By Brian Fallow
WELLINGTON - The extra $100 million a year Labour plans to spend on industrial development by the end of its first term in Government is modest by international standards, Labour's industry spokesman Pete Hodgson said yesterday.
Australia, for example, would outspend New Zealand four to one in relative terms. Labour's spending plans equated to 2 per cent of the company tax take, or a quarter of what the Government spent on consultants, he said.
"It isn't a lot. But the Tories are saying they are going to do nothing."
An extra $100 million would double Government spending in this area. "Beyond the third year, if the programmes are working, we will lift it above that," Mr Hodgson said.
"We have to walk before we can run. Much as we would like to ramp things up faster, if you are determined, as we are, to monitor and evaluate which programmes are working, you have to accept that takes time."
Finance Minister Bill English said the Labour policy marked a return to the days of "Wellington knows best" with subsidies being dished out to a few businesses while the rest paid higher taxes and fended for themselves.
"The idea of development grants, tax breaks on technology depreciation, export guarantees and credit financing schemes will appeal to people who want to set up businesses," Mr English said.
"But the reality is that only the lucky few are going to see any of this money."
Regional resources could end up being channelled into lobbying Wellington for a bigger share of the handouts.
Enterprise and Commerce Minister Max Bradford described Labour's enterprise financing plans as "funding losers".
"If a business idea is not good enough to get money elsewhere, then Labour will give them a handout," he said.
But Mr Hodgson said it would not be a top-down lolly scramble. "The whole ethos of Industry New Zealand [a new body to be set up to oversee industry development programmes] is to be closely linked to business." It would be run by a board substantially drawn from the private sector.
It was needed because of market failure in the provision of finance for small and medium-sized businesses, especially where the development of a new product, process or service involved new technology or a substantial technology shift.
Mr Hodgson said the additional $100 million limit included the revenue cost of allowing all research and development spending to be expensed in the year it occurred and of accelerated depreciation for capital expenditure on technology.
But Labour had rejected suggestions that New Zealand should match the Australian regime in allowing more than 100 per cent of R and D spending to be deductible.
* Prime Minister Jenny Shipley and Enterprise and Commerce Minister Max Bradford will launch the Government's Biz Programme, the replacement for Business Development Boards, in Dunedin today.
Labour: $100m fund is modest
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