureau.
    The Sovs had a disaster. What has changed?

    In Europe today we have the PIGS, with UK only a little behind. And the US is ready to follow if Obama has his way.

    Governments can do squat.
    They have no money.
    They have:
    a Our money (taken from us), and
    b. An ability to borrow on our sweat.

    The time when the media tells the pollies they are talking BS is long overdue.

    Please!

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  6. Sonny Blount (1,845 comments) says:

    Ultra Fast Broadband is a project Rob Muldoon would be proud of.

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  7. lastmanstanding (1,201 comments) says:

    R&D tax credits are one of the great tax rorts of all time. as a CA for number of decades ( forgot how many) it is very easy to turn non R&D operating expenses into claimable costs.

    The GUmint needs an army of people who understand the business to sort the wheat from the charf and we CAs know this.

    IMHO GUmints should stay right out of this area and simply set the corporate tax rate low enough so companies invest in R&D as a means to increasing profits NOT as a means of reducing taxes.

    The policy setting is wrong wrong wrong. We want people who will invest for investments sake NOT to save a few tax bucks.

    Thats why we are in the shit now. Too many looking to say tax bucks and not enough investing for growth

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  8. labrator (1,745 comments) says:

    Well said @lastmanstanding. I’m all for doing away with govt picked “winners”. If you’re going to throw your money into a start-up or project you should hope that the rewards will be worth it regardless of whether you get tax benefits from it.

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  9. reid (15,917 comments) says:

    The really critical R&D need is going to come when all our scientists retire and we suddenly find, hello, there are very few young scientists to replace them. What’s that going to do to our acknowledged world leadership is many things ag?

    Strange we don’t hear anything about that, cause it’s quite obvious.

    You woulda thought the MSM would be right on it, wouldn’t you.

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  10. Pongo (371 comments) says:

    Biggest problem in NZ is after you come up with a great idea is getting it to market and then not flogging it off to the first foriegner that knocks on your door.
    R and D tax credits are a bit of a have, hell I am a painter and my son is studying chemistry at Canterbury so I am sure there is a way we can throw a few chemicals in a tin of paint and maybe save a bit of tax and supplement his interest free student loan drinking allowance.

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  11. reid (15,917 comments) says:

    Now you’re thinking, Pongo.

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  12. KH (687 comments) says:

    It doesn’t matter if you are a $15 hr wage slave. Or a $50 hr high tech one. You are both a wage slave. And neither really helps the nation get wealthy
    What Marx said was that the benefit always flowed to the owner.
    And Asian countries and peoples understand very well.
    You have to own and control your stuff. The enterprises need to belong to New Zealanders.
    We need to be realistic about the hard world we live in.
    Best thing ever was that NZers owned and controlled the farms they worked on.
    And the reason for any economic wealth NZ has.
    Why are we letting that erode.
    And Sir Paul is not wrong. But we have to add ownership and control to his recipe.

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  13. side show bob (3,660 comments) says:

    I think sir Paul is full of it, most of the world is now “high tech” . Yes one bright idea may pull us out of the shit but ideas do not respect borders or copy-write. Our future lies in food production, tourism, mining, both minerals and fossil fuels. Low wage, I think not, the world continues to shrink, work it out.

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  14. Anthony (766 comments) says:

    SSB, that is why Sir Paul said we need to create a country where talent likes to live! He doesn’t believe in picking winners but in funding a range of research and development to same level as is done in most other developed countries!

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  15. rakuraku (162 comments) says:

    Selling the country’s assets to China, Australia and the USA, or wealthy New Zealanders in cohoots with the Government is not in the best interests of New Zealanders.

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