State Sector Management Bill

Some of the early provisions of the State Sector Management Bill cut to the heart of what the bill is really about in terms of research, science, and technology issues. First, I want to come to the aspect of the definitions contained in this bill.

A number of submitters made some comment on that matter—in particular, on clauses 7(1) and 7(2). One or two of the submitters wanted to try to put into the bill, and to have much more fleshed out, the definitions of what constitutes science, research, technological development, innovation, and benefit to New Zealand. They felt that the bill as it stood at that point did not go into that sufficiently. They wanted to see those terms expressed more fully, explained and defined more fully, in the legislation, and I think there was some sympathy for that view.

In particular, the submitters cut to the definitions that are applied by the OECD in terms of science, research, and technology. Those definitions, which are widely accepted as being the authority on research and development, are the Frascati definitions. They define basic research as “experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundation of phenomena and observable facts, without any particular application or use in view.” In those terms, basic research is what one would call the foundation work that we do in science. Applied research—and I quote from the Frascati definitions again—“is also original investigation undertaken in order to acquire new knowledge. It is, however, directed primarily towards a specific practical aim or objective.” We can see the difference between the two definitions.

Our science in New Zealand obviously straddles both of those areas. We have fundamental research taking place, particularly in our universities. The work of the Crown research institutes tends to be more of the applied nature, although I have to say that even in those institutes a significant amount of good science is happening, particularly in the basic earth sciences. But I think the feeling was that those definitions, in a sense, set the bill up, so there was no problem in understanding what was being referred to in clauses 7(1) and (2).

The applied and the more experimental research is somewhat different from those two areas. Again, I will quote from the Frascati definitions: “Experimental development is systematic work, drawing on existing knowledge gained from research and/or practical experience, which is directed to producing new materials, products or devices, to installing new processes, systems and services, or to improving substantially those already produced or installed.” We can think of many, many examples of that, one of which is the development of the red kiwifruit. That is really a development of something that currently exists, but the new knowledge and new science that was applied to kiwifruit enabled a new product to come about.

In many ways, that example cuts to the heart of what this bill looks to do, which is to look for innovation in terms of our science, research, and technology. The bill tries to build on that aspect of what we do in our science and research institutions. That is where we get the greatest amount of economic benefit; the economic benefit comes from improving what already exists. There is nothing wrong with that. Obviously, a lot of things come out of blue-sky science, and we do some extremely good blue-sky research in our science institutions. But not much of it—or very little of it—actually goes on to produce real economic benefit. The core of the economic benefit comes from the area covered by the Frascati definition that I just read out, which applies to experimental development that builds on and develops processes and aspects of our science system that are already in place.

We discussed at some length in the Education and Science Committee whether it would be worth putting the Frascati definitions in the bill. I think we came to the basic conclusion that with regard to the use of the phrase “RS&T” in clauses 7(2)(e) and (f), although the Frascati definitions are good and comprehensive, they are really already embodied inside that definition. They are embodied in the bill already. It is well known what they mean and they are well accepted throughout New Zealand, so we thought it was probably unnecessary to draw that definition out any further. However, we agreed to amend the phrase “RS&T’ used in clauses 7(2)(e) and (f) to read “research, science, or technology,” but we did not change the definition of “RS&T funding” in clause 4.

I come to the second issue raised by submitters on this part of this bill, which was the phrase “the benefit of New Zealand” in clause 7(1). Again, it was felt by some submitters that we should have that specifically brought into the bill and stated up front. The committee did not discuss that in great depth, but we felt that the phrase “the benefit of New Zealand” is probably intended to have its ordinary, natural meaning. In fact, most of us would believe that it is pretty self-explanatory, and that to expand it and try to define it would do the opposite to what the submitters wanted, which was to make that definition clear. If we had defined it, that might have made it much more restrictive in terms of the future interpretation of the legislation. So we left that particular part of the definition, “the benefit of New Zealand”, in place.

In conclusion, I think this particular issue of the definitions is really important, as we are moving towards a bill that, in a sense, develops a new title of research and innovation, and that was well discussed. I think we have now started off this new legislation with a full understanding of exactly what the various definitions mean. We are clear about that, and it is based in the commentary on the bill. I will leave it at that. Thank you.

Part 1 of the State Sector Management Bill is part of a new strategic approach that the Government is taking in the area of science and innovation, whereby we are bringing together the two agencies that provided advice to Ministers in this area. We are bringing a much greater focus on the delivery of science and its outcomes to the New Zealand store of knowledge, which will improve our ability to commercialise any ideas and products therefrom.

The bill brings together the Foundation for Research, Science and Technology and the Ministry of Research, Science and Technology into the Ministry of Science and Innovation. The Ministry of Science and Innovation will have separate boards, which have been given statutory powers and responsibility for the granting of various innovation funds to people involved in the science sector.

The Minister of Research, Science and Technology, the Hon Dr Wayne Mapp, has often made the point that he has always met with both the Foundation for Research, Science and Technology and the Ministry of Research, Science and Technology every time he has considered these issues. That indicates that in terms of the Minister’s dealings with the department, we will have an improved relationship. But, more important, I think that those involved in research, science, and technology innovation in New Zealand will see an improved responsiveness from the centre and a much greater focus on the shared priorities that we have across the science and innovation sector. I am sure that later on, in response to questions, we will be able to give them some more detail on that.

What a load of twaddle! I am sorry, but nothing in the State Sector Management Bill will achieve all the grandiose stuff we just heard about. I am not sure, but apparently the Minister of State Services has had great conversations with the Hon Dr Wayne Mapp about how he would have great discussions with the Ministry of Research, Science and Technology and the Foundation of Research, Science and Technology. Well, the only discussion I have had with Dr Mapp on this matter was when he told a select committee that the Ministry of Research, Science and Technology and the Foundation of Research, Science and Technology should not be combined. That is the only thing I have heard Dr Mapp talk about when it comes to the Ministry of Research, Science and Technology and the Foundation of Research, Science and Technology.

The Minister of State Services says we should have a strategic approach. How is this merger a strategic approach to assisting research, science, and technology in New Zealand? There is nothing strategic about a Minister who less than 18 months ago said this merger should not happen, suddenly deciding that because the Government needed to be seen to be doing something, it should happen. The Minister also said this merger would help with the delivery of science and science outcomes. I see that the Minister of Research, Science and Technology is now in the chair, and I would like to know which exact clauses will suddenly help the commercialisation of science in New Zealand. What really worries me about that contribution is that nothing in this bill will do that. Labour will not vote against Part 1, not because we think it will be great but because we do not think it will necessarily do any damage. But if the Government seriously believes that there will be a step change in science in New Zealand from combining the Ministry of Research, Science and Technology and the Foundation of Research, Science and Technology, then we are really in trouble when it comes to innovation. It simply will not do that.

I circled under clause 4, which is the interpretation clause: “ ‘Minister’ means the Minister of the Crown who, under the authority of any warrant or with the authority of the Prime Minister, is for the time being responsible for the administration of this Part”. I would like to remove the word “Minister” and replace it with “Paul Hutchison”, because he is a National member who understands the science sector. He would never have stood up and given a contribution like the one given by the Minister of State Services. He claimed that this bill will result in a strategic approach to research and science in New Zealand, and commercialisation, and all these grandiose things. Paul Hutchison would never have said that, because he knows that what the sector needs is more funding. That is why we should remove the word “Minister” and replace it with “Paul Hutchison”.

I will talk about Subpart 1, “Allocation of funding”, which is in Part 1. It outlines the purposes for which this research, science, and technology funding may be allocated. There a number of very worthy causes here. Clause 7(2)(a) states that the activities should be “likely to increase knowledge or understanding of the physical, biological, or social environment;”. As we know, we are in a brave new world now. The Royal Society of New Zealand is bringing the humanities into its organisation, so it is appropriate that under this part of the bill we recognise the research that goes on in the social sector. As we go to clause 7(2)(b), we see that a funded activity “is likely to contribute to New Zealand’s economic growth;”. Absolutely, but there should be recognition of the fact that just saying that will not make it happen. I come back to the fact that all the ideas listed in clause 7(2) are worthy ideas, but they will not result in anything if the Government keeps slashing funding and support, and if scientists in New Zealand keep on being fired. That does not contribute to the economic growth of New Zealand.

Then we see in clause 7(2)(c) that a funded activity “is likely to develop, maintain, or increase skills or scientific or technological expertise that is of particular importance to New Zealand;”. We cannot argue with that, except to say again that just saying it does not make it so. We would like to see the Minister in the chair take a call to outline how the decisions that his Government has made to cut back on the funding that the previous Government put in place will help bring about the activity described in clause 7(2)(c) into being. From where we sit, and from the discussions we are having around the country with people in the sector, things are going in the opposite direction. Clause 7(2)(c) states “increase skills or scientific or technological expertise”. Increasing skills in science is a core part of what the sector needs, yet science advisers in schools are being fired. How can this measure increase science skills in New Zealand if we have no science advisers, which means that science is undervalued at primary school? That will feed all the way through the system, and we are very, very concerned about that. Those advisers have gone now. They are highly talented, highly skilled. They have all been snapped up by other countries, which are very happy to have them, and those advisers are very happy to be in countries with Governments that support science, unlike in New Zealand.

I think clause 7(2)(d) is very telling. It states that the activities referred to are “unlikely to be funded, or adequately funded, from non-governmental sources;”. Why do we have to have that? Because New Zealand has one of the lowest private sector spends on research, science, and technology. Acknowledging here that there is not adequate funding in this area raises the question as to why the National Government got rid of Labour’s research and development tax credit. Why did it get rid of Labour’s research and development tax credit to the point where it now even has to admit in legislation that we cannot get funding from non-governmental sources? The provision refers to activities “unlikely to be funded, or adequately funded, from non-governmental sources;”. Why does the Minister in chair not explain why he cut one of the single biggest factors that would have resulted in more non-governmental funding of science in New Zealand? Everyone was telling him that. Prior to the last election, we found out that groups from all over the country were flying around trying to catch up with Bill English, who was then the Opposition spokesman on finance, to tell him to please not get rid of the research and development tax credit, because more non-governmental funding for science was needed. Yet this Government decided, based on who knows what reason it has for doing anything in this area, that it would get rid of it. Well, Australia did that, and do members know what? Australia had to bring it back because its funding had fallen down so far and it had been such a failure, yet this Government failed to take that lesson on board.

We come now to clause 8, which is under the heading “Criteria for assessing RS&T funding”. It lays out criteria that the Minister is to set, and that the boards the Government is setting up will need to adhere to when deciding who gets this particular funding. Clause 8(1) states: “The Minister must from time to time, by notice given to each board and published in the Gazette, set criteria for the assessment of proposals for specified RS&T funding.” That is quite a lot of power for the Minister. We get a bit nervous about a whole lot of power in an area of such technical expertise being placed with a Minister who, from time to time, may be someone who does not know a lot about research, science, and technology and does not have a background in it—

💬 Hon Simon Power: Oh!

Simon Power assumes I am talking about the Minister in the chair, but I said “from time to time”. That was a very telling Freudian slip, I say to Mr Power, but I was not actually talking about his colleague. Although I note that when Dr Mapp took over the portfolio, he kept telling everyone he went to meet that he did not want the portfolio and was as surprised as anyone to get it.

💬 Hon Dr Wayne Mapp: I never said that.

I say to Dr Mapp that he did. I think Dr Mapp was trying to lower expectations, but it had a bit of a negative effect in the sector.

From time to time we may have a Minister who does not have a lot of expertise in this area, yet clause 8(1) provides that Minister with an extraordinary amount of power to decide where this funding goes and to set criteria. As someone with a science background, one thing I like to point out to colleagues—and I think David Carter has also pointed it out—is that the person who invented the motorcar said that if people had asked what politicians wanted and businesses wanted, they would have been told they wanted faster horses. That is very telling. Sometimes Ministers do not know where science funding will go or what the next big thing will be. We could look at a whole lot of other things: penicillin was discovered by mistake; when the electron was discovered everyone said what a useless piece of information it was, even though it was kind of interesting, and now our entire world is run by electronics. Yet this clause puts the power to direct the direction of funding of science in the hands of one person, and I wonder whether that is the most sensible thing to do. It seems to me that it is a move away from the funding of fundamental science, which is where we tell people to go out and find new discoveries—the big things that actually create a lot of wealth. They are the kinds of things that are funded in the United States and more and more are being funded in places like Australia, where people understand the importance of fundamental science. [Interruption] The Minister is chipping away at me, but he could get to his feet and take a call, which I would very much appreciate. It seems like a lot of power is being given to one Minister to direct which areas of science will be funded.

I note that funding cannot be given to particular people. That is a very important safeguard in the law, and I absolutely agree with it. But there are areas of science where not many people work, so one could direct funding towards a particular area of science, and it would go to a particular person who one knows is the key person working in that area. So there is a little bit of undermining of that, perhaps. I know that my colleague Chris Hipkins is particularly concerned about this issue, so I will not steal his thunder in that regard.

But I would like the Minister in the chair to take a call, and can I say how pleased I am that the Minister of Research, Science and Technology is in the chair for this particular part.

As my colleague Moana Mackey alluded—it was a very good call—I wish to talk about the purpose of the bill as stated in Part 1. The Minister of Research, Science and Technology is being given the power to establish boards to make independent funding decisions, and I stress the word “independent”. I will quiz the Minister in the chair, the Minister of Research, Science and Technology. I hope that he will give me some responses to the questions I am about to raise, about how some of the powers vested in this bill will aid that independence in the decision-making criteria.

Clause 8(1) states: “The Minister must from time to time, by notice given to each board and published in the Gazette, set criteria for the assessment of proposals for specified RS&T funding.” But clause 8(3) prevents the Minister from directing funding decisions toward particular people, so the Minister could not determine that a particular person or project would be funded.

However, I would like to know how the Government will ensure that the powers given in clause 8(1), and also in clause 10(3), which specifies: “The Minister may specify that a board is to make funding decisions on proposals for specified RS&T funding in relation to 1 or more areas of research, science, or technology, or related activities,” will not be used in such a way that funding is directed to specific projects or people. In the research, science, and technology community in New Zealand there will probably be only one or two people or entities working in a particular area in some cases. It seems that the Minister is being given, through the bill, the power to direct funding into quite specific projects. I would like some comment from the Minister on that.

Perhaps, as a useful way of doing that, he could comment on this: one of the things the bill does is require the Minister to establish one or more boards, but I do not think we have heard how the Government envisages implementing this proposal. I would like to know how many boards, for example, the Government envisages establishing under this bill. The Minister is indicating two boards. I would be interested to hear what areas they will be working in and what the scope of those two boards will be. It could well be that the concern I had about funding being directed into specific areas will be alleviated by the way those boards are to be composed and the remit that they will be given.

Under the purposes for which research, science, and technology funding may be allocated, I guess I welcomed the order of priority given in the ordering of the activities referred to, in the sense that the first priority, set out in clause 7(2)(a), is to increase knowledge or understanding of the physical, biological, and social environment. As my colleague Moana Mackey said, we do not always know where scientific discovery will land up. It could well be that some of the major advances in science and technology in the future come from pursuits and endeavours in a research area that at the moment we do not necessarily see much value in. If we were to place the priorities set out in paragraph 7(2)(b) ahead of the priorities set out in subclause 7(2)(a)—subclause 7(2)(b) refers to contributing to New Zealand’s economic growth—we might well miss out on some absolutely fantastic opportunities.

One of the concerns that we have about all funding for research, science, and technology—and when I say “we”, I mean generally as a country, as opposed to specific parties or politicians—is that funding is being too narrowly focused on stuff with an economic impact, and not on the wider value of science. If we want to really promote scientific discovery and research new and exciting areas that do not necessarily let us know where the research will lead to, it will require a much more holistic approach than simply what is in the bill. The bill is pretty narrowly focused and, as Moana Mackey commented, it will not really change an awful lot.

We need to look at where science takes place, starting at schools. We are struggling to get kids coming out of schools who are interested in pursuing careers in science. [Interruption] There will be even fewer under national standards, because science is not given a particularly high priority under the Government’s national standards policy. Actually, that is where it starts. It starts with getting more kids who are leaving school, wanting to pursue careers in science. If we are not doing that, and the Government has taken science advisers out of schools, then a lot of the rest of this debate will be immaterial. Also, I guess we have to look at the scientific research and endeavours that are undertaken in universities.

Before I get into clauses 7, 8, and 9—

💬 Louise Upston: Wishful thinking.

Absolutely! I know Louise Upston will be taking a call, because she followed this bill very closely in the Education and Science Committee. I am sure that we will hear from her. Rather than chipping across the Chamber, she will get up and take a call because she believes in the importance of science, Archives New Zealand, and the National Library.

I will comment briefly on Minister Ryall’s intervention earlier about the importance of having the strategic approach and improved responsiveness that we would see as a result of what is covered in Part 1. It is difficult to take that too seriously, because I suspect that the improved responsiveness we will see is that the new Ministry of Science and Innovation will be quicker to say no; that will be the improvement in the responsiveness. If the Government is not prepared to commit resources to science, research, technology, and innovation, then all of this shuffling of deckchairs means nothing. I think it is important to say at the outset that members on this side of the Chamber are strongly supportive of science funding. We were very alarmed to see the moves that this Government made in its early days, and we would like to see a greater commitment beyond simply structural changes, which, as my colleague David Shearer said, do no harm as such, but do not exactly lead us anywhere in a particularly positive direction.

My colleague Chris Hipkins made some points about clause 7. Some submitters to the select committee expressed concerns about the way in which clause 7 constructs a hierarchy of criteria that will be assessed when making decisions about research, science, and technology funding. In particular, concern was raised about the question of contestability. I know that Minister Ryall, Paul Hutchison, and other National members who have had a bit of involvement in the sector know that one of the really difficult balances in research, science, and technology is the balance between stable funding and contestability. It truly is one of the enormous challenges that faces any Government in trying to work out how to ensure that we have that kind of blue-sky thinking that Chris Hipkins talked about, or indeed how we avoid the “faster horse” phenomenon that Moana Mackey mentioned. How do we make sure that the new and innovative idea is taken up?

The concern was raised in the select committee that the way in which clause 7(2) is laid out does not give sufficient emphasis to contestability. The officials made a good argument to the select committee that the merging of the Foundation for Research, Science and Technology and the Ministry of Research, Science and Technology bring together a number of different types of funding, and that the foundation tended to have a fairly rigorously contestable process and the ministry has perhaps a number of other different processes that it is working on, and therefore we did not need to take up the idea of the submitter who said that the contestability provisions of the Foundation for Research, Science, and Technology Act should find their way into this Act. That is an interesting point, and it is one that the Minister may choose to comment on.

When we read through clause 7(2), or the whole of clause 7 for that matter, it is true to say that it does not have that clear statement around the question of contestability. I think it is important that we have that balance of stable funding. In particular, we know that the Crown research institutes talk a lot about the importance of stable funding and contestable funding—contestable funding that highlights the possibilities of cooperation between different actors in the science sector. I think we can certainly support clause 7 as it stands now, but the Minister may choose to comment on how this definition and the purposes will deal with the question of balance between stable funding and contestable funding. I think that lies at the heart of getting our science system right. We have to have the contestability element to generate those new ideas. We have to have the funds to support those new ideas. From time to time, when funding for the Marsden Fund is announced and there are some quite different, new, and unique funding elements—sometimes a research element is undertaken by the spouse of a former Prime Minister, for instance, or somebody like that—it draws attention from the media. But, actually, that blue-sky research sometimes is the thing that gives us the spark to generate both economic wealth and social and environmental benefits. I think clause 7(2) is interesting, and I would like to hear from the Minister on it, even though the select committee itself resolved to accept the officials’ advice in that area.

I thought I should take a call in response to a number of the questions asked. I found it interesting when I listened to the various Labour members from whom we have heard so far. I sometimes think Labour members live in a parallel universe. The sense I am getting from the science sector is that there is a great deal of optimism at the moment, and I do not mean just the stuff said directly to me but also what has been said indirectly, through the Chief Science Adviser to the Prime Minister, Peter Gluckman, and many others. The sector sees that the changes the Government has made—which are not just legislative but also broader in the Crown Research Institute Taskforce and the increases in funding to the Marsden Fund and the Health Research Council—have been significant. Although Mr Shearer tended to dismiss these changes as being a minor consequence, as indeed did Moana Mackey, they are, in fact, part and parcel of a broader setting that we are changing here. In a sense we could say that this legislation is effectively enabling legislation. Although we may not see the words in here in a strategic setting, effectively, that is what is then able to be undertaken. That was missed in the previous division of the ministry and the Foundation for Research, Science and Technology.

I note that Moana Mackey is inclined to keep repeating the untruth—because she knows it to be untrue—that I did not want to be in charge of the ministry. She knows it is untrue, because she knows that I actually said I was not expecting the portfolio. But I am very pleased to have got it. The reason I am pleased to have it is that I had spent a lot of time in Opposition in a working group on the North Shore, which included people like Professor Raine and a number of other leading science people. We were thinking about the role of innovation in New Zealand, and we wrote a series of papers on it as a part of the work that one does while in Opposition. When Dr Hutchison—

💬 Hon Darren Hughes: Did he ask the Prime Minister if he could be Minister of this portfolio?

He knew I was interested, because I had been writing papers on innovation for the party.

In answer to some specific questions that Mr Hipkins raised on the issue of boards, I say there will be two boards: one will be a science board, and one will be an innovation board. The name—and I think Mr Shearer correctly recognised why the name was chosen—is intended to show an end-to-end process connecting fundamental science right through to commercialisation. As a consequence, we need two boards. A science board will fund more of what one might call blue-sky research and will consist mostly of New Zealand’s leading scientists, as we would reasonably expect. The other board is the innovation board, which will be mostly focused towards the business end of funding: the Technology New Zealand funding and the $50 million there, the vouchers worth $20 million over 4 years—they are hugely oversubscribed; there is a good lesson for the future—and the recently announced technology development grants, which are worth about $190 million over 4 years. The grants were also hugely well-received. I might also add that they were oversubscribed, and they were superior to Labour’s tax credit scheme, which was aimed at lawyers. The tax credit scheme went through the Inland Revenue Department system and was disconnected from the most innovative businesses.

I know that a number of members have made reference to the TIN100 publication, which is produced by the Technology Investment Network. That sets out New Zealand’s leading technological companies. They are the ones, by and large, that have benefited from the technology development grant. A rigorous process was undertaken to work out which firms had the highest levels of research and development capability, and they are getting the grants.

💬 David Shearer: Which bureaucrat did that?

It was an independent selection process, I tell the member. So there are two boards there.

A point was raised by Mr Grant Robertson about the balance between stable funding and contestable funding. That is an important point, and the OECD task force made a report in 2007 on this very issue. The previous Government seemingly just ignored that report, but we established the Crown Research Institute Taskforce, which was intended to take on board the lessons from it. Members may know that the OECD has just come to New Zealand in the last week, essentially to review what has occurred since then. The report particularly noted two things. The Crown Research Institute Taskforce will deliver more stable funding. We do not want all of the funding to be stable, and I think Mr Robertson was correct in saying that. There is an issue of balance, and we have the Science and Innovation Advisory Council to ensure that the balance is there. But there is no doubt that the Crown research institutes are enthusiastic about the results of the task force and are looking forward to implementing it.

There are three elements. Firstly, statements of core purpose are hugely important. The most effective Crown research institutes are the ones that have the best understanding of their mission. The second element is stable funding, or core funding as it is called. The third element is a more appropriate form of accountability. Financial measures are still important, but they are not the only measures.

It is my clear understanding that those within the sector have been appreciative of the measures undertaken. They can see the strategic purpose of those measures: the ministry, the Crown Research Institute Taskforce, and the simplification—hugely—of the appropriations. I inherited a system where the appropriation system was chaotic and caused a huge amount of confusion within the sector. One of the ways that we improve the sector is to reduce compliance costs within the sector. Mr Shearer knows what I am talking about, because he has heard it from many, many people. Those sorts of things have been done to date. They form something of a foundation for further improvements, and the sector has the opportunity to build from it.

Part 1 is all about getting a more effective system that will be able to achieve the purposes set out in clause 7. I assure Mr Hipkins that the two boards have been established precisely to ensure that the Minister does not fund individual scientists. Thank you.

Before I was interrupted on the State Sector Management Bill, I was about to go on to clause 8. But I think I will return briefly to respond to a couple of Dr Mapp’s comments, in particular, in relation to the research and development tax credit, since I had raised that matter.

Suggesting that the fund that has been set up—some announcements about which were made in the last few days—somehow replaces that tax credit is a bizarre thing to say. How does Dr Mapp or, indeed, any of the officials who are making the decision really know they have covered the waterfront, in terms of making sure we have the best and the brightest people working on the best ideas in New Zealand? The research and development tax credit had the great advantage of being universal for companies and accessed by everybody. Weta Digital does remarkable work and needs to be supported in that, but it might not be the only organisation that is doing that work. We need to support companies across the board if we are going to lift the amount of research and development that is done in New Zealand. It is no coincidence that other countries in the world use a universal-style tax credit, because they want to encourage all companies to invest in research and development, and the opposite is true: they do not want to see companies going overseas because the support is not there.

One of the great risks of moving away from the tax credit approach is that the Australians have retained the tax credit, and the incentive is now there for people to go overseas. So it is all very well to say that a fund has been established and we are finding the people who will lead us into the future, but what about new companies? What about the start-up companies that really need that support, but now do not get it because winners have been picked by the Minister of Research, Science and Technology or the Minister’s officials? I think that the Minister raising that point now really drives home to us why this bill, and why Part 1 of this bill, although relatively anodyne, does not take us anywhere. Those good initiatives of the fifth Labour Government may have been undone by the Minister.

I am grateful to the Minister for responding to my comments about the question of contestability and stability, and obviously that is an issue of great significance to the Crown research institutes. It is also an issue of significance to universities. University research in this country is vitally important to our economy. It is of growing importance to our economy, and there is concern among some university researchers about the way in which they relate to Crown research institutes, how they are able to work with them, and whether there are systems in place within the purposes and the criteria laid out in Part 1 for universities and Crown research institutes to work together. University researchers are very well aware that their job is to get into those contestable areas and to try to get support. They have the Performance-based Research Fund as an underlying piece of stable funding, but it is very important for them to know they are regarded as being part of that research sector. I encourage the Minister, in talking about that, to ensure that universities are mentioned.

To return to clause 8, as I was about to say, in the Education and Science Committee one submitter came to us and suggested that the way in which the Minister might set criteria needs some consideration, as well. The question, really, was whether the Minister should be setting this criteria on an annual basis, or perhaps with a slightly more arm’s-length approach by moving out to some kind of policy statement that might set the criteria, with a frequency of no more than every 3 years. Again, the committee looked at the approach, as listed in clause 8, and felt that it was OK for that to continue. But, again, there was some concern, as my colleague Chris Hipkins said, about the closeness of the Minister to some of those procedures. How do we know that a particular Minister will not push a particular barrow, and so on? That was one of the issues raised under clause 8. The Minister in the chair could take a call and advise us how he will implement clause 8. When this bill is passed into law—for a brief period, anyway—it will be his responsibility to implement it.

The Education and Science Committee decided to make a change to clause 9, and I am sure that my colleague David Shearer will take this matter up, as well. We were concerned about the way in which proposals could be referred to the boards and how they would make decisions on those matters. In order for boards to be independent and to give a proper assessment that was not directed entirely by officials or entirely by the Minister, they would need their own sources of information. Clearly, that was of great concern to us.

It is a pleasure to take a call on Part 1 during this example of the Government’s bold agenda for reform in our country, which sees us sitting under urgency on a Saturday. Part 1 deals with the science sector, and we will deal with other parts during the morning. Of course, we have been told by members opposite that they are not scared of hard work, but we have heard only the briefest of calls from them during the morning. Roger Douglas, who came to Parliament to try to reform the State sector, could not speak for even 1 minute on a bill that reforms the State sector. So we are grateful to the Minister in the chair, the Hon Wayne Mapp, who is at least engaging on some of the issues. Although we have a lot of criticism of him, at least there is some praise in that respect for the fact that he is taking it very, very seriously. But that is not what we are seeing from other areas.

I have about three points on different clauses that I would like to address this morning. The first is clause 7. It deals with the purposes for which specified research, science, and technology funding may be allocated. Subclause (2) sets out six criteria for which there are purposes that are considered to be germane to the funding of sciences. I think that the areas the Minister has set out are far too narrow. In particular, I would like him to comment on the complete absence of any focus on Māori issues for research, science, and technology. I see that the Māori Party supports this bill, and I ask them to reflect on this clause. There is nothing in the purposes listed that specifically indicates there is a role for this new agency to have any focus on Māori issues for research, science, and technology. I say to the Minister if the New Zealand Government is not going to have a focus on Māori issues for research, science, and technology, then which country is? Which country will look at Māori-specific issues, a Māori kaupapa view, on research, science, and technology, as he is specifically making sure that in this bill the New Zealand Government is not going to.

That is a massive omission from, and weakness in, clause 7(2). New Zealand’s economic growth is specified as the second purpose but there is nothing at all for Māori interests—in particular, Māori economic development. If we think of some of the areas where there are significant Māori asset holdings in the country, particularly around land holdings, I would have thought that the ability of innovation in research, science, and technology to unlock some of the potential for Māori economic interests would be absolutely suited to, enhanced by, and lifted up by the purposes in clause 7. I want to know from the Minister whether that was an overt decision by the Government when considering this issue through Cabinet. Did it make an overt decision to exclude a specified clause for Māori issues?

💬 Moana Mackey: They talked to him about it.

The member Moana Mackey makes the point to me that Māori have specifically talked to him about it. Māori interests have gone to him and said they want to be included in the research, science, and technology agenda. Clause 7(2) does not facilitate the ability for that to happen. I think that is a mistake; it is an omission. I do not think we should simply vote this bill through because it is Saturday morning and Government members are grumpy at the Leader of the House because they are here. That is not a reason not to speak.

💬 Hon Member: That’s rubbish.

The member opposite looks particularly grumpy, but that could be for other reasons. We know, well and truly, of their inability to engage in debate on these issues. We know they have had enough. They say we should just get over it and go. But if “getting over it and going” means that Māori interests are forgotten, then the Government will have to make sure it does not omit such important issues as Māori economic interests. I want the Minister to talk about that, in a very important way for our country, because if the New Zealand Government cannot do it, no other Government will. He needs to address that and explain why it has been left out.

Another purpose that has been left out is to make sure there is a connection with private scientific research. That is a big mistake. This Government talks long about the need to have public-private partnerships, yet this bill is at the cutting edge of the Government’s reform agenda. Members of Parliament, like Melissa Lee, came here to merge Archives New Zealand and the National Library. She came here to make sure that the Foundation for Research, Science and Technology can line up with the Ministry of Research, Science and Technology. Those are crucial issues of substance, amazing things that have happened, yet we now know that Government members will not have the gumption to talk about them, particularly to bring that private focus through in this clause. So I wanted to talk about why the Māori focus is not included in the purposes in clause 7(2) and also why the private focus is not there. If the Minister has cause to reflect on those exclusions, he may be able to inform the Committee.

We could amend the clause right here and now. We could introduce a new paragraph (g) in subclause (2) to provide a kaupapa focus. If that amendment were put up, I am sure Te Ururoa Flavell from the Māori Party would support that. He seems to be getting some notes at the present time on that very matter. I cannot believe that the Māori Party would vote for a clause that specifically excludes the ability of Māori to be recognised, overtly.

We know that National went through a phase where things Māori were unpopular. The 2005 intake campaigned on the “Kiwi not iwi” billboards, and some Ministers—particularly one I see on the front-bench—cackled and giggled away about how brave they were in the Brash years. That was an amazing thing, she thought. Then that kind of went out of vogue, because it was all “tīhei mauri ora!” with the Māori Party and getting in with them. So Government members in regard to clause 7 could show us that they genuinely meant that stuff or whether it was just a passing moment in time. Was it just one of those things one does in Opposition but not in Government? That could be the new principle of the Brownlee Government.

💬 Hon Gerry Brownlee: The member is flustered.

No, there is so much to say, because I know there are only a limited number of calls between now and midnight and I intend to take all of them, before I come back here on Monday morning. I want to make sure we are working very hard. The Leader of the House should not be so surly about his inability to run a programme and his inability to put together a programme where people could agree on things. That would not fit with clause 7, I must admit. But clause 7 should include a Māori focus and a private focus. If the Minister ignores everything else I say, I can understand that, but on that Māori issue I would like to hear from him, because at one time he was the Opposition spokesperson on the eradication of political correctness. That is what he was.

💬 Hon Trevor Mallard: Wayne Mapp.

Wayne Mapp had a portfolio about eradicating political correctness. I want to know whether his bias and prejudice on that matter is why clause 7 has come through in this way.

💬 Hon Trevor Mallard: Lost it in November 2008.

Huge success! The portfolio did not survive a change of leader. As soon as Brash had gone and Gerry Brownlee was sacked as deputy leader of the National Party, the portfolio was gone. That was part of the long decline of Gerry Brownlee’s career, which started the moment John Key took the leadership and Wayne Mapp lost his portfolio. Mr Chairman, I was responding to an interjection.

The next thing I want to say is about clause 8(3)(b) and the conflicts with the board being directed to allocate funds for the benefit of a particular person. I trust that the Minister has quite a sensible approach on this and about how the board will operate.

💬 Hon Trevor Mallard: I don’t know about that.

I am a generous person. It is ridiculous. I want the Minister to give us an assurance that he will not have that board modelled on the way the New Zealand Transport Agency board has been modelled in this respect. We see extraordinary political interference from the Minister of Transport in respect of a similar kind of clause in another law. I want the Minister to give an assurance to the Committee that the kind of political interference that Steven Joyce undertakes, particularly around ridiculous roading proposals for the people of Kapiti, will not be repeated in the science sphere. But that is just by the by.

The next clause I want to address is clause 10(7), and it is very important because this bill is at the heart of the Government’s reform agenda. This bill shows how it will transform the New Zealand economy—turbocharge New Zealand, catch up with Australia, and bring step change for working families in New Zealand. This bill is part of the reform agenda to do that. Clause 10(7) refers to all the administrative services being transferred to the new ministry to enable the board to carry out its function. That goes to the heart of the cost of this legislation becoming law. At the time, Minister Tony Ryall—let us not say any more about that—said that over 3 years this bill would save $20 million through the savings in administrative costs. I would like to know from the Minister under clause 10(7) how much there will be in savings as a result of the research, science, and technology changes, and what the administrative costs are that are being transferred for the ministry to pick up for these two boards to operate. If it is $20 million over 3 years for the whole package, what proportion of that fits in under the research, science, and technology banner? We have not had anywhere that I can see an explanation of what those costs are.

The Government is trying to get the deficit down because it has borrowed money for tax cuts and we are running a big deficit in New Zealand. If this reform agenda is about reducing costs, then surely the Minister will be able to tell us what burden of costs will be put on the ministry under this clause. It seems to me this could be an area where any of the savings that Minister Tony Ryall has identified could easily be eaten up by the board functions. He has told us that under paragraph (a) of the purpose clause there will be two boards; the purpose of Part 1 is to establish boards. I was going to ask him how many boards; he has told us there are two. We would like to know about the cost. The Māori issues are very important.

I move, That the question be now put.

It is something of a disgrace that the National Government should want to shut down discussion of the State Sector Management Bill, which is critical legislation being brought to us under urgency. I will address that matter in a moment. At the outset I say that as somebody who gave up science at the end of the fifth form, I am not one to talk about any details of science, but I grasp absolutely the importance of research, science, and technology to the future of this county. It is a no-brainer. It is recognised internationally. In fact, President Obama said that the future lies in science, science, and science. I have been really pleased over the last 2 years—although it has taken the Minister of Research, Science and Technology, Dr Wayne Mapp, 2 years—to see him move to a position where there is a quiver of excitement about him around this portfolio. It is clear that he has now latched on to the fact that this is of critical importance.

The Labour Party supports this particular move in this bill. But why are we debating it in urgency? I do not understand why it should have been brought under urgency. It seems to me that in Part 1, which we are debating at the moment, nothing needed urgency applied to it. I advise the Minister that if, in fact, this had been a tax bill that had reintroduced the research and development tax credit, then yes, urgency might have been needed in order for the tax credit to be effective again from 1 April. But, no, this Government decided when it came into office to kill the research and development tax credit, which had been in place for nearly 1 year and was about to bear fruit for all of those businesses that had invested in research and development and were going to see some of the benefits of that investment. If that had been Part 1 of this bill, then there might have been some justification for urgency. However, as it is, under Part 1 we have all the provisions relating to research, science, and technology, particularly the allocation of funding and the establishment of the structures that will deliver it.

The thing about this legislation and the enabling clauses in this part of the legislation is that the country actually needs more than what this tinkering delivers. In fact, if the Government had not been so obsessed with utu and revenge, and it had just taken a deep breath when it first came into office, it may have seen the sense and the purpose of the research and development tax credit and not taken the axe to it, as it did to our Fast Forward Fund of some $700 million, which was beginning to bear substantial fruit. In scrapping the tax credit and not reintroducing it through a tax bill but simply reshuffling the structures, this Government is really indicating that, first of all, it has been misfiring on the elements that are needed to promote a really dynamic science and innovation environment in New Zealand, and, secondly, it has taken 2 years to get to anything that would be remotely useful in this space in New Zealand.

We do not oppose the reshuffling that is happening, but we are concerned that this is all there is at the moment. Although there is some reference to funding in this part of the bill, the fact remains that it is nowhere near sufficient. This is a moment when, as with so many other parts of the Government’s activity, there is insufficient investment.

I move, That the question be now put.

I am just checking before I call the next speaker.

💬 Hon Gerry Brownlee: Which one paid the most?

The CHAIRPERSON (Hon Rick Barker): They are all in arrears. I call David Shearer.

I will spend a couple of minutes commenting on the response of the Minister of State Services to questions that arose as a result of some of the probing from this side of the Committee on this part of the State Sector Management Bill. I thought two things he said were really important. First of all, he said that the vouchers and the grant scheme that this Government has brought in as its new way of stimulating the economic side of our science and innovation moving forward are oversubscribed. That is the word: “oversubscribed”. It means that a bunch of different companies out there did not get a look in. They did not actually get any of the grants or the vouchers. Why would they not get a look in? One of the reasons might be that with many of these companies that applied for a grant, the entrepreneurs behind them have mortgaged their own house, have borrowed from friends, and have gone to the bank, because they have a really good idea. They have an idea like, for example, Facebook or Google. Those people went to the Government department, went to the bureaucrats who decide on the vouchers and grants that are to be allocated, and were turned down.

Members should contrast that with the tax credit. The tax credit would actually universally enable companies to get research and development relief as a result of their own efforts. It would have brought about a cultural change in companies in New Zealand that would lift our appalling private sector research and development, which is less than one-third of the OECD average. It would have actually brought about the transformation that this Government says it wants. It would have brought about the step change that it wants.

I come back to what the Minister said in response to questions. He said that this scheme is superior to Labour’s tax credits. I point out one piece of information that came up in the last few weeks when I was talking to various people. First of all, companies want the tax credit more than they want the grants. That is overwhelming. If members sit down and talk to the chief executive officer of any company, they will find that that is exactly what they will say: they would prefer the tax credit, of course. But the grant is there, so they apply for it. They apply for it because it means they will get more money for research and development, and they can use the money they were going to spend on research and development to fund other parts of the company. It is not stimulating more research and development; it is keeping it more or less the same.

But I come back to the point that the tax credit system is superior. When the Labour Government was putting the tax credit in place, it went to Australia and looked at its tax credit system to see what was available and what was being offered. The Australian system was effectively a 7 percent tax credit at that point. It was very hard to administer and was not seen as particularly cutting edge. Our officials came back here and put together the tax credit and it came in during the last year of the Labour Government. It was supported by Treasury. It was a 15 percent tax credit that would cost about $37 million in its first year and rise to about $350 million after 5 years. Foolishly, it was voted out by this Government when it came into office.

What did the Rudd Labor Government in Australia do when it came into office? The first thing it did was raise its research and development budget by 25 percent. If we are looking to try to catch Australia, we should consider what Australia did. That was the first thing it did. I think there was a 6 percent increase in the total package of reforms that this Government brought in, in the Budget, versus Australia’s 25 percent. But the really interesting thing that happened was that the Australian officials came to New Zealand, looked at our tax credit system, and took it back to Australia. Australia right now has an almost carbon copy of the credit system that the Labour Government put in place here. Why is that? It is because Australia recognised that that was the best thing it could do to encourage innovation in companies throughout Australia. There has been an appalling loss of potential in this country as a result of this Government cutting the Labour tax credit.

I rise to speak on Part 1 of the State Sector Management Bill in relation to the merger of the Ministry of Research, Science and Technology and the Foundation for Research, Science and Technology and the creation of a Ministry of Science and Innovation. As other colleagues have said, we support this provision and believe it to be in line with our support for innovation. We are concerned, though, that this by itself will not make the huge difference that we need in this country. A merger is not a plan, and this Government has failed to show real commitment in the area of innovation.

I want to talk specifically about clauses 17, 18, and 19. These are the clauses that relate to the employees of these organisations. Whenever we look at structural change like this it is very important that we consider the implications for the people who work in those organisations. These are people with families who work very hard at their jobs. I understand that the people who work at the Ministry of Research, Science and Technology and the Foundation for Research, Science and Technology are well-regarded people who are committed to the work they do. I know that the organisation that speaks on behalf of those employees, the Public Service Association, has acknowledged in its submission to the select committee that its members at the Ministry of Research, Science and Technology are generally supportive of the objectives of the merger and welcome the opportunity to work in a new organisation mandated to lead Government and sector work on science and innovation. So it is a good start that the employees can see that it is valuable. They are also not resistant to change, and their union makes that point, but they urged the Education and Science Committee to take account of the fact that change is difficult and stressful, that it can be demoralising, and that those issues must be mitigated by good process and good leadership. I hope that that has been taken on board by the Minister. I would be very interested to hear from the Minister, if he was listening, as to whether he considers that it is important to provide and encourage that good leadership in a process of staff change.

As I say, clauses 17, 18, and 19 outline the rights of employees in these organisations. It appears that they are reasonably comprehensive and will allow for a smooth transfer of employees from both the foundation and the ministry into the new organisation, the Ministry of Science and Innovation. I am very pleased to see that, but there is a need for some certainty in these organisations. Certainly, the people who work at the Ministry of Research, Science and Technology have already been going through a period of significant uncertainty. I understand that last year 50 percent of the Ministry of Research, Science and Technology’s first, second, and third-tier managers left and that none were replaced on a permanent basis. That takes me to my next point, which is that this new organisation, which we support, is expecting a lot more. There are a whole lot of new things to be done, and that is positive, but the expectation of this Government is that this will be done with less staff. So there is a significant reduction in staffing—

💬 Hon Trevor Mallard: Fewer staff.

Sorry, fewer staff. I thank my colleague the Hon Trevor Mallard very much. He is on the ball even at this time on a Saturday morning. Fewer staff will be expected to deliver more, and that is an important point. We need to make sure that we are not putting levels of pressure on people that would undermine the very good intentions of this new ministry.

One of the very interesting points in clause 19 I want to talk about is subclause (3), which is about the avoidance of doubt. It states that: “the employment of a transferred employee … does not—(a) constitute new employment for the purposes of the KiwiSaver Act”, and that is good, but, most important, paragraph (b) states that it does not “treat that employee as a new employee for the purposes of the Employment Relations Act”. Many people in this Chamber may not understand the significance of that, although I hope that at least the people on the Transport and Industrial Relations Committee do. It is, of course, that these employees, unlike many other New Zealand employees, will not be prone to dismissal in the first 90 days of their new employment. They will retain their rights as employees. They will retain the right to take an unjustified dismissal case should that unfortunate situation ever arise for them. I thought that it was worth noting that at least this group of employees will not suffer from the consequences of the very poor employment relations changes that have been made.

I move, That the question be now put.