Govt urged to invest more m research

Press, 20 December 1986, Page 3

Govt urged to invest more m research

By

MARTIN FREETH

in Wellington

The Government has been warned that it must take a firm lead in New Zealand’s technological development or see the economy slip to Third World status.

A Government-ap-pointed committee has criticised strict adherence to more market policies without State support for industry to invest in research and technology, which it says is vital to New Zealand’s future international competitiveness.

A report by the committee takes particular issue with the Treasury for wanting only to cut Government expenditure and ignoring New Zealand’s need for investment.

It urges a doubling of New Zealand’s national spending on research and investment during the next seven years.

The committee’s chairman, the former Gover-nor-General, Sir David Beattie, warned yesterday that New Zealand’s expenditure now was among the lowest of countries in the O.E.C.D. and it could slide to become a Third World country without Government action.

The report recommends no further cuts in State funding of research and tax incentives to promote new investment in industry.

In particular, it urges provision of a 150 per cent tax deductibility for research and development expenditure, comparable with an incentive provided in Australia. That would effectively mean the taxpayer funding three-quarters of such spending by a company on the top tax rate (instead of half now available under standard tax deduction for business costs). The Minister of Science and Technology, Mr Tizard, said he had “broad sympathy” with the report and predicted the Government would accept some recommendations immediately. Mr Tizard rejected the Third World scenario, pointing to New Zealand’s technological leadership now in some areas of primary produce processing.

He appeared to concur, however, with comments by the committee on the stance of the Treasury to State spending on research and technology.

"Everyone has been losing battles with the Treasury over funding,” Mr Tizard said. He believed the department was “listened to too often.”

The report argues that advice to the Government has “erred dangerously on the side which leads to disinvestment in research and development.” Decisions on funding in that area required judgments based on experience in management of industry, not "theoretical economics” on which the Treasury gave advise, it says.

The Opposition’s spokesman on science, Mr Simon Upton, welcomed the report as probably the most cogent argument yet against applying a “pure market philosophy” to all Government activity. It would strengthen Mr Tizard’s arm in overcoming resistance on science and technology by the Treasury Ministers, Mr Upton predicted. The report posed a dilemma for the Government, now uninterested in a long-term contribution to strategic research in New Zealand, he asserted.

National was now drafting up its own policy in this area, Mr Upton said.

The committee argues that New Zealand cannot afford to not give incentives to industry to constantly improve the quality of products. All its trading partners do, and market deregulation will open New Zealand industry to increasing competition from those countries, it says.

The report puts at $454 million (about 1 per cent of gross domestic product) total spending on research and development last year. It argues that the doubling of that in seven years should be achieved mainly through a lifting of industry expenditure to $5OO million a year, from $204 million now.

Encouragement of that would involve tax and other incentives yet to be worked out, and moves to create more venture capital.

The committee criticises also the Government’s “arbitrary” application of “user pays” in departments. While the policy is basically sound, it was being applied with the aim only of reducing Government costs, the report said. Departments were actually being encouraged to

duplicate research that lifted their revenue and to make no distinction between its uses to industry.

The committee wants more time to examine the “user pays” thrust of the Government and greater evaluation of the national worth of State-funded research. Other recommendations in the report call for the Government to form a research and technology policy, and establish a statutory advisory board to oversee that. It calls also for a Science and Technology Research Council to be set up next year to set priorities for State funding and for greater emphasis on scientific training in the secondary school curriculum. Other members of the committee, which received 433 submissions and talked to 300 people before writing its report, were: Professor M. M. Clay, social scientist; Dr L. C. W. Hobbis, a physicist; Mr John Kneebone, a Tirau farmer; Professor Matthews, an economist; Mr R. G. Norman, a former Commissioner of Works; and Sir Earl Richardson, an Auckland industrialist.