Tuesday, March 11, 2008

Muldoon's back with more subsidies

Back in the bad old days of Rob Muldoon, industries would clamour for a subsidy or a tariff or import quota, to protect them, promote exports or help “encourage jobs and innovation”. Those days were largely gone after the fourth Labour government, which ruthlessly purged corporate welfare partly to save taxpayers’ money, but also to ensure a “level playing field” with the government not “picking winners”.

After an initial shock, most businesses accepted that with the government out of the game of dishing out subsidies and protectionism there was no longer the need to lobby for such things and business could get on with producing and selling.

However, this started to be eroded with Jim Anderton converting the largely policy advisory Ministry of Commerce into the more interventionist subsidy Ministry of Economic Development. The “winners” picked by Jim Anderton’s subsidy machine – NZ Trade and Enterprise – are probably not worth looking at too closely, when you write off the losers. Of course since you didn’t want to “invest” in those businesses anyway, you were the loser either way.

Now according to the NZ Herald Labour is throwing $700 million of your money away on the food and pastoral sectors to promote innovation. Business NZ Chief Executive Phil O’Reilly responds to this by saying “This is an excellent model for commercialising research, based on research-industry collaboration”.

Commercialising? Since when it is commercial to use taxpayers’ money, which might otherwise have been used by OTHER businesses for their innovation?

Nobody would argue with innovation by business, but wouldn’t it be simpler to just forget subsidies and cut company tax some more? For starters, how about a company tax rate of 15% (half that of Australia, and lets bring income taxes down to match)? How much innovation might THAT bring?


Meanwhile National, showing a growing pattern of "me to" ism, has a press release saying "National Party Leader John Key says National will make a significant increase in funding for agricultural research and development, but it does not support the model announced by Labour today.... We will make long-term funding commitments that provide certainty to the sector because we see it as a way of lifting productivity and helping to make New Zealand a smarter nation."

Um, how about letting businesses keep more of their own money? "knock knock" any policy innovation at the National Party?

6 comments:

Stephen said...

The fact that the fund is contestable for all and sundry means nothing?

libertyscott said...

Oh so my retired parents will get some?

Um no. It's a subsidy. Most of those paying for it have no hope to get any of the money. A transparent, best value bidding system for subsidies is just the least worst way of subsidising.

Stephen said...

I would've thought people would 'see the money' through the 'trickle down' of patents/intellectual property generated? 'Sustainability' is listed as one of 'key areas' so reducing our/farmer's Kyoto liabilities wouldn't hurt...Not sure why they targetted this sector in particular but halving company tax for all-comers is obviously pretty far off what they want to do.

Obviously you're never going to be happy with this, but Muldoonist 'protection' and 'winner-picking' this ain't.

National WERE rubbish on this.

Stephen said...

In essence, it would seem to be a targeted tax break on research and development/innovation. Of course different from company tax in that these businesses are more or less being told what to invest in. So often we hear about business productivity being low in NZ due to a lack of investment in non-human capital or R & D, so this would) on the face of it) appear to rectify this situation...

James said...

If it requires State subsiding it needs State euthanising....if the free market doesn't value it enough to fund it via free choice its a liability to us all.....let it die and its parts be reinvested in new productive market ventures...

Stephen said...

'Industry' is going to match the fund up to about another billion dollars. No idea if they would have spent that anyway, or this was a kick up the arse for them...