National are bleating about Labour’s Research & Development tax credit – largely because as they have no economic plan of their own, so they can only talk about other parties’. It’s a sad sight after 2.5 years of government.
Having worked all my life in the hi-tech productive exporting sector, I believe we need strong investment in R&D if we are to move forward as a country. Sir Paul Callaghan’s brilliant address shows us that tourism won’t generate the revenue we need to catch Australia’s wealth. Agriculture is great, but it’s not scalable. Technology, on the other hand, is our second largest export sector (above meat!), and requires few resources other than brains and entrepreneurship.
In Sir Paul’s talk he mentions that we have 10 hi-tech companies that generate $5bn in revenue for the country – these without us trying. If we could expand it to 100 companies that successful, we’d close the $45 billion wealth gap with Australia – National’s seemingly forgotten mantra.
So Labour have put out a plan to foster those companies and grow them and our economy. At $800 million over 5 years, it will require $6.4 billion worth of R&D from the private sector.
But companies will only get it if they actually invest in R&D. That’s why almost all OECD countries have R&D tax credits – it’s an effective way to get the private sector to invest. Australia thinks it’s a good scheme – that’s why they’re currently implementing the scheme we had in 2008. Our Treasury knows it’s a good scheme too – Bill English ignored their advice not to cut it when he came in.
And our businesses know it’s a good scheme. The likes of Fisher & Paykel are praising it, even if Business NZ head Phil O’Reilly can’t bring himself to back good policy if it comes in Red.
Sir Paul gave a version of his address to the recent Labour Congress, which had a couple of extra slides, making fun of poor old Don Brash. Don thought we invested well above OECD average in R&D, and concluded that R&D funding was not useful in his 2025 Taskforce report (never lets the facts get in the way of a good story…). This Herald editorial seems to make the same mistake, complaining that we’ve “encouraged company research and development at public expense for years.” But we haven’t really made much effort; our investment in R&D both public & private has been anaemic – we rank only above Mexico & Turkey in the OECD for our percentage R&D spend. That’s right Don, not well above average but 3rd to bottom – and do we really want to be emulating those 2 economies?
China gets how important our hi-tech sector is, and reports on it. National apparently don’t get it. Whilst they pick a few winners with their TBG grants, the fact that the rest of the industry get nothing and that National cut $55million from skills training last year and are presiding over a massive skills deficit shows that they aren’t looking after its future. Tax credits are great for the entrepreneurial start-ups we need (they get them before they make a profit), and the skilled workers in hi-tech will lift wages and help reduce income inequality.
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Some quick thoughts on paying for it by introducing farmers to the ETS 2 years earlier… Do you want to pay the tax for their pollution for them? Everybody else will be paying in 2013, so it’s a question of fairness. And National’s complaint that it’ll have agriculture in an ETS before anywhere else in the world… that’ll still be true in 2015 under their plan, so they can’t be that worried about it in reality.
And Red Alert pretty comprehensively deal with John Key’s “milk and cheese will be more expensive” lie.
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