Debate on Crown Entities, Public Organisations, and State Enterprises — Industrial Research Ltd

Thank you, Mr Chairperson, for the opportunity to speak on the performance and current operations of Industrial Research Ltd. There is no question that the nine Crown research institutes are a very important part of New Zealand’s science platform and innovation platform.

Indeed, an indication of how they have performed over the last 9 years was given by the National Science Panel—the most esteemed group of scientists in the country—at a meeting of the Royal Society of New Zealand last night. The panel said: “Between the vision of the science system and the reality there is a serious disconnect, and that, indeed, is a great worry to New Zealand, and, of course, in terms of the Labour Party’s performance.” It went on to say: “In our view, science policy over the past decade in New Zealand has resulted in a gradual disempowerment of science and scientists. As a result, science has ceased to play a leading role in shaping the nation’s future.” Once again, that is an incredibly serious indictment on the performance of the system and the management of it by the Labour Government over the last 9 years.

The panel even went on to say: “New Zealand does produce some outstanding science and has a rich heritage derived from its past great scientists, but with high transaction and compliance costs, and low intake of quality students from our secondary schools, means that our capacity to continue to do so is diminishing.” In fact, the president of the Royal Society told a meeting of MPs not so long ago that the science dollar that was handed out by the Foundation for Research, Science and Technology ended up being worth, at the laboratory bench, approximately 50c. In other words, transaction and compliance costs, and the entangled bureaucracy set up by this Labour Government, have absolutely diminished the value of those very important dollars.

Let us look specifically at the Crown research institutes. Between 1992 and 2001 there was an increase in the equity of the Crown research institutes in the order of 106 percent. Over the last 6 years, the equity has pretty well remained static. That, again, must be a damning indictment on the management of this Labour Government.

If one looks at Industrial Research Ltd, which was one of the jewels in the Crown research institutes’ crown up until about 2000, one sees that in 2002-03 its return on equity was minus 2.1 percent, the next year it was minus 14.8 percent, the next year it was minus 20.2 percent, the next year it was minus 6.4 percent, and the next year—that is, 2006-07—it was a very concerning minus 25.8 percent. Equity itself went down from $27.7 million in 2002 to $19.3 million in 2006-07. What is worrying is the Crown Company Monitoring Advisory Unit commentary, which is extremely understated in saying that Industrial Research Ltd’s financial performance was below expectation, with a full-year loss of $5.7 million. Over these last 5 years Industrial Research Ltd has been seriously eroded in terms of its return on equity, its equity, and its ability to support the other very important scientific platforms.

That has been the sort of management we have had under a Labour Government. I note in the OECD review of New Zealand’s innovation policy a comment made on governance. The appraisal noted concerns about finding suitable directors for Crown research institutes, and concerns about turnover of directors. It said that although some steps have been taken to address these problems, the Crown research institute boards continue to have a relatively high level of turnover and a relatively high proportion of inexperienced directors. As we stand here today, 23 directorships of Crown research institutes are vacant.

💬 Chris Tremain: How many?

Twenty-three directorships are vacant as we stand. Surely any Government worth its salt should have ensured that those directorships were filled in an orderly and timely manner.

I would like to respond to some of the remarks from Dr Hutchison. It is unfortunate that the Opposition spokesperson should be so mistaken in his assessment of, for example, Crown research institute directorships. I will tell members how many directorships are vacant at the moment—there is one.

💬 Dr Paul Hutchison: You must have filled them very fast.

No, we did not fill them very fast. We have not filled any in the past few days. You see, the member has probably gone to the Act and decided that it states there can be between five and nine directors in a Crown research institute, and he has probably decided therefore that he would have nine. We do not operate like that; we use as many directors as we need—usually seven, occasionally eight, sometimes six. We have a vacancy in Landcare Research at the moment and we certainly have 23 vacancies coming up on 1 July 2008. As usual, I would say about half of those will be rolled over; they will be given a second term. On the other hand, we will probably replace somewhere like the other half—I am not sure yet, but Cabinet will make its decision and we will take the advice off to the Governor-General.

The question really is how the Opposition spokesperson on Crown research institutes can get stuff that simple, that wrong. Why does that guy continue to draw his salary when he gets up in this Chamber and makes a serious—

💬 Hon Clayton Cosgrove: He’s substandard.

He is substandard all right. Let us go back to last night’s report—the manifesto. The member has failed to acknowledge one thing about that report. That panel was set up in 2006. It finished its report in 2007 and decided—for reasons best known to itself—that it would tell the world about it in 2008. It said that it was very keen for there to be less bureaucracy in the application process, failing to acknowledge that between writing the report and releasing it, this Government has moved to a stable funding system for a fair chunk of science and research. It said that it needed bigger investment—unaware of the New Zealand Fast Forward programme that was announced a month before last, which the leader of the National Party called a gimmick even though every other commentator in the country said it was great. You see, the National Party is out of touch on science. The report that was released last night has to be described as a little jaded and a little out of time. I think, frankly, those adjectives apply rather well to the National Party. So I just enjoy the opportunity to take part in this call, to debate science again with Dr Paul Hutchison, and to say to him: “Dr Paul Hutchison, you have a clear interest in science—I acknowledge it, and I admire it. But I invite you to keep up with the facts, keep up with the details, and, if you can, keep up with this Government.”

I seek leave to debate the financial review of Landcare Research New Zealand Ltd, which is also a review of the Education and Science Committee.

The CHAIRPERSON (H V Ross Robertson): The member can do that. I was just going to put the question. The member seeks leave to do that. Is there any objection to that course of action being taken? There is none.

Report noted.

Landcare Research New Zealand Ltd