The R&D Policies: the good, the bad and the lack of

Well the elections, whether it be NZ or US, seem to be on the tip of everyone’s tongue lately. It’s actually hard to avoid them in your day to day living whether it is TV debates, the latest attack on an MP in the papers or Rodney Hide on the street in his unapproved electoral finance canary yellow jacket.

Being 23yo, I have only had the chance to vote once before and even then I refused to vote due to the lack of a party that provided adequate leadership or wise policies. This time round the prior has remained exactly the same (even with a new National candidate in the picture) with some improvement on the latter. Personally I am swung towards National simply due to a need for a change of government (9 years is long enough Helen). Furthermore the two leading parties which supposedly form the right and left sides of government have become so similar that is hard to go wrong.

Despite my prejudged vote, being in the R&D arena I started surfing through National’s and Labour’s R&D policies. Below I have provided comment / opinion on the various aspects of each party’s policy.

Labour (Click here for policy URL)

FFF – Earlier this year the government introduce the Fast Forward Fund, a $700million fund for investment in food and pastoral sector over the next 10 to 15 years. Labours election policy simply states to retain this fund. Refer to comments about his fund under Nationals policies.

The 15% R&D Tax credit was also introduced this year to help stimulate private sector investment in R&D. Labour is looking to retain this

Vote: RS&T (the entire fund of MoRST approx 650 million, makes up Marsden funds etc) – Labour is looking to make 1/3 non contestable funding in three years.

Labour will in the next 3 budgets increase funding for the Marsden Fund, Health Research, and new Transformational R&D (including new materials) as well as renewable energy research, social research and funding to address the needs of researchers early in their careers (yet they do not specify how much).

The current split in public sector research, science and technology investment is approximately 40 percent basic research, 40 percent strategic research and 20 percent pre-commercial development. This is likely to shift towards basic research to balance the expected increases in private sector investment at the other end of the spectrum. I think the current balance is sufficient, greater than 40 percent of non applied basic research would be too excessive.

National (Click here for policy pdf)

Discontinuing the R&D Tax Credit and Funding More Science

“Discontinue the R&D tax credit and use $315 million of the savings to boost funding for research and science over the next three years. This boost includes $157.5 million for the Performance Based Research Fund, the Marsden Fund, and the Health Research Council, and $157.5 million for secure funding of Crown Research Institutes.” The $315 million is approx a third of the savings from the tax credit (over 3 years). The other savings from it go to the personal tax cut scheme.

This cutting of the R&D tax credit definitely created a stir and bagging from the R&D industry and the taxation industry (no surprises there, as less tax regulations = less business for them). Check out the below links for the reactions to Nationals decision.

ARTICLE 1, ARTICLE 2, ARTICLE 3

Apart from the ugly results delivered in the PREFU (resulting in the complete cutting of the credit from the reduced 10% rate) they cite some interesting reasons for cutting the tax credit.

The objective of the tax credit was to increase investment in R& D. However they believe that the credit would simply be subsidising R & D that would have happened anyway. While this justification is true, it still misses a point. The credit frees up additional money to allow R&D projects to be undertaken that previously that weren’t financially feasible.

It is also not clear how much additional R&D this will encourage. Specifically the means of how to measure this increase/decrease ? How would they distinguish from companies simply claiming more expenses under R&D expenditure?

A good result of the cut is that it also frees up some cash for injection into a CRI dedicated fund and other basic research funds.

Ultimately does this mean there is a net loss of approx $700 million over three years that would otherwise be savings from R&D expenditure due to the presence of the tax credit? When I put it like that I does definitely sound like R&D is missing out on A LOT.

Secure Funding for CRIs

Set up a new secure funding allocation for Crown Research Institutes, made up initially from: Savings from discontinuing the R&D tax credit and the funding currently in the CRI Capability Fund. This may also free up funding sources previous hunted by CRI researchers.

Boosting Primary Sector Research

Wind up the Fast Forward Fund. My personal opinion on this fund is that its very focus on food and pastoral science is its downfall. Of course being in the human therapeutics area I’m most likely biased, but I believe despite our strong history in agriculture, other areas of science research (biomedical for example) deserve equal attention. Especially considering how well of human health biotech companies have been doing (Neuren, LCT, Protemix, Coda to name a few).

On first look you may think that all of AgBio comes under the FFF, however it does miss out a lot of important and economically significant fields/sectors such as wood, wool and hides.

Being a separate fund it also requires own management structure i.e. wasted money. National’s solution uses existing infrastructure to deliver the funds.

Instead the money will be directed into three areas.

  1. Establish an international centre for research dedicated to the reduction of on-farm greenhouse gas emissions, and fund it at $20 million a year. – Not my favourite course of action as there are already groups researching this e.g. vaccination of cows to cut down methane producing bacteria in the rumen. Simply funding the projects already in place such as 5 mill over 5 years.
  2. Boost funding within Vote RS&T for primary sector and food research by $25 million a year. National actually states the funding increases to be made.
  3. Boost funding for research consortia in the primary and food sectors by $25 million a year. Note compared to the FFF this funding scheme contains a broader Agritech/bio focus. Rather than a 10-15 year 700 million commitment , they are only committed to a $210 million over three years

Prime Minister’s Prize for Science

Introduce annual Prime Minister’s Prizes for Science, and make $1 million a year available to fund them. I don’t think this is necessary is there are other National science prize schemes already in place e.g. MacDiarmid Young Scientist of the Year

Science at the Heart of Government

Create a new role of Prime Minister’s Science Adviser. This role will be filled by a scientist seconded for a time from the sector. I thought this was already in place as Nick Bain previously filled this/ or similar position.

Reducing Compliance Costs

Reduce compliance costs and unnecessary bureaucracy within the science system. Great point! To bad they can’t extend the reduction of bureaucracy and over-management  through to other departments.

Overall it seems like National is severely cutting R&D investment and investing a portion of the savings back into R&D through other channels to soften the blow. With such it makes me wonder where Labour is actually getting the money for their income tax cuts. However it looks like National has put a lot more thinking gone into National’s policies. However both proposals, as expected, are far from perfect. For example one area of concern, not addressed by either party is the funding structure and operation. Too much time is spent writing unsuccessful grant applications. This is time which could have been spent increasing R&D expenditure. There needs to be a consolidation somewhere along the line.

Other side mentioned intentions of National include the rewarding of IP inventors in CRIs and increased student co-supervision in CRIs, which is already happening especially with HortResearch

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