Editorial: R&D tap needs to give more than a trickle

Public money is about to trickle again into one of the economy's least cultivated fields for economic growth, science and research.

In a pre-Budget announcement yesterday the Government committed $225 million over the next four years in the hope that good ideas can be turned into high-value innovations for businesses, exports and the economy.

That money, about $56 million a year, will the third biggest outlay in the Budget after health and education, which says much about the meagre spending increases to be expected for all else next Thursday night.

"Knowledge drives prosperity," the Prime Minister, John Key, said. "And the Government has a crucial role in ensuring that knowledge is developed and used to improve the living standards of all New Zealanders."

The National-led Government has some ground to make up in this area. Soon after assuming office it turned off Labour's science funding tap, from which flowed the generous research and development tax credits and the Fast Forward Fund, a long-term $700 million backing for the food and agriculture sectors.

Those programmes involved serious public money and the imperative of the recession, as much as ideological differences over how to spend it, no doubt led to short-term decisions. Since then the Government has announced a Primary Growth Partnership of $190 million but that has yet to develop primary, forestry or food production.

The loss of research and development tax credits has held back small and medium-sized businesses which do not have the capability to commit to R&D on their own.

Yesterday's Government initiative is smaller, too, than National promised in Opposition although it is possible it will claim that with other piecemeal spending on public science the total would be equivalent to its pledge.

The centrepiece is the $190 million funding for medium to large, research-intensive firms which want to undertake research.

They will apply for taxpayer-funded grants for up to 20 per cent of their research spending but will have the freedom to spend that money where they see fit.

No pre-approved projects or government-vetted inventions. Mr Key thinks they are the "R&D savvy" players and leaving it to them will reduce bureaucracy.

It seems likely that many of these larger companies will be manufacturers which will be encouraged to commit long-term to research and development. It is a commitment New Zealand needs to foster.

A mature approach with few strings attached seems appropriate in winning innovators' confidence.

If all the money is taken up, firms involved will in total be spending up to $237 million a year on such research. It is not clear if the private monies involved will all have to be "new" or in addition to current investment.

While welcome, the policy of pushing 85 per cent of the new public funding towards bigger businesses, and usually businesses that are already "research-intensive", will leave most New Zealand firms out in the cold. The Government will not be so much picking winners as pushing money to established winners.

With the cuts to tax credits for research and development, smaller innovators will need to fight for yesterday's crumbs - a total of $20 million over four years in "technology transfer vouchers".

In most cases the individual businesses will compete for up to $200,000 at a time, which can be spent with a university or crown research institute.

The latest announcement is like so many made by so many governments over so long. New Zealand needs to lift its investment in public science and private R&D to lift the performance of the economy.

Message received. Now turn on the tap and direct it to the entrepreneurial and innovative so that the country begins to see a return.