Debate on Crown Entities, Public Organisations, and State Enterprises — Callaghan Innovation

Last week, when we had the pleasure of having the Minister of Science and Innovation at the Education and Science Committee for the estimates hearing, the Minister told us that he did not see the Government’s investment in Callaghan Innovation as being about creating jobs in the high-value manufacturing sector. He said that he saw this as being about creating jobs in the research sector. Well, therein lies the difference between Labour and National and what we see as the purpose of our investment and putting money into science and innovation. This is a Minister of Science and Innovation who, I would note, in an earlier contribution this afternoon called interest rates one of the laws of physics. But I did think he at least understood innovation and what it takes to translate good ideas and smart thinking into viable products and companies. But when you are divorcing the investment that we make as a country and the commitment of taxpayer money into science and innovation from the creation of high-value jobs in the high-value manufacturing sector, we have a problem.

National thinks that achieving the Budget surplus is all it is about. But in Labour we have a grander vision of this. We want to make investments that will lead to New Zealanders having higher-paying jobs in the future. That is the reason we invest. If we stop and pause to consider the name of this very new Crown entity, Callaghan Innovation, we see that it was the vision of Sir Paul Callaghan that the reason we invest was to transform our economy for the good of people—not for the good of companies’ balance sheets but for the good of people and the country as a whole, with the purpose being to put more money into people’s pockets. This is not a vision that the Minister shares, clearly.

But what we do have in Callaghan Innovation is a fledgling Crown entity where, really, very few people are still sure of exactly what it is, what its mandate is, or what it is trying to achieve. This is from some of the people who work in the organisation. If we have a look at what could have been, if we have a look at the Taiwanese model, if we have a look at the Danish model, we see two very good organisations that had a clear mandate from their Government and a very well-defined mandate of what it was and what their role was to do. That was the creation of high-value manufacturing to really kickstart advanced technology in those countries.

But if we have a look at how we have started out with Callaghan Innovation, we see that we have Callaghan Innovation trying to sell important intellectual property in terms of high-value manufacturing through KiwiStar Optics. We saw that last year. This is still something that is bubbling along without resolution. But one of the very fearful things that we have is that this is a Government and a Minister that was willing to sell some of our good ideas offshore and for New Zealand to not realise the benefit of that.

But then we have a look at what is happening to many of the companies that are receiving grants from within Callaghan Innovation, and actually some of the precursor organisations as well. We ask whether what we have put in place has done anything to turn round the fact that too many of our good ideas get sold and disappear offshore. If we have a look at the figures released in 2012 by Technology Investment Network, we see that 32 of our biggest and best high-tech businesses that were created in the last decade have disappeared overseas, and Callaghan Innovation is not doing anything to turn that round. We have seen BioDiscovery not being able to receive its full grant, because, although it would have been awarded it only late last year, it has already made a decision to take it offshore. We have had LanzaTech make the decision to go offshore. We have had GreenButton make the decision to go offshore.

So what is it that could have averted that, and is Callaghan Innovation doing it? And is the Minister pushing along the reason to do it? Well, many of these companies have pointed to the fact that the places that they are moving to have research and development tax credits. If we have a look at LanzaTech, it pointed specifically to the more positive research environment that it was moving to that would allow its business to flourish. Instead, what we have is Callaghan Innovation in its fledgling state, and Labour really hopes that Callaghan Innovation succeeds. When we are in Government, we will actually put the levers in place to ensure that it can, but now we have many in the sector, both the science sector and the business sector—

Kia ora. Ngā mihi nui ki a koutou. Kia ora. I rise to take a call in the Crown entities debate to talk about Callaghan Innovation. How we build a smart, innovative economy should be one of the key issues we are all talking about in the coming months. At the moment, there are some great pockets of excellence happening across Aotearoa. There is some amazing stuff happening by Kiwi firms, and I will take my hat off to the Government because there are a few projects that are deserving of public support. But what we see is that despite the pockets of excellence, and despite the amazing, smart, green, innovative thinking that is occurring, it is happening in a vacuum of Government leadership.

We see a Government that is focused on raw logs, more oil and fracking, and more milk powder exports overseas. We are on a hiding to nothing as a nation economically if we continue to simplify our economy and become more dependent on commodity markets, where the buyers are setting the price, not us in New Zealand. We risk being stuck at the bottom of the OECD rankings, where we have declined year after year over the last three decades, if we stay just on raw logs, milk powder, and oil, and this is where the Government is literally throwing tens of millions of dollars of taxpayer subsidies. So although I celebrate and take my hat off to the pockets of excellence and the Government support that is occurring, it is tiny compared with the subsidies we see to the fossil fuel industry and to the agricultural sector, which is just intensification and raw commodities.

If we want to build a richer New Zealand with more Kiwis in employment and more profits staying in New Zealand, we need to keep up the focus on a smart, green, innovative economy. This is where the future is. This is where we can build a richer New Zealand. So although we did not support the initial legislation establishing Callaghan Innovation, some of the research has been widely supported. Obviously we did not support it because of the direct ministerial oversight of the Minister sitting in the chair, the Minister of Science and Innovation, because there is too much control for one person picking winners. What we want to see is a true competitive process where good ideas can flow through, not just on the whims of the Minister.

We know we have a national problem when it comes to research and development. We spend less than half of the OECD average both at the national and commercial levels. We need to do more. If we look at other nations like Israel and the amount it is investing in research and development, we see what we should be striving for that, because we can build more jobs—more well-paid jobs—when we focus on innovation.

One little policy area in this smart green innovation space that the Green Party will be championing this election is around digital manufacturing, additive manufacturing, and 3-D printing. This is something that is, when you hear from the Government benches, more of a border security threat, because that is where the officials’ primary focus is going through the Customs Service. What we want to see is a focus on the economic potential. I welcome that Ministry of Business, Innovation and Employment has finally supported groups like the Titanium Industry Development Association with some assistance to get a 3-D printer. There is a lot more we can do with the advanced digital manufacturing sector to grow jobs. It is 16 percent of global GDP—an $11 trillion sector—and it will be taking a bigger slice. With other Governments offering substantial support and substantial leadership, we cannot miss out. We need more leadership here. We need to set those research and development investment targets much, much higher.

We need to support those successful Kiwi companies, particularly in the green energy space, which the Pure Advantage group of successful Kiwi businesspeople says is a $6 trillion opportunity for New Zealand to get a slice of. It is a $6 trillion global market. So a green investment bank would be a great solution in the next term of Government, and a good green Government will focus on smart green innovation. We need to not just keep Callaghan Innovation but see a green investment bank established.

We need to support our capital markets with things like a capital gains tax, because it will focus investment away from the housing speculation market towards the productive economy. What I want to see is Kiwi families and Kiwi investors investing in Kiwi businesses. At the moment under the market we are seeing a signal flowing through to focus on speculation. [Interruption] I am sure that Jami-Lee Ross does not want to see more speculation in the Auckland housing market, which is going up and up and up, driving the interest rate rises that we see under the Key Government. There are more interest rate rises under the Key Government.

What we need to do is see those proper economic signals to invest in productive businesses, invest in employing Kiwis, and invest in innovation. Ultimately, this is where Callaghan Innovation is doing some good things. Where is it failing? It is the Minister in the chair. It is the lack of leadership and the lack of focus on a smart green economy. So this election will be a good opportunity for Kiwis to debate the issues—smart green innovation or more logs and oil.

May I say that I do not think that the last two speakers get out that much. They really do need to get out some more. I had to laugh at young Gareth Hughes, because he literally said that we have to encourage the capital markets and we need a capital gains tax. That is exactly what he said. The answer to encouraging the capital markets is to tax them more! That is obviously the answer; how silly of me! He also suggested that the idea of taxing about a quarter of houses would reduce the investment in housing, whereas at the same time taxing 100 percent of businesses with a capital gains tax would increase the investment in businesses. I do not know how that is supposed to work.

He also should have gone to Fieldays last week, because he acted as if the primary sector does not innovate. He said that the primary sector needs to innovate more, and not just sell raw stuff overseas. Well, hello! The news is that actually that is what is happening. For those of us who did go to Fieldays, I myself was incredibly encouraged by the amount of investment in technology and innovation that is going on there, with the assistance of organisations such as Callaghan Innovation. The farming industry is now very much a data-driven industry, and the members opposite should get out more and actually learn what is going on out there in the actual market place. But the other thing I would note—

💬 Dr Megan Woods: Ask them about a research and development tax credits in the market place while you are out there.

Oh, by the way, in terms of the whole LanzaTech rubbish, with the greatest respect, the research and development grants that it was entitled to in this country were more generous than the ones in the US. The reason it has gone to the US is actually what happened under Labour’s watch, when the company was largely sold offshore while Labour was still around. It hired a chief executive based in the Midwest of the US and now she wants to put the company there. That is the extent of it. So, actually, a little bit of work, Megan, would be good in terms of before you pick your examples as to why things should happen.

What is actually happening is a big increase in private sector research and development, supported by Callaghan Innovation. We now have $142 million a year being co-invested alongside private sector companies in research and development growth grants, and the Opposition still has not woken up to that because it is still harping on about the policy I think it has announced seven times now and implemented once, which is the research and development tax credits. It has got nothing more to say on innovation at all. That is the entire story in innovation since about 2007. Well, news—we are in 2014. Something else a little fresh would be helpful.

But the other thing I have got to take up with the member opposite, Megan Woods, is the issue of this whole thing that companies having international investment is somehow bad for them. I can tell her that actually a normal part of the innovation process is that some of the companies are eventually bringing in international investors. The good news about that, which Ms Woods has overlooked, is that it frees up capital to invest in more companies, so people like Sam Morgan and so on, who sold their TradeMe shares, have now invested in a whole range of other companies, and that is part of what encourages the ecosystem in New Zealand.

My definition of success in innovation is the increase of innovation that occurs in New Zealand, and that is what is happening right now in this country. We have had a big increase in research and development by businesses, and it is continuing to grow. We have had a big increase in exports by what is known as the high-tech sector, which is the information and communications technology sector, high-tech manufacturing, and medium high tech manufacturing. That is increasing. That is a factual reality.

💬 Dr David Clark: How close to the OECD average?

Speaking of the OECD, Mr Hughes was saying that we are continuing to go down the OECD ladder. Well, I have some news for him, actually. We stopped going down the OECD ladder as soon as the Labour-Greens crowd went out of office. We stopped. And, actually, we are now going up. The former Prime Minister Helen Clark talked about being No. 22 in the OECD for years and nothing happened. Now, suddenly, we are at 20 and going to 19 because of the work done by this Government relative to other countries in the OECD.

Here we have a growing high-tech sector that is in really good shape, with more and more companies listing publicly and more companies being seeded and growing. We have big support of that from this new entity, Callaghan Innovation. If the member Ms Woods is unsure of what it is for, I recommend this quite simple page with five bullet points on it. That would be a good summary for her to start with. We are lifting the investment in New Zealand’s technology companies and the Opposition needs to bring itself up to date.

Report noted.

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