Government to cut business assistance schemes

A handful of business assistance schemes funded by the Government are to be canned because it is considered the money can be better spent elsewhere.

The funds from the axed schemes will be redirected into other activities in next week's Budget, in which the Government may also give strong indications about its plans for the energy sector.

Minister for Economic Development Trevor Mallard said yesterday that a regular evaluation of seven New Zealand Trade and Enterprise programmes had established that some weren't needed.

Just three of the programmes evaluated were found to be working well, and Mr Mallard said changes "are needed immediately" in other areas.

He also announced the terms of reference of a wider review of all Government-funded business assistance programmes, which is expected to be completed by September.

Government assistance for businesses has come under fire in recent years, particularly from Act leader Rodney Hide, who has argued the best way to help businesses would be through tax cuts.

But Mr Mallard argued that the Government had a legitimate role in helping business and industry lift productivity. It had to be accepted that there was an element of risk in doing so, he said.

Among the schemes that will end from June 30 is one known as the major events fund, which provides occasional funding for big events in partnership with the private sector.

Another to be canned is the cluster development programme, which helps related firms collaborate on issues such as training and infrastructure.

Mr Mallard said cutting the schemes was not a cost-cutting exercise.

"It's about putting money to better use," Mallard said.

There will be savings of $4.8 million a year from the moves, and announcements of where the money will be spent will be contained in the Budget.

The Government has given little away in recent days about what Budget announcements remain to be made.

But it has sent strong signals that is thinking hard about major changes in the energy sector.

It is thought to be looking at issues around electricity transmission and the structure of the sector, with a view to securing future energy supply.

Industry sources believe the Government may signal legislation that would allow Transpower to acquire a corridor of land for the proposed 400kV transmission line.

Even though it has no approval to build a line, the legislation would allow Transpower to gain land and to recover costs from its customers.

At present the Commerce Commission, which sets Transpower's prices, will not allow the grid operator to recover any investment that does not have the approval of the Electricity Commission.

Meanwhile, the Electricity Commission will not allow Transpower to approve any project that does not meet its economic benchmark.