Taxation (Research and Development Tax Credits) Bill

on behalf of the Minister of Research, Science and Innovation: I move, That the Taxation (Research and Development Tax Credits) Bill be now read a second time.

This is an important bill for our economy. While total research and development spending increased to $3.9 billion in 2018, or 1.37 percent of GDP, New Zealand still lags behind the rest of the world. This bill, therefore, is part of the Government strategy to address that and to boost our economy through support for research, science, and innovation. The support that this bill promises for business has been generally welcomed by submitters to the select committee, and rightly so. The New Zealand economy is better off when businesses are encouraged to be bolder, think laterally, and invest more in novel ideas.

In bringing this bill to its second reading, I’d like to thank the Finance and Expenditure Committee (FEC) for their work on this bill. In particular, the committee has made some very valuable recommendations to this bill, which I would like to briefly run through.

The purpose of the controlling rights requirement in the bill is to ensure that R & D contractors are not able to claim for R & D activities they perform for other people. The Finance and Expenditure Committee recommendation is to make several amendments to ensure that joint ventures undertaking R & D are eligible for the tax credit, which would otherwise be excluded.

In the bill as introduced, contractors’ profit margin was removed from the calculation of the credit, with the aim of giving equal treatment to expenditure on R & D performed in-house and by contractors. However, the Finance and Expenditure Committee considers that splitting out the profit margin could incentivise businesses to conduct R & D in-house when it would be more efficient to outsource it. In that way, the cost of the profit margin would be part of the true cost of performing research and development. The FEC has recommended that it be considered eligible expenditure for the credit.

In the bill as introduced, expenditure on internal software development over $3 million would not be eligible for the credit. The committee considers that the existing provision would unduly cap some internal software development expenditure that would have a spillover benefit for New Zealand. The recommendation, therefore, is to increase the internal software development cap from $3 million to $25 million in order to better reflect the distinction between internal software development, which has an external focus, and external software development. The committee also recommends amending the legislation so that internal software development undertaken for the purpose of internal administration would be excluded from receiving the credit.

Turning now to integrity measures. In designing the measures contained in this bill, the Government has been careful to protect the sustainability of the scheme by building in checks and balances. I’m very pleased to see that the FEC was of a similar mind, and they have made some very useful recommendations to protect the integrity of the scheme. The bill as introduced allows for activities and expenditure to be considered as eligible or ineligible R & D by Order in Council. The Government’s view was that frequent fine-tuning of this scheme is preferable to periodic major changes, which can be unsettling and undermine business confidence. The bill, therefore, allows for this fine-tuning through regular review and the ability to adjust the scheme by Order in Council as required. While not disagreeing with the central concept, the committee considered this power needed to be tightened up and only used in defined circumstances.

The policy intent of this bill is to encourage businesses to undertake additional R & D. The committee considered that a business reclassifying expenditure would not necessarily encourage additional R & D. In some cases, it is simply changing the way costs already incurred are viewed in order to secure the tax credit. They therefore suggest that a person should file their R & D supplementary return by the due date if they would like to make a request to amend their R & D tax credit assessment. This would limit a claimant’s ability to retrospectively reclassify expenditure as R & D expenditure.

The committee made one other recommendation to limit claimants’ ability to retrospectively reclassify expenditure as R & D expenditure. The bill as introduced allows the commissioner to increase a person’s R & D credit claim up to two years following the expenditure. The committee has recommended reducing the maximum time frame from two years to one.

The bill as introduced contains an in-year approval process. This allows taxpayers to have their expenditure considered for eligibility under either the general approval or the significant performer regimes. The committee has recommended that if a significant performer was unsure whether its activities would satisfy the core or supporting R & D activity definitions, it would be beneficial to allow the business to obtain general approval for these activities. Allowing significant performers to use the general approvals regime would give them more certainty about the eligibility of those R & D activities, but it also provides a greater level of scrutiny from Callaghan and R & D officials.

The same thinking is behind the committee’s recommendation that supporting R & D activities should also be able to be considered under the general approval regime. The committee foresaw instances where an application could be declined and felt that claimants should have the opportunity to discuss their applications and provide additional supporting information if appropriate. The recommendation, therefore, is that the commissioner should contact the claimant before declining their application.

Finally, the committee has also suggested a pilot programme for the in-year approval mechanisms, the general approval process, and the significant performer regime for year one of the regime. This would allow IRD to improve the in-year approval process before it is rolled out to all claimants in the second year.

These worthy adjustments from the Finance and Expenditure Committee to the draft legislation join the other safeguards which were already built into the scheme, including that claimants must satisfy certain general criteria to be eligible for R & D tax credits, that the tax credit is available for R & D that happens primarily in New Zealand rather than offshore, and that claimants have to perform at least one core activity in New Zealand. We also have an anti-avoidance rule and a requirement to publish claimants’ details in a five-yearly evaluation, to name a few of the measures. We want to ensure that the R & D we are supporting will contribute to the kind of groundbreaking thinking that we want to encourage, so there’s also a test that there is genuine scientific and technological uncertainty.

As an aside, I think it is worth mentioning that questions of what qualifies as genuine scientific and technological uncertainty are not being decided by tax officials alone. Callaghan Innovation will be advising Inland Revenue in its administration of the scheme. In many cases, it will be a case of one scientist discussing the merits of an R & D project with another scientist.

That is a brief overview of the most important changes made to the bill, and once again I thank the committee for their important contributions to this bill. R & D performed by businesses results in new products and services, helping to strengthen and diversify the economy and improve international competitiveness. This bill gives crucial support to businesses who are striving to open up new fields of enterprise. So it is with pride that I commend this bill to the House.

Thank you, Madam Assistant Speaker, for the opportunity to take this call on the Taxation (Research and Development Tax Credits) Bill. I’m actually really grateful to have this opportunity to speak on this bill, because, based on my observation of how this bill was dealt with in the select committee process, I thought there wouldn’t be any opportunity for the Opposition to contribute. So I am really grateful. This is because during the select committee process, when we were deliberating on this bill, we had a minority view, and Government members voted against inclusion of our minority view in the report back. I have been in several meetings where bills have been deliberated, and I cannot remember any time when we were in Government when we voted against a minority view to be included in the report back. So this, in my view, was just suppressing National’s view—suppressing National’s view—and so I want to take this opportunity to read out the minority view so that it is on the record.

“The National Party supported the bill in the first reading as we see merit in exploring the potential for taxation to incentivise greater investment into R & D, and to have the opportunity to explore where the framework proposed by the Government would be the best way to do that. It’s now clear that this legislation will not work well for many. Moreover, this bill gives no real visibility of what additional R & D spending will occur as a result of a significant item of expenditure. It’s essential that businesses have certainty over the details. The Government is determined to roll this policy out in 2019, and those that are pre-profit for now will be covered by temporary arrangements subject to review down the track because, as per the Government’s own officials, the issues were too complex to resolve now.

The National Party is disappointed in that the Government has followed the process that is creating uncertainty for businesses and investors investing in R & D. That’s the reality, yes. The Government officials have also accepted that only a small number of companies that receive growth grants will be eligible for R & D tax credits, which indicates that this Government has failed to understand the nature of businesses in New Zealand. The difference in R & D definition in various policies will create further complications—for example, the ability for Statistics New Zealand to measure business spending on R & D.

The bill also creates a significant fiscal risk to the Crown, as it’s very difficult to estimate what the policy will cost as uptake is uncertain and can fluctuate substantially year to year. Small and unprofitable firms were able to find support under National’s innovation ecosystem. We understood that the big companies of tomorrow emerge from the risk-taking entrepreneurs of today. This policy needs a thorough consideration and should be part of the full package to support all companies that are invested in R & D, and hence the bill should be delayed until that time.”

So that was our minority report. Very clearly we wanted to state that we are not satisfied with this legislation after it has been through the select committee process, and we are opposing this legislation. It’s actually quite disappointing, because we supported this legislation in the first reading. We supported this legislation in the first reading because we wanted to work with Government during the select committee process to make this bill a better bill. But that opportunity wasn’t there, but I’m not surprised that the Government tried to suppress the Opposition’s voice.

But if you look at what businesses had to say about this legislation—this is legislation which this Government claims is their biggest policy. How many submissions did we receive on this bill? Thirty-two—32 submissions. And how many businesses do we have in New Zealand—how many businesses do we have in New Zealand? Around 550,000 businesses in New Zealand. Out of around 550,000 businesses, this bill received just 32 submissions. That is 0.005 percent. Businesses didn’t care about this policy, so businesses didn’t see this policy to be relevant to them. They didn’t want to waste their time coming to the select committee. [Interruption] Yeah, I know, I know—Government members are getting agitated. That is what happened during the select committee process, and that is why we were denied having a minority view included in the report back.

ASSISTANT SPEAKER (Poto Williams): Order! We will not have discussion across the Chamber. Thank you.

Thank you, Madam Assistant Speaker. Out of those 32 submitters, 13 appeared before the Finance and Expenditure Committee. So you can see how relevant this legislation is to businesses, the type of businesses that we have in New Zealand—not relevant at all. Most of those businesses think that it’s not going to deliver any benefit for them, so they didn’t want to waste their time coming before the select committee to talk about this legislation.

What we saw during the select committee process was that submitters raised some points, and officials accepted that, yes, for some submissions the intention was exactly what the submitter was saying, so the wording was changed to reflect that intention. That clearly shows that there were several flaws in this legislation, and this is not the first time, because we had an initial draft that was put out for consultation and, yes, it was fixed after that and then the bill was introduced; it went to the select committee. During the select committee process, again, several changes were made because the legislation didn’t reflect what, actually, the intention was.

So looking at those changes, we don’t have any confidence that this bill is actually going to deliver what the Government is thinking it’s going to. I think we will be again in the state like we just heard with the bill before, the Social Security (Winter Energy Payment) Amendment Bill, where the Government was fixing mistakes in that legislation, and I think this bill will be back again in a few months’ time, or maybe a couple of years’ time, to fix mistakes in this legislation.

Another thing on the minority view—it would be, actually, really good to see Government members defending their position, or maybe they don’t want to defend it and will come out in a very arrogant manner saying that they had the numbers. So it was their decision not to allow a minority view included in the report, and that would be interesting too.

One point that one of the Government members raised was about how there’s only a small number of companies that are receiving growth grants that will qualify to receive the R & D tax credit, because this bill is to phase out growth grants and bring in the R & D tax credit. So the facts were put forward to that member, because that member didn’t know exactly that it is, actually, a small number of companies that are receiving growth grants that will qualify for the R & D tax credit. The next thing we realised was that, actually, some members didn’t understand the difference between the R & D tax credit and the refundability provision in this legislation. So if Government members were trying to pretend that that is the same thing, then there is seriously something wrong—something wrong. There is a different criteria for R & D tax credit and refundability provisions in this bill. It’s not the same thing—it’s not the same thing.

So the refundability provisions in this bill are temporary provisions, and we really wanted the Government to fix that, because companies that are in pre-profit stages should be able to have some certainty. For the Government to put something in this that is temporary and say, “We will be reviewing our policies to support pre-profits in 2020.”, which also includes the R & D loss tax credit policy that was put in place by the previous National Government, started in 2015, delivering some really good results—that is creating a lot of uncertainty for companies that are in pre-profit stages. We wanted to work with the Government in the select committee process to ensure that this uncertainty is removed and that there is something concrete for companies that are in that pre-profit stage. But the select committee process appeared like it was just a stamping exercise, because it was about just getting the legislation through the select committee and brought back to the House for the second reading, committee of the whole House, and third reading.

Now, another interesting thing is that we’re debating the second reading of this bill, but the policy has already come into effect from 1 April—so the policy has already come into effect. We saw that this legislation has been lagging behind from the start. During the select committee process, I didn’t see any leadership from the select committee to go out and connect with businesses that have, or are, receiving growth grants, because it’s those businesses that are going to be hugely impacted by this policy. We have done that. We have gone out and spoken to those businesses, and we have their responses here, and we can clearly see that they’re saying that MPs should be going out and engaging with companies to understand their R & D plan, and then the funding should be provided accordingly. The select committee—in my experience in the past, we have gone out and connected with sectors if we thought that sector was important to connect with for any particular legislation, but the select committee didn’t bother because they didn’t want to hear from them.

So I think this is going to be another failed policy just like their KiwiBuild and light rail policy. We oppose this bill.

Thank you, Madam Assistant Speaker. Painful, that’s what that was—painful—and it was just as painful on the day when the member Dr Parmjeet Parmar was sitting in there barking in the Finance and Expenditure Committee, trying to tell everybody what she believed was the right thing to do. It was a tough moment, and I do have to address this, because it was a time when the member was sitting there and we had to have a discussion about what was fact and what exactly was fiction.

There was a discussion about whether or not the wording should be this way or that way. The member was unrelenting in her consideration of what we were trying to suggest to her. We didn’t want to change any wording from it, but, actually, what happened was that she was so determined to not listen to anything that we were saying that, actually, we were within our rights to vote it down. We have no interest in supressing Opposition view. If you look back at the nine years that we were in Opposition, we were very keen to submit a minority view to any bill that was going through Parliament, and that one was going to be one where we were very happy to do it, but because of that one issue, it didn’t happen. So, unfortunately, that didn’t happen. The member had her moment to vent her anger at the process and let everybody know just how put out she was about what happened in the select committee on that particular day.

So, as far as I’m concerned, we can put that to the side and concentrate on just how good this piece of legislation is. The Government is, in fact, committed to building a productive, a sustainable, and an inclusive economy, and research and development is going to play a huge part in that. Currently, we’re spending $3.9 billion, which only equates to 1.37 percent of our GDP this year, and that’s what this Government is focused on: high goals, achieving well above what the previous Government were having us wallow in. So we have set this very ambitious target to increase expenditure on R & D to 2 percent of GDP by 2027. That’s right: we’re aiming high when it comes to research and development, and who will benefit from this? All of New Zealand, because when businesses invest in research and development, they can help to solve a lot of problems that we have as a country. They can help to push their own businesses forward.

We did have 32 submissions from businesses, from a variety of places across the employment spectrum. They came, they presented to us, and they were very supportive of this. There were a few things that we had to tweak, and earlier my colleague the Hon Aupito William Sio outlined some of those changes that we are intending to make as a result of listening to those submissions in the select committee meetings.

Just to run over a couple of them, the one part that we talked about was just, first off the blocks, the changes to the eligibility criteria for the credit. Now, the original proposal was that the controlling rights requirement—and this might sound a bit technical to people who don’t understand—in the bill as introduced was to ensure that R & D contractors weren’t able to claim for R & D activities that they performed for other people. But, as a result of the submissions, the committee recommended that we make several amendments to ensure that joint ventures undertaking R & D are eligible for the tax credit, which would be otherwise excluded. We had that that we dealt with. There have been a few considerations around claiming the credit for a contractor’s profit margin, also around software development, too.

Members, you can be very happy that this is the second reading of this bill. It represents the next step in ensuring that New Zealand increases its levels of business R & D investment, with the aim of bringing us closer to the international average. The R & D tax incentive is going to be a significant addition to New Zealand’s research, to New Zealand’s science and innovation ecosystem, as part of our wider Government support to support the commercialisation of New Zealand’s excellent service and research base. This is going to help us to develop, as I said, that innovative and resilient domestic economy. Thank you, Madam Assistant Speaker.

Just before I call the honourable member Andrew Bayly, I just want to point out to the House that the time clock above the Noes door is malfunctioning. However, above the Ayes, it is still reading correctly. I will advise members when they have got a minute or two minutes to go in their speeches.

Thank you, Madam Assistant Speaker. It is a pleasure to be talking on this Taxation (Research and Development Tax Credits) Bill. First of all, I’d just like to congratulate that member who’s just resumed his seat, Tamati Coffey, for such an incisive display of knowledge around this bill—very good, very good. Nice to see him leading off.

This bill is about research and development, and, you know, it’s interesting going back and looking at history and the context of what we’re talking about tonight. The thing about research and development is that no one in this House is going to stand up and say we shouldn’t be doing it—no one—but the issue about research and development is that it is a see-sawing issue. We have been through periods where we’ve had these types of schemes in place, and then we’ve gone back to specific tailored schemes, and then we’ve reverted back. Unfortunately, we’ve got another reversion—another revision and reversion. It’s a reversion back to the past, and this bill takes us from where it was a very targeted system, using the Callaghan group to actually identify and work out where we want to spend our dollar—the hard-earned dollars of the New Zealand public—and what this bill does is it says, “No, we shouldn’t do that. No, we’re going to scrap that. It’s been in place for a few years. No, we’re going to be going on, because philosophically we’ve got to be seen to be doing something about R & D.” And, of course, now we’ve arrived at this new thing, which we’ve all seen before, which is “Let’s just open it up and go for it.”

The first thing that I found staggering is how few people actually came to the committee—32 submitters. Now, there are, roughly, 530,000 businesses. I actually got my computer out and worked it out as a representative sample. That is 0.00000006 percent. Isn’t that amazing, the number of people who thought “This is so incisive, so important.” that they came to our committee and made a submission. And I’d say to you, there are not many companies—and I’ve been in this situation—

ASSISTANT SPEAKER (Poto Williams): Order! [Interruption] Order! Despite the fact that you, clearly, speak very well, Mr Bayly, I cannot hear the member over the chatter and rabble that’s going on in the Chamber. Can we settle, please? We’ve got 15 minutes to go, and I would like that to be done with some order. Thank you.

And I appreciate that, Madam Assistant Speaker.

ASSISTANT SPEAKER (Poto Williams): I’m sure you do. We just wish they would listen.

There are times in this House when there are people who are very noisy.

So the issue is that not many companies or business owners are going to say “No, we don’t want R & D support.”, and that is correct. We do need to supply them and support them, but the issue I’ve got—the first issue with this bill, and we discussed it at length with the officials—is the one around definition. What do you want to try and achieve with research and development? I’d suggest to you that what you’re trying to do is grow the economy faster by supporting those businesses that need the help in the form of financial—but it’s not only in financial terms; it’s also all the other things around governance and all those other aspects that will enable those companies to proceed and grow faster than they otherwise would.

If you have a clear line of sight on what you want to achieve, then the issue with this bill and the definition—and this is the bit I struggled with—is that we have moved, one, from being very clear about commercial outcomes. It’s fine, as the honourable member Tamati Coffey talked about, achieving a 2 percent spend on research and development. I would suggest to you that that’s not what we’re after. That is about just spending money. That’s about ticking a box. What we actually should be measuring, and what we should be achieving with expenditure of this scale—we’re talking about a budget for this of about $1.4 billion over four years—what we should be trying to achieve is actually to grow this economy much faster. That is the issue, of course. We’ve seen this country go backwards from an annual GDP growth rate of 3.3 percent under our Government over the last three years to now just over about 2.6 percent—a big, significant drop. This is the type of thing that can drive this economy, because when you do this well you can afford to spend it on health, you can afford to spend it on police, you can afford to spend it on all those things like education.

This bill, I think it has an issue with its objective and its definition. Also, I think the issue around its cost—we did make an adjustment reducing the threshold from $100,000 to $50,000, but the one issue is: what is the cost to make applications? Is it worth it? Are smaller companies going to be prepared to do this? I think these are the issues—particularly around start-up businesses—and this bill does not deal with them. It assumes that we’ve got these larger businesses who are doing research and development, and I would suggest to you it’s not necessarily about them. It’s about the dynamic small businesses who will yet become that big business. I think that is the issue with this bill, and that is one of the principal reasons that we cannot support this bill in its form. We do support the overarching objective for New Zealand to increase its spend but it’s got to be for the right purpose. It’s got to grow these companies, and it’s got to result in a better outcome for all New Zealanders.

Thank you, Madam Assistant Speaker, for this opportunity to speak to this fantastic piece of legislation, brought to the House by this coalition Government.

I just want to address a few comments by the previous speaker, Andrew Bayly. He seemed to suggest that small businesses were disadvantaged by this legislation, by the nature of their size and the costs of application. I distinctly remember that member asking officials that very question in the Finance and Expenditure Committee, and kudos to the officials who spoke quite eloquently about the nature and the flexibility of the application process, which would reflect the size and the nature not only of the business but the application itself. There is the ability, and this legislation does reflect the opportunity for small businesses to take advantage of this legislation in a cost-effective way. So I completely rebut the comments from the previous speaker.

Mr Bayly also made the comment—and I quote—that he “didn’t know what we were trying to achieve with R & D tax credits”. Well, let me spend the next eight minutes and 45 seconds outlining exactly what it is we were trying to achieve with R & D tax credits in the New Zealand economy. The tax credits themselves are an incentive for business to engage in efforts within their organisation that will see them advance, accelerate, develop, and grow existing organisational plans, products—

💬 Andrew Bayly: Is that your elevator pitch?

—services, and systems. So to Mr Bayly, I suggest to him that he just read some basic 101 books on R & D tax credits. What we’re trying to achieve here is, essentially, a level playing field. So around the world, essentially, all of our OECD trading partners run R & D tax credit regimes. New Zealand is behind the times.

💬 Jonathan Young: That’s what it’s all about!

Yes, it is all about that. So for nine years, Mr Young, this country has been served incompetently by the previous regime. They attempted to bring in this exact regime. They attempted to bring this in—no, actually, forgive me. It was the previous Labour regime who brought this regime in, and the National Party came into power and scrapped it. They said they didn’t want New Zealand businesses to take advantage of R & D tax credits from the Government. It is shameful. They shut it down and they said that it wouldn’t make a difference. Well, we know from international example that R & D tax credits make a huge difference to research and development of companies around the world, and our New Zealand businesses have been suffering from that kind of competitive disadvantage, as it were, because our international competitors have been able to avail themselves of this opportunity.

Right now, as we have learnt from the Prime Minister and from the Minister of Finance earlier in the House today, the world economy is going through an economic downturn. What is exciting, though, is that at the same time we have learnt that right now the New Zealand economy is performing better than, essentially, all of our trading partners. In fact, the Acting Minister of Finance tried to list all of the economies that we were performing better than but was stopped by the Speaker because the list was so long. That is how well the New Zealand economy is performing, and that is a huge kudos to New Zealand business right now, who are performing exceptionally in this world economy. What they’re doing is exporting to the rest of the world. Actually, right now, to be fair, the New Zealand dollar’s quite advantageous for them. So there’s lots of money to be made right now around the world.

This piece of legislation came about, I’m proud to say, in negotiations between New Zealand First and the Labour Party as we formed what has become a magnificent coalition of these two parties. What New Zealand First was saying—and I acknowledge the previous contributors who spoke to the fact that New Zealand businesses are performing exceptionally well. We are near the world average in terms of percentage of GDP to R & D, but we’re not there yet. So the conversation was about what can a good, practical Government do to make sure that New Zealand businesses have an advantage—well, actually, not an advantage, but get on to the same playing field that their international competitors are able to avail themselves of right now. This is what this legislation seeks to do.

We have strong evidence from around the world, from international studies, that tax credits are an effective way of raising R & D engagement by business. I think it was a speaker on the opposite side of the House who spoke about talking to business not wanting these things. Quite contrary is my experience. I have gone out in my privileged position as the Parliamentary Under-Secretary to the Minister for Regional Economic Development, which is a great programme that will complement what it is we’re trying to achieve here. But the conversations around R & D tax credits and the possibilities that small, medium, and large businesses will be able to use because of this legislation, because of the 15 percent tax break—I’m going to say—that they can avail themselves of is a huge, huge incentive for them to invest, to spend, to commit to their businesses, to their products, to their services, and, in so doing, increase their economic performance and, hopefully, their profits. They told me that they will see their profits increase because of this; not only their profits but the New Zealand economy, jobs, and regional growth. Now, that is exactly what this Government has sought to do through this legislation, and I believe that through those conversations, I’ve already had engagement which tells me that this will be the outcome of this legislation.

So it is with a great deal of pride, actually, that I stand to support this legislation. This is a Government that is spending more on our engagement around the world, that is doing more in our engagement around the world, to support businesses in their efforts to grow business in export markets around the world. In fact, just this evening, I was speaking to the Minister for Trade and Export Growth, and my understanding from a very brief conversation is that exports to Canada have already increased by 600 percent in specific industries. Now, that is exactly the kind of conversation that businesses, this economy, and this Government is absolutely proud to have. So on that note, I support this legislation and absolutely commend it to the House. Thank you very much.

Thank you, Madam Assistant Speaker. It’s a pleasure to take a short call—and it will be short—on the Taxation (Research and Development Tax Credits) Bill, and I need to say, I guess, for all the reasons so eloquently espoused by Parmjeet Parmar earlier tonight, we are not supporting this bill. I want to make a couple of comments about this, because, the bill—and I would like to remind the last speaker, Fletcher Tabuteau, that just because the rest of the world does something doesn’t mean we should.

I want to just go back in history a little bit, because this is an issue that we’ve never dealt with adequately in New Zealand in my lifetime. So if you go back to the reforms of the 1980s, which may well have been necessary, that was the last time, in my view, that we adequately funded R & D in New Zealand, and we’ve never been able to, primarily, I think, for fiscal reasons. We’ve never really got back to the point of funding R & D satisfactorily in New Zealand, and no Government in that time, since the late 1980s, has come up, in my opinion, with a method of funding this type of expenditure in New Zealand that works. I think that’s our great challenge, and I don’t know whether this is the answer or not, but what I do know about this bill is that it’s going to deal with the large spenders well, but it may well be challenging for anyone else to access it, and I think that’s the challenge we’ve got with it.

So if you look at our history, when we last funded this type of thing reasonably well, farming was one of the beneficiaries of that, and we were leaders throughout the world in agriculture as a result of that funding. Since that day, of course, we’ve had a whole lot of new things come along that weren’t even heard of in the 1980s: biotech, the technology industry—they were hardly heard of. No one had an email address in 1985 that I know of—they may have had, but I didn’t know about it. So the world has changed dramatically, and I think that’s the big challenge we’ve got.

So I think my issue with this bill is that it’s expensive to access. Big operators will be able to access it easily, and they’ll have the infrastructure to do it. Smaller ones, I think, will struggle, and the cost of access is one of the things that really concerns me and the expertise to provide that access is also an issue.

One of the things, I think, that the Finance and Expenditure Committee did well in the course of this was to deal with the issue of outside contractors, because, in New Zealand, because of our scale, we, frankly, don’t have the ability—nor should we have the ability—always to internally employ R & D experts, or people that are part of this programme. There was a proposal in the initial stages of this bill that would only fund 80 percent of those outside contracts, and the reason for that was that there was a feeling that there was profit charged in the course of that and we should take the profit out of that discussion. That has been done away with, and I think that was a very good decision the select committee made.

So I think some things have come back from the select committee in good order, and I congratulate the select committee on doing that. It is a bill, as Parmjeet Parmar said, that we can’t support, and the reason we can’t support it is because I don’t think it encompasses the entirety of where we need to get to with R & D and the way in which we arrange the funding of it in New Zealand. It will be a challenge for the Government to get there, and it will be a challenge for future Governments to arrange this stuff, but there’s no question in my mind that in New Zealand we dragged the chain on this, and we need to find a way of satisfactorily doing it. This will do it to some extent in some parts of our industry, but I’m not sure that that’s where we need to be.

So that’s my contribution to this bill. We can’t support it for those reasons. I would like to think that this is a partial solution, but it’s not the entire solution. Thank you, Madam Assistant Speaker; that’s my lot.

Kia ora, Madam Assistant Speaker. There’s a limit to how many cows we can crowd in our paddocks; we see it in our rivers. There’s a limit to how many tourists we can cram in Fiordland; we see it in our infrastructure. There’s no limit to the export of innovation and R & D. That’s why the Green Party is supporting this. The Government is increasing spending in R & D. It’s making practical changes, such as tax credits, to make it easier to support the innovative economy. It’s fantastic to see the computer software changes—

I’m sorry, I apologise to the member. This debate is interrupted and is set down for resumption next sitting day.

Debate interrupted.

The House adjourned at 10 p.m.