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A budget of hypocrisy? 16 June 2000 Edition
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"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.

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