Advanced Technology Institute Bill

The clauses we are debating at this stage of the Advanced Technology Institute Bill really cut to the heart of some of the concerns that people have around the bill. The purpose statement in clause 3 is a very short statement that says “The purpose of this Act is to—(a) establish the Advanced Technology Institute and to provide for its main objective, functions, and operating principles; and (b) provide for transitional and other matters.” It is this clause that I want to talk about, because, really, a lot of the anxiety that is being felt out in both the business and science communities is about this very purpose of the Advanced Technology Institute—the what, the when, and the who of this organisation, and what it can hope to achieve.

Let us be clear, the idea of the Advanced Technology Institute is motherhood and apple pie, in many ways. Everybody wants to see it succeed. If it can work, it will be great, but this enabling legislation gives us none of the detail. What we are hearing out there is that what people want to know is what the Advanced Technology Institute is going to achieve, what its philosophy is, and what it sees as its core purpose. You will see as we go through the stages of this debate that Labour has put up an amendment in Supplementary Order Paper 154 that actually does go to what the objective of the institute will be. The benefit to New Zealand—the institute operating to the benefit of New Zealand—is something that Labour really encourages this Committee to mark out clearly to the establishment board that this is how the institute should operate and what the institute should be operating for.

The role and purpose of the institute are currently pretty much a line of question marks. Within the science communities and within industry, people are saying “I am not really sure what the Advanced Technology Institute is, I am not really sure what it is going to achieve, and, what is more, I am not sure how it is going to achieve it.” This is something that is of great concern to Labour members. It was certainly of great concern to Labour members who sat and listened to the submissions to the Education and Science Committee that there really was not this firm idea of the purpose of the institute. We want to see some more detail around that.

Labour is supporting this legislation. It has to be signalled that Labour is supporting this legislation with a great deal of reservations. We are putting up some amendments that we think will strengthen the enabling legislation and will give far more direction and clearer direction to the establishment board and the establishment unit of the institute. What we are seeing is a paucity of discussion with industry and science leaders by the establishment unit, and this even goes back to what the purpose of the institute is.

Unfortunately, the select committee process did not allow for us to progress that discussion and to clear up some of the understanding with the science sector and with industry. We had a ridiculously truncated process at the select committee. Submissions were open for only a matter of days, and submitters had to come and speak within days of putting in their submission, which for many in industry was simply not doable. I think it spoke volumes that a very small number of submissions were received. I think this is incredibly important legislation. It is certainly incredibly important to how Labour sees our economic future, and the fact that we had so few members of industry come along and talk about how this new entity could aid them in increasing and helping with their businesses was of great concern to us.

There are a number of questions around the very purpose of this institute. What business model should be put in place? What should it be? What should its role be? These are all questions that are hanging out there. How should it collaborate with the existing capability sets that exist out there, whether or not they be in research and development? We have a number of players in the research and development space. We heard from a number of universities, we heard from some of the other Crown research institutes, and we heard from some of the other private research and development providers, which are very unclear about what the purpose of the Advanced Technology Institute is. We heard from other people involved in the commercialisation space. They also have no idea, really, of what the core purpose of the Advanced Technology Institute will be. And we heard from people involved in the area of consultancy, which is looking more and more like what the Advanced Technology Institute is going to be, from the little bits of information that we can glean from various places.

One of the fundamental questions that needs to be addressed with the Advanced Technology Institute is how it can avoid cannibalising existing relationships in the science and innovation sector, whether they be at the research level, whether they be at the science level, whether they be at the consultancy level, or whether they be at the commercialisation level. These are the very things that have to be cleared up, because Labour has great fears that this is yet another example of the Government talking big and using the rhetoric of how important science is, but it is talking big and failing to deliver. We are already seeing the establishment date of 1 February being pushed out from what it originally was, 1 November. There are real concerns around whether it will be ready to go on 1 February and whether it really is feasible that we will have something set up.

In terms of the institute’s purpose, we have seen that that has been expanded from its original conception, which was to provide research and development expertise into the high-value manufacturing sector. We have seen that expanded out into the food space, just as we saw that happen with the technology voucher system, which has been a failure for this Government. It was announced with great fanfare in Budget 2010. There was going to be $20 million spent over 4 years on partnering with industry in the space of high-value manufacturing. It was going to be about game-changing research and development. It was going to be about the big pieces of research. There were going to be grants of over $100,000. Well, they have failed—$4 million in only 2 years—because industry has not seen this as something that will help its businesses. It was only $4 million in 2 years, and less than one-third of those grants were over $100,000, because the Government had to shift the threshold down to $30,000 because it realised that this was not something that was fit for industry.

What concerns us here is that industry has not had the chance to input, the purposes are unclear to industry, and there is very little clarity around it. That cuts to the heart of it. What you will hear from us later as we go through this legislation is that we would like to see a legislative requirement for the Advanced Technology Institute to chart out its purpose through the inclusion of a statement of core purpose—statements of core purpose being, of course, what all the Crown research institutes produce every year that chart out the ground in which they work, so all the other providers understand what area a particular Crown research institute works in. More important, industry would understand the area the Advanced Technology Institute would chart out. You will hear about amendments that we are putting up in that space. We would like to see the members opposite on the Government benches support some of these measures that we are putting up as amendments, because we think these will provide some of the clarity around the purpose, provide some of the clarity for science, and provide some of the clarity for industry.

The Advanced Technology Institute, if we look at models in other countries that are working successfully, has to have a strong relationship between Government, the science sector, and industry. Unfortunately, what we are seeing in the case of New Zealand is a really heavy-handed approach from the Government. When we have leaders within the scientific community and leaders within the manufacturing sector coming to us as Labour members and telling us “We have no idea what this Advanced Technology Institute’s purpose is or what it’s meant to do.”, then we have really grave fears.

We really want to see this succeed. We think that in order for the New Zealand economy to improve, it must have science and innovation at its core. Industry must be able to access that, and we have got to be investing in that in meaningful ways. We are very fearful that this legislation, and the Advanced Technology Institute that is being established under this legislation, will not deliver that either for the New Zealand science sector or for the industries that it purports to support. So I would like to hear from Government members opposite how it is that there is clarity around the purpose, the very core of what it is that the bill is trying to achieve, and perhaps move beyond rhetoric and get down to some brass tacks of what the place is of the Advanced Technology Institute within a sophisticated scientific landscape and for industry that already accesses research in other places. How is it different? What is its purpose? What is its unique part within the New Zealand science ecosystem? We have not been satisfied that that question has been adequately answered.

We also know that the scientific community and many of the key players within industry have not been satisfied about what the purpose of the institute is. We hope that that can be cleared up, because in order for the institute to succeed that has to be cleared up. If nobody understands what its purpose is, then there are real clouds there.

I am very pleased to speak on the Advanced Technology Institute Bill. At the outset I would like to acknowledge that there is a Supplementary Order Paper. There was a function at Parliament whereby an announcement was made about the Advanced Technology Institute being renamed Callaghan Innovation, and there is a Supplementary Order Paper to that effect. I think that we all in this Chamber acknowledge, and many people throughout the different speeches on this bill have acknowledged, the late Sir Paul Callaghan, and we do that again this evening.

I just want to start by mentioning a couple of issues around the process. Obviously, in the Committee stage here we are looking at Part 1, which is about the purpose, but members opposite have raised issues of process. As I have said before, although it was a tight, 6-week select committee process at the Education and Science Committee, we made a huge effort to ensure that stakeholders were aware of this legislation. We wrote to a number of stakeholders and we delivered a very lengthy commentary to address some of the issues that had been raised not only by Opposition members in their speeches but also by the many submitters who came to us. We had 23 submissions, of which we heard seven oral submissions. Of those submissions I think it is really important to note as well that only a couple were opposed. So the majority were in favour, and we saw that the other week, actually, at the announcement of Callaghan Innovation.

I believe that it is actually very clear what the purpose of this legislation is. I think we also need to understand that it is part of the wider economic framework. In relation to the comments that Megan Woods has made—and I am going to address what Clayton Cosgrove is talking about in terms of that wider economic framework—specifically around both the purpose and what other people think about that purpose and also in relation to a number of the comments she made about, for instance, the core statement of purpose, these issues were addressed through the select committee process. They are in the commentary. We heard submissions around the statement of core purpose. But the big message we came back with as a select committee—it was what the majority of the select committee said—was that a number of the amendments that were raised were about being overly prescriptive. Whether it was the stakeholder advisory group and putting forward seats for unions, or whether it was prescribing geographical areas for the stakeholder advisory group, these were incredibly prescriptive things for an institute that was set up to have some flexibility. As we all know, the technology space is a rapidly changing area.

I just want to touch on a couple of things around the core purpose. It is very clear that the first role is to help lift capability within the innovation system, and it is going to do this through a couple of things. The first is to help build industry-led innovation consortia that combine Crown research institutes, universities, polytechnics, economic development agencies, and businesses. One of the core changes that we made as a select committee was to insert the word “collaboration”, because we recognise—whether or not it is through Kiwinet, which came to us—that there is an important aspect of this institute in that it is bringing together stakeholders. It is providing a one-stop shop for businesses to ensure that we convert more ideas to market, but we also do not want to duplicate existing networks.

The second thing is that it will be a portal through which businesses can access appropriate research and development, and technical expertise and facilities within New Zealand and overseas. Again, that is a crucial driver for this institute—that it is a one-stop shop for businesses.

Thirdly, it is there to foster the mobility of experts, for example by sponsoring secondments between universities, the Advanced Technology Institute, and businesses. Again that is about the transfer of knowledge.

So I think it is very clear, when we look at this purpose within both Part 1 and also the many discussions at the select committee about whether we are being overly prescriptive, that these issues have been canvassed, including in a lengthy commentary.

I just want to touch on that issue that Megan Woods raised in terms of the statement of core purpose. We said in the select committee that we recognised that one submitter did propose that the Advanced Technology Institute be required to adopt this. We actually—the majority—disagreed with that, because although we accept that that is a specific mechanism for Crown research institutes, we recognise that the Advanced Technology Institute will have a purpose document and that the responsible Minister is currently considering what that purpose document might look like. We need to understand that we are dealing with something different here. Whether it was about the status of the Advanced Technology Institute in terms of it being an autonomous Crown entity, we dealt with issues right the way along about that variance of the Advanced Technology Institute compared with other entities. So, in my view, the issues of the core purpose have been adequately canvassed throughout the select committee process. When you look at Part 1—

I rise to take a call on Part 1. Part 1, in clause 3, establishes the Callaghan Innovation centre, as it is now going to be called, and provides for it to meet its main objectives and functions, which actually are not contained in clause 3. To make sense of clause 3, you have to refer to the main objective, functions, and operating principles of the Callaghan Innovation organisation, which are referred to in clauses 12 and 13. There they are listed, but still in very general terms. Clause 12 states that the organisation’s “main objective is to support science and technology-based innovation and its commercialisation by businesses, primarily in the manufacturing sector and services sector, in order to improve their growth and competitiveness.” Then its functions are listed over about two pages.

One of the points that was made by a submitter to the Education and Science Committee, which is referred to in the minority report from the Labour Party members of the select committee, was that if the objective of the Government is to improve our performance in the world by transforming more products into high-value goods—also services, but, in particular, goods—overseas, then the settings in the economy need to be right to facilitate that. They made the point that the macro policy issues, which are not addressed in this purposes section of the bill, are fundamentally important. Those listed in the minority report as a consequence of submissions to the select committee are the settings that get the money going into the right part of the economy. We have a tax system in New Zealand that is rare by developed country standards. It has a bias for certain classes of investment that do not grow our productive output overseas, and have the effect of distorting investment into the parts of the economy that do not grow our exports—namely, into land-based activities, rather than into productive manufacturing adding of value. If the Government was serious about growing the innovative enterprises in our country, it would be addressing those macroeconomic issues that only a Government can fix, because businesses cannot fix them for themselves. I would reinforce that point that these purposes that are being established here are not met by the bill, because these gaping problems in the economic structure of our country refuse to be addressed by this Government.

The other macro setting that was referred to by submitters was the fact that under New Zealand’s Reserve Bank policy at the moment—our monetary policy—we give priority to inflation targeting and the control of inflation, over and above every other factor, by law. We require that the control of inflation is given primacy above everything else, and that includes factors like the currency. We have heard time and again from some of these high-value exporters that they are suffering as a consequence of the overvaluation of the New Zealand currency. Just about everyone agrees it is overvalued. The IMF recently said it was overvalued to the tune of about 15 percent. Since then it has gone higher, and this legislation, again, does nothing to address that fundamental determinant of the competitiveness of our export sector—the overvaluation of our currency. So, although the Labour Party believes that it is important to bring forward innovation and to grow the breadth of our exports, which are too narrowly focused at the moment, and although I certainly agree that our primary production sector is the most important sector of the New Zealand economy in terms of the value of our exports—that is most certainly true—another issue is also clear. It is clear that New Zealand cannot make it in the world on the back of that primary sector alone, and therefore we need to grow the breadth of our exports by transforming more products into higher-value products that we can sell to the rest of the world so that we might, for the first time in decades, cover the cost of our imports and interest through the value of our exports.

So the objectives of this bill, to the extent that they are set out in this legislation, are laudable. I do not think that anyone in this Parliament disagrees that we should be trying to help grow that sector of the economy that is not succeeding as well as it should at the moment by the conversion of more products into high-value products. The problem that we have with this legislation is that we are not really clear how the Government, through this legislation, achieves that purpose, because the legislation does not articulate that in any clear way.

Some of the other concerns that were expressed by some of the submitters who did submit in the short period of time available were that they were not clear that this was necessarily going to result in additional effort in the New Zealand economy, rather than replace existing effort through existing enterprises and institutions, with the same effort being conducted through this new organisation. One of the challenges for this new organisation is that it truly does make sure that it is additive to what is already happening in the economy, rather than just squeezing out what is happening elsewhere. We already do have some really good examples of innovative companies in New Zealand, whether they are companies providing one product or companies that provide research and development expertise. There are some very good examples of that, whether it is the Gallagher Group or whether it is Scott Technology—service providers to other companies that are bringing forward new products and bringing forward new manufacturing processes or products, which aid in the growth of our export business. If a company like Scott Technology ends up finding itself competing against Callaghan Innovation, then we are not necessarily going to be going forward.

There was not much to be found in this Budget that increased the competitiveness of our export sector. The Advanced Technology Institute, or as it is now to be called, Callaghan Innovation, was an exception to that general failing—from my point of view, anyway—in the Budget, and for that reason the Labour Party will be supporting it.

I do want to return to the process point that Nikki Kaye addressed. I do not think there is any excuse for a 6-week submission period. How long has this been on the Order Paper since it came back from the select committee? I cannot really see from the paper that I am looking at when this was—

💬 Nikki Kaye: We had a reading immediately.

What was that?

💬 Nikki Kaye: We had a reading immediately.

Has it just come back in a few weeks ago?

💬 Nikki Kaye: Well, no, we’ve already had a reading.

Right, OK. Well, I cannot see why there was a need to truncate the normal process, as this has been, and not allow submitters the time to actually think about the issues—to actually have the time to consider the issues and make a considered decision as to, one, whether they should submit, and, two, if they were going to submit what they should say in their submission.

You can never know what you do not know. Therefore, we will never know what deficits would have been shown in this legislation and what further ideas would have been brought forward by people who had the normal period to submit. The normal period for the calling of submissions is 6 weeks. That enables people to consider, take advice, talk to their industry associations, talk about it with other people who export, and come to a view, rather than just having to commit straight off the mark to a response, which would be ill-considered. Most people do not like making ill-considered submissions, and so, faced with the choice of making an ill-considered submission or just letting it go past, most people in the end choose not to submit. That is why we should protect the processes that we have at the select committee through the normal process. This is all the more important in a country like New Zealand. We have only one House of Parliament, and, therefore, we are more reliant upon select committee processes to make sure that we do not make legislative mistakes than are other countries that have two Houses of Parliament. With those reservations I will take my seat, noting that the Labour Party supports the bill.

I am pleased to make some brief initial comments to this first part of the bill, the Advanced Technology Institute Bill, which contains, as we know, the purpose, the interpretation, and the statement of binding the Crown. We will say a great deal more about this bill later. You will be aware, of course, that the Greens initially supported this bill at its first reading, in the belief that there is a place for an organisation of the type that this legislation seeks to establish. But we have changed our view on that, given that, to a large extent, the objectives, the functions, and, indeed, the operations of this new entity are so poorly defined in this legislation. There is still a great deal that is unanswered. There is a great deal that we simply do not know about how this organisation will be structured, even what the transitional arrangements will look like, how it will operate, and what powers it will have. We do know that they will be substantive, in that there is a great deal of concern both in the business and indeed in the research and the tertiary sectors, and in the Crown research institutes and elsewhere, about how this piece of legislation is going to roll out.

On the question of functions, which are core to any organisation—to any piece of legislation, in fact—we absolutely do not know what the boundaries are, what the parameters are of some of the powers of this new organisation, not least of all around funding—the allocation and administration of funding. We asked some very pertinent questions at the Education and Science Committee to which we got answers along the lines of “Come and ask us later when we have made those decisions.”, which will be after the legislation has been passed. That is an appalling process. That is a process that denigrates and, indeed, dismisses the importance of due parliamentary process.

The point has already been made by Labour speakers that we had 6 weeks from go to whoa. We know that that constrained submitters. We know, as the last speaker David Parker quite correctly pointed out, that the sorts of organisations that we would expect to make substantive comments about this sort of legislation are those very organisations that actually want to make well-informed, substantive, thoughtful comments based on reflection and engagement of their stakeholders. They had no time to do that, and the bill, the drafting of this legislation, is so much poorer for it.

We do not know, in fact, what the reason was for the haste. Why have we been presented with a document in which even core functions and powers are so poorly described and outlined? What was the reason for haste? We have asked that question repeatedly, and I would love to hear the answer to it. I understand entirely that there is no reason to sit on one’s hands when there is a need to be filled. Nobody on that select committee, indeed in this Parliament, wants to see legislation delayed just for the sake of process, but nowhere did we hear a compelling reason for such extraordinary haste in this instance.

We understand that the title of the bill will be changed, and we will talk of that later, but the reference to Sir Paul Callaghan has been made. We absolutely hold the late Sir Paul in the highest regard. I never thought that in my life I would sit in a town hall in Wellington listening to a person talking about the relationship between science and industry, and that you could have heard a pin drop. It was as if a rock star was on stage—an extraordinary scientist, an extraordinary communicator. Our reluctance in opposing this legislation is in part because we are very concerned that it is not seen as any reflection on that gentleman or his legacy.

The chair of the Education and Science Committee, Nikki Kaye, made comments about some proposed amendments that were, in her view, rather prescriptive. I take issue with that. She referred to the need for flexibility and innovation. I believe that the functions, the powers, and the operating principles of this bill give the Minister of Science and Innovation such extraordinary control over the future of science funding and the creating of those relationships, but the very innovation, and the opportunity for this organisation to act flexibly, and to respond to business and to the research sector will be seriously constrained. It is, and it will be, a tool of the Minister—that is patently clear if one looks at the provisions, and obviously we will be commenting on the detail of those later. To suggest that the very sound proposals for amendments that were put up by the Opposition parties were overly prescriptive is unfortunate and does not accurately reflect the genuine concerns that this bill is so loosely drafted as to be unworkable.

I rise to speak on Part 1 of the Advanced Technology Institute Bill around the purpose. New Zealand First will be supporting this bill as it goes forward. I take on board my Labour Party colleagues’ comments with regard to industries, corporates, universities, and research institutes not understanding the purpose of this bill. I want to put on record my understanding from the Education and Science Committee of the purpose of this bill so that it is written down in Hansard, so that if it ends up that this comes back, or this becomes a problem going forward, we have some sort of touch point here in Hansard. And so—

House resumed.

The Chairperson reported the Local Government Act 2002 Amendment Bill with amendment, progress on the Advanced Technology Institute Bill, and no progress on the Legislation Bill and the International Finance Agreements Amendment Bill.

Report adopted.

The House adjourned at 9.56 p.m