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Norman: A smarter greener economy through innovation

16 July 2014

Building a smarter greener economy through innovation

Green Party Co-leader Dr Russel Norman

Tēnā koutou, tēnā koutou, tēnā koutou katoa.

Thank you very much Dr Dickinson, who Twitter followers might know as Nanogirl.

You innovate, you teach science, you run a commercial laboratory, you promote science in an imaginative and cool way. And you are here. What more could we ask?

Elections are about choice and voters will certainly have one on September 20.

Voters can choose National’s business-as-usual, backward-looking pollution economy – the antithesis of innovation.

Or they can choose the Green Party’s plan for a smarter, greener, more productive economy that is jobs-rich and sustainable and benefits all.

Under National, the New Zealand economy has been dramatically simplified.

Essentially, New Zealand is increasingly reliant on one product and, increasingly, on one market.

National has bet the farm on the farm.

Its solution is more dairy production, less diversity, both economically and ecologically.

The one product/one market approach is high risk.

But even more risky is National’s failure to protect our environment, which is actually what underpins our economy.

Any high-carbon economic model has a built-in self-destruct mechanism.

National has completely failed to grasp this.

Green plan to return New Zealand to innovation

The Green Party has a better idea.

We believe that to get ahead the plan must change – we have to innovate.

And there is one certainty about innovation – it is not business as usual.

New Zealanders are innovative people.

We have a can-do mentality. When people talk about No.8 wire, they are referring to our ability to find imaginative and inventive solutions to problems.

Economies that innovate do better over the long-term, creating good jobs that pay well, enabling us to live high quality lives and providing the social services we need.

Innovation is the best way we can add value to our exports.

If we want to provide for our social needs and aspirations, we need to be at least as innovative as other affluent nations.

That means making high value-added manufactured goods and services, not simply selling commodities like raw logs and milk powder.

Innovation underpins success of small advanced economies

Economist David Skilling’s study of small countries with advanced economies such as Denmark, Israel, and Finland found that one of the defining characteristics of their wealth was high investment in R&D.

Each has niche manufacturing industries that make up significant parts of their economies, while high tech industries make up a disproportionate share of their exports.

Each had agricultural-based economies in the 1970s, and while they haven’t abandoned agriculture, it now makes up a small proportion of their exports.

Unlike the National Government, with it’s largely laissez faire reliance on the market, in each of these overseas cases the state has played a very conscious and significant role in promoting research.

The state didn’t pick winners but it certainly picked sectors which the government supported. And they certainly invested more than we currently do.

From those state initiatives, start-ups in the private sector evolved.

Shortcomings of National’s innovation programme

National has done a lot of talking about innovation.

Steven Joyce increased the frenetic pace of restructuring the government innovation system, and produced 100-point lists of actions.

But for all the talk, and 100 point lists, there is one figure that tells the real story.

The 10-year outlook of the National Statement of Science Investment shows research and development spending will actually fall, in real terms by 21 percent.

That’s right – National is about to make major cuts to research and development funding.

When New Zealand already invests only roughly half of what most other developed countries do in research and development, and considerably less than other small, advanced economies, these further cuts are a disaster for R&D and our capacity to innovate.

And if the funding cuts weren’t bad enough, Steven Joyce has also strapped innovation in a straitjacket with his grants system.

By putting himself at the centre of a complex web of R&D funding, Steven Joyce is denying businesses the freedom to innovate on their own terms.

Businesses’ R&D investment shouldn’t be reliant on the Minister’s approval stamp.

At present, New Zealand innovators are starved of the resources needed to turn our breakthrough moments into valuable solutions.

Both our public and private sectors under-invest in innovation.

Public sector leadership is lacking because of under-funding; and the private sector under invests, in part because of poor public sector leadership.

Our universities are slipping backwards in international rankings and we patent relatively few new ideas.

Scientists and innovators are sick of endless restructurings. Many have simply left.

That is indicative of the gap between National’s rhetoric on innovation and the reality.

Policy to transition from commodity dependence to innovation

As I said, this year’s election gives people a real choice.

Today I am announcing that the Green Party’s economic priority for the election is building a smarter greener economy that benefits every New Zealander.

In order to build a smarter economy we need to invest in innovation.

Today, I’m announcing that the key policy points in the Green Party's plan for an innovative economy are:

1. $1 billion of new government funding over three years for research and development, kick-starting a transformational shift in how our economy creates wealth.

2. The Government taking a collaborative partnership approach to innovation with the private sector, which will include:

a) R&D funding made up of tax credits and grants;

b) a requirement for firms that go into overseas ownership to repay their grants;

c) a new voluntary option for large grants, where companies that receive significant taxpayer funds agree to the Government taking an equity stake in their business.

3. Enhanced incentives to study and teach engineering, mathematics, computer and the physical sciences. The Green Party will fund an additional 1,000 places at tertiary institutions for students of engineering, mathematics, computer science, and the physical sciences – our future innovators – costing $50 million per year.

These policies will help secure our long-term prosperity by significantly ramping up our investment in innovation.

Innovation and know-how can enable us to do more with less, better protecting the natural world we all love whatever our political hue, while allowing us all to live prosperous, fulfilling lives.

Tax credits as well as grants

The centerpiece of this policy is an additional $1 billion of government investment in research and development above current spend.

The one billion dollar investment will be directed to both the public and private sector.

As well as direct funding to scientific institutions and businesses via grants, we will offer tax credits to encourage the private sector.

Tax incentives are the simplest way to encourage R&D investment and don’t carry the political transparency risks inherent in direct grants.

We want to provide business with the freedom to innovate. A tax credit creates a level playing field and means businesses can get government support for R&D without all the paperwork and bureaucracy inherent in the current system.

We want business to get on with innovating now. A tax credit is the simplest and quickest way to spur R&D activity.

However, there is still room for direct government grants in our R&D system.

We will ensure greater investment is made in promising new paths in the ICT, renewable energy, and manufacturing sectors as well as adding sustainability as one of the criteria for considering grants.

In time, we expect the private sector to match the government’s increased investment to bring us closer to the OECD average.

In Finland, for every $1 the government invested, the private sector invested $3.

A hybrid model of tax breaks and direct grants, underpinned by much higher levels of government funding, will mean more businesses invest in R&D transforming the way our economy produces wealth.

Investing in people

We will also invest in people.

Currently we don’t have enough engineers, scientists, mathematicians and computer scientists.

The Green Party will fund an additional 1,000 places at tertiary institutions for students of engineering, mathematics, computer science, and the physical sciences, costing $50 million per annum.

We will establish funds for these sectors to promote post graduate work.

We will promote these sectors to prospective students via a national advertising campaign.

And we will support industries to employ tech graduates.

Recognising the importance of start-ups

We also recognize the importance of start-ups.

Successive Governments have underestimated their significance.

In the US, for example, all net new jobs since 1980 have come from companies less than five years old.

We will review the stock option tax regime for new enterprises to make such schemes fairer and more viable.

We will also establish a regime within Immigration New Zealand to support entrepreneurs, and not just rich people, to move here.

Green Investment Bank

In terms of access to capital, we have already announced that we’d establish a Green Investment Bank to help lead the transition from an economy with a heavy carbon footprint to a smarter, greener one.

The estimated potential market share of the global green economy available to New Zealand is up to $22 billion annually – much more that current earnings from dairy.

The Green Investment Bank initiative has been warmly received across the banking and business world. It will underpin a necessary deepening of the capital markets.

Our decision to put a price on carbon will also drive innovation by incentivizing carbon efficient investments and technologies.

Using the revenue from the carbon tax to cut company tax rates will give smart green businesses a double dividend.

Conclusion

The opportunities for New Zealand are there, and they’re exciting.

The Green Party will ensure we seize them with both hands.

At present we have a Government whose thinking is stuck in the last century – promoting a commodity-based economy and subsidizing fossil fuels. This is National’s pollution economy.

The Government’s own 2011 review of the innovation sector recommended ‘progressive increases in Government investment in R&D…to at least match the OECD average’, but the Government’s funding plan is taking our economy in the opposite direction.

National has it wrong when it comes to R&D. They are cutting funding and micro-managing the grants system, while steering what grants there are into pollution generating activity.

Voters have a choice. National’s simplified pollution-economy that creates few jobs and delivers uneven results.

Or a smarter greener economy where innovation flourishes and we develop high end export products the world needs.

National likes to paint the Green Party as anti-business. But the bottom line is that National plans steep cuts to R&D and the Green Party will significantly increase government investment in R&D.

We are also the only party that has so far announced a cut in the corporate tax rate for this election.

And we are now the only major party going into this election pledging significant additional R&D investment to spur innovation in our economy, including through business tax credits.

Under our policy more businesses can participate in R&D through tax breaks, while the government can refocus the grants system towards research into building a cleaner and smarter economy.

Under our innovation policy, companies will be better off.

Our vision is of a society that develops its wealth by tapping into New Zealand’s can-do spirit and using our smarts.

Innovation is in our blood.

People like Bill Hamilton of jet boat fame, Bill Gallagher who developed the electric fence and Rod Drury who is building Xero into an accounting software giant.

We have a rich history in innovation – let’s honour it, and build a more diverse and robust economy – one smarter, cleaner and greener.


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