"We do not want to pick winners. We do not want to regulate, subsidise or compel."
And thus spoke Treasure Michael Cullen -- just before he announced that the government
would not be offering a fair and even tax regime for R&D spending -- but instead
it would be offering a system of handouts to be allocated in accordance with some
yet to be announced criteria.
Does the word hypocrisy mean nothing to this man?
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And so The Labour-led coalition government delivered its first budget. While there
was a commendable focus on long-overdue social spending -- the word "investment"
was used only a fraction as often as the word "spend" -- and that about says it all.
The focus was very much on spending predicted revenues -- with very little
real attention paid (despite the rhetoric) to ensuring that those revenues
continue to grow.
Yes... the R&D grants scheme will be worth little more than an extra $4 million
per year distributed amongst a lucky few -- but I still find abhorrent any system
that effectively forces one companyto subsidise the activities of its
competitors.
"The Internet has the capacity to substantially improve New Zealand's economic performance. But if we are neither quick
enough nor smart enough to take these new technologies and make them our own, we risk falling behind the rest of the
world" said Cullen in his speech.
But then we find that most of the government's funding for the development
of a new economy is not scheduled to come into effect for two or three years
from now. Now I'm aware that a government's perspective on "near future" is
about the same as a geologist's or astronomer's -- but once again we see them
talking the talk but failing to walk the walk.
And as for the amount -- why does the critical task of stimulating a new economy
effectively get a boost of less than 10% of that announced for arts funding?
Then there's the "tax fraud" myth...
Cullen's excuse for not providing R&D tax breaks is that it would encourage
tax fraud. Excuse me Michael... but I seem to recall that before the last
election members of both National and Labour were claiming that the punitive
tax scheme we currently have was encouraging tax fraud by causing manufacturers
to reclassify their R&D expenditure as something else so as to avoid the
penalty. Why did I see nothing to address this acknowledged "leakage" of tax
revenues -- and if this is indeed the case -- how can you possibly claim that
allowing the right-off would make the situation any worse than it currently is?
And where's the encouragement for increasing the number of sci-tech graduates
from our polytechs and universities?
Sure, there was a general increase in funding -- but I might argue that for
all their merits, a graduate with a BA or degree in philosophy is seldom
as much value to a new economy company than is a sci-tech graduate. The
education funding is untargeted and therefore wasteful.
"We will host an electronic commerce summit later this year to get
community and industry input into developing an
e-commerce strategy that is world-best."
Now this is a worry. What is government doing trying to stick its oar into
the strategies that business needs to devise in order to extract maximum benefit
from e-commerce? Maybe there are legislative issues -- but we've already seen
that this government is not particularly interested in taking any notice of the
opinions or wishes of business or citizens (witness the R&D situation and
the response to the two referenda held at the last election) so is this simply
another round of rhetoric and posturing?
Need I remind Dr Cullen that Governments' don't create much that is the "world's
best."
It's also a real worry that the government seems to think that e-commerce is
simply another "clip-on" for business and that any traditional bricks and mortar
operation can simply use e-commerce to boost their bottom line. I don't think
I need point out that there are currently many, many more loosers than winners in the
world of e-commerce and the current approach seems a little naive to say the
least.
So, has this budget delivered for businesses?
Sorry -- I, and it would seem the vast majority of other business people,
don't think so. And the worrying thing about this is that I can't see the
treasury forecasts for GDP being met without the emergence of a strong knowledge-based
economy in this country.
What will happen to his forecasts when next year sees another of those "once
in a hundred years" droughts or storms that have devastated our key primary
produce exports so frequently in recent years? Without a strong knowledge
economy we are playing Russian roulette with our overseas earnings.
How will Dr Cullen fund all his commendable social
spending and retain its "fiscally conservative" position?
In fact, I'd dispute Cullen's claim that this is a fiscally conservative budget
because it makes too little provision for assuring NZ's competitiveness in
global markets in future years. Has it escaped the government's notice that
none of the announced social spending is possible unless this country is capable
of developing products and services that are both in demand and well priced
within the new global economy.
So, in summary: the government is to be commended for addressing long-overdue
spending in such areas as mental health, housing assistance, health and
exducation -- but it must be said that this is a very, very myopic budget with
no real encouragement for the creation of a new economy and no contingency
for more production catastrophes in our primary sector.
Needless to say it has done nothing except confirm that my decision to
look at overseas options was the right one. If Dr Cullen can happily
bid farewell to the many Kiwi entrepreneurs who aren't afraid of hard work and
have the potential to create strong export earnings but just want a
level playing field then I think the rest of NZ should be very worried.
As always, your feedback is welcomed.