Hutchison Paul: Taxation (Urgent Measures and Annual Rates) Bill — In Committee 
Hutchison Paul: Taxation (Urgent Measures and Annual Rates) Bill — In Committee 
[Volume:651;Page:175] 
Dr PAUL HUTCHISON (National—Hunua) 
: 
 Thank you Mr Chairman for the opportunity to speak again on Part 2 “Research and development tax credits repeal”. I think it is important to reaffirm that central to the Australian innovation policy was getting right the basic business framework in order to carry out research and development innovation and in order for that country to benefit from it. Australia’s priorities were clearly spelt out as getting taxes down getting the regulatory regime right and having a flexible labour market. There is no doubt that this Government’s programme does exactly that and in terms of the scientific field it will be helped by the improvement of the Resource Management Act and the Hazardous Substances and New Organisms Act. 
I acknowledge very much the fact that the Hon Pete Hodgson put a lot of effort thought and time into research and development over the last 9 years. I think that some worthy programmes were brought in such as the Incubator phenomenon the Venture Investment Fund the Pre-seed Accelerator Fund and numerous others. However this question of the quality of the tax credit has certainly played on the minds of many thinkers throughout the world for many years. The Hon Jim Anderton might say that to remain competitive we have to do what the rest of the world has done. But Finland one of the countries that have demonstrated high economic growth year after year and prominence in innovation does not depend on tax credits at all. In fact it has targeted funding of research and development. 
I emphasise once again the press release that the Hon Bill English put out the other day. It pointed out: “We firmly believe in the importance of research and development to keep New Zealand internationally competitive but the tax credits aren’t the most effective way to ensure that. We will work with business to better target government expenditure on innovation.” This is one of the areas that I for one will make sure I keep reminding the Minister of Finance about. 
But I also think it is important to point out that it was the Hon Pete Hodgson who said that New Zealand was underfunded in terms of investment in research and development both in the public sector and certainly in the private sector. Well it is a bit rich for Labour members to talk about this. They had 9 years and as a percentage of GDP investment in the public sector actually went down slightly over the last 9 years. It went down at a time when New Zealand had the greatest opportunity to grow investment in this crucial area. After all it was Helen Clark who said in the Speech from the Throne in 2005 that research and development innovation was critical to driving New Zealand’s economy yet the next Budget spent billions of dollars on areas that will only cement in intergenerational welfare dependency and a mere $19.4 million was put into research and development. Here they were at the eleventh hour setting up the Fast Forward Fund which we will be replacing with exactly the same amount of funding but far far less bureaucracy. We have committed to the initiatives that are of high quality and to spending very much the same amount but we will avoid the duplicative bureaucracy that Jim Anderton managed—inevitably with his Pavlovian socialistic reflex—to put into that fund. But we think investment is very very important and I accept that. 
The other point which Moana Mackey made was regarding the $315 million over 3 years. That $315 million is absolutely committed to go to secure funding for the Crown research institutes something which has been recommended by the OECD and many others for many years. That was very much the point made by my colleague the good Mr Bennett from Hamilton East who said that one of the legacies of our pre-eminent Crown research institutes AgResearch is the fact that it is having to make 50 60 or 100 scientists redundant as a result of its poor performance under the watch of the Labour Government. That is a particularly important point. The other 50 percent of that $315 million will go to the Health Research Council the Performance-based Research Fund and the Marsden Fund. Clearly those are funds that are very much in need of support from Government because they will not get it from anywhere else. 
In terms of private research and development and the effect of the tax credit there certainly has been a very mixed reaction on behalf of businesses. Many of them have said to me—and I personally am involved in two businesses that carry out research and development—that they are going to carry on with the investment despite the repeal. They will carry on and they will most likely increase their investment because of the fact that a new National Government will improve the business environment so that many thousands of businesses in New Zealand particularly innovative businesses can indeed thrive. We will continue to decrease taxation we will improve the regulatory regime and we will make the labour market more flexible. 
As Bill English said there is no doubt that this is a matter of choice and in the circumstances where we had dire warnings in the pre-election fiscal update this was the only wise choice to make. After all this Labour Government has left us the legacy of 10 years of deficits and it did not even have the honesty to disclose the huge accident compensation losses. When Dr Cullen says this particular part of the bill is dishonest unfair and plain stupid I would reply to him that he is myopic in denial and the man responsible for taking New Zealand two steps further down the ladder of the OECD. There is no doubt that research and development are vital for New Zealand that they absolutely will play a part in the economic growth of the future and that National will be committed to high-quality investment in this area.