Technology grants to replace r&d tax credits: Key's science package

Tuesday 11th May 2010

The government will trust medium to large-scale, research-intensive companies to spend new research and development grants as they see fit, rather than reinstate tax incentives which its says encouraged creative accounting.

Prime Minister John Key announced the new grants scheme this morning as the centre-piece in a new research, science and technology package worth $321 million over the next four years. Some $225 million is new spending and makes rs&t the third biggest winner in the 2010 Budget, behind health and education.

Some $189.5 million over four years, or $47.38 million a year on average, will go on the new technology development grants, which "will target medium to large, research-intensive firms which can show that their activities result in wider benefits to New Zealand."

"These will almost certainly include, but are not limited, firms that undertake high value manufacturing," Key announced today to widespread approval from a Wellington Chamber of Commerce audience.

The government will contribute 20% of the firms' expected r&d spend, up to a set maximum, for three years.

"In turn, the firms can determine exactly what r&d activities this money is spent on. These firms are, after all, "r&d savvy" so know better than anyone where this funding would be best spent," Key said.

The grants will not be project-based, so would reduce bureaucracy and would avoid "the kinds of inventive accounting and lack of cost control that plague tax-based measures like r&d tax credits", he said.

The National-led government axed such tax credits shortly after taking office, and has faced pressure for a replacement ever since.

Other key announcements today are:

Introduction of a technology transfer voucher system, with funding of $5 million a year ($20 million over four years), to encourage collaboration between public science institutions (e.g., universities and Crown Research Institutes) and firms with limited r&d capacity of their own. The vouchers, worth typically $100,000 to $200,000, would also encourage public scientists to meet firms' needs;
$24.7 million over four years ($6.85 million a year on average) to spur the commercial uptake of public science discoveries, which remains too low;
$11 million over four years to establish a national network of scientific research commercialisation centres - an initiative that has yet to be fully worked up but which is provided for in this year's Budget;
Retention of the Tech NZ fund, which provides 50% project funding, albeit with "sharper focus", Key said.

Also announced today were a series of initiatives intended to boost top scientific talent:

$25 million over four years for the Rutherford Discovery Fellowship Programme, targeting New Zealand's most talented post-doctoral, early to mid-career researchers with grants of up to $200,000 a year for five years;
$9 million over three years from 2011 for a programme to attract top scientific talent to New Zealand ;
$44 milliion over four years for research infrastructure, such as high performance supercomputing and contributions to major science projects such as the Square Kilometre Array, which are too large for any one institution to develop on its own.

Key's Science Adviser, Sir Peter Gluckman, described the announcements as "the most significant for New Zealand science in 50 years".

Of the $321 million package, $96 million is being taken from other government science funding that is deemed not to be delivering value. No detail was available on those cuts immediately after Key's speech to the Wellington Chamber of Commerce.

Businesswire.co.nz

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