Government grants to be fewer but bigger

Trevor Mallard

The Government plans to start picking winners with its economic development funding - meaning bigger grants for fewer companies, says Economic Development Minister Trevor Mallard.

The new approach - aimed at boosting productivity and innovation in the export sector - was flagged yesterday by Prime Minister Helen Clark in her opening speech to Parliament, when she said there would be a "refocusing" of spending on economic development.

"It's a change in policy emphasis,"said Mallard, elaborating on Clark's comments.

"It's saying its all right to do some bigger things. As long as it's in partnership."

Investing in partnerships with companies or certain industry sectors was controversial because it could be viewed as trying to pick winners, he said. "But it seems to me there is more potential in doing some bigger exercises rather than doing a whole pile of grants where a business might get $5000 but it might have cost them $2000 to apply for it."

Government funding agency Trade and Enterprise New Zealand spreads its resources across 11 different categories of grant. In 2005-2006 year (to February), it has allocated about $20 million but that has been split across 377 individual grants.

Over the years, several grant schemes had been started. Mallard said results of evaluation last year were starting to come in. "Some things are working better than others."

Details of the new grant regime were still being worked through but would be in place for the 2007 export year.

Mallard emphasised that small-scale grants provided for domestic businesses through schemes like Industry and Regional Development would not be scrapped.

He rejected suggestions the policy shift was an admission that the Government had got the emphasis wrong in the past.

"A Government - particularly one that has been in power for some time - ought to be regularly re-evaluating. This is part of that."

In her speech, Clark also pledged to increase funding for science and research and alluded to plans for greater collaboration between Crown research institutes, tertiary institution researchers and industry.

New figures from accounting firm KPMG show New Zealand invests just 1.17 per cent of its GDP on research and development - about half the OECD average.

Labour claims to have increased spending on research and development by 56 per cent since it came to power but National's Research, Science and Technology spokesman, Paul Hutchison, said the total had actually dropped as a percentage of GDP.