The Government is launching a new $250 million R&D grant scheme, which arguably looks a lot like one it earlier axed - only to see low uptake of the R&D tax break that replaced it.
However, Research, Science and Innovation Minister Megan Woods refuted that suggestion, saying the new scheme was much superior.
The new funds will be spread across two schemes that will operate over the next four years. One is called the "New to R&D Grant", that is anticipated to support around 400 firms, the other is the "Ārohia - Innovation Trailblazer Grant", which will support around 100 firms.
The new scheme looks a lot like the old Callaghan Growth Grant programme, which was axed by Labour in 2018 in favour of a universal tax break for R&D.
And the "back to the future" feel is underlined by the fact that Crown agency Callaghan will administer Trailblazer grants after applications open in September.
Entrepreneur Sam Morgan welcomed the demise of the Growth Grant programme, which saw companies receive up to $5m a year in non-refundable grants if they ramped up their own R&D budget too. Morgan called it an attempt by the Government to pick winners - a skill he considered it did not have, in a market where private equity would naturally flow to companies that did have promising R&D.
Now it seems growth grants and the R&D tax break will co-exist.
This morning, there was an indication that the R&D tax break scheme had fallen short of its targets.
Woods said today that the Trailblazer scheme would "turbocharge innovation" and "provide an on-ramp to our existing R&D Tax Incentive."
She added , "The R&D Tax Incentive now has over 1500 businesses enrolled, with over $118 million of RDTI credits approved."
Budget 2018 saw the government allocate $1 billion to cover the first four years' cost of a 12.5 per cent tax break, on the basis that around 2000 firms would take up the incentive.
"I want to provide extra encouragement to businesses that are performing innovation that is new to the world. Now with a combination of the R&D Tax Incentive, and the new grants programmes, we will have a system of support that is much more representative of the full gamut of business activity we want to stimulate," Woods said this morning.
"As we continue our economic recovery from the challenges presented by Covid-19, we need to continue to foster and invest in innovation which we know creates huge value for society and is vital for addressing our social and global challenges such as tackling high emissions. Returns on fundamental research and development can take decades to materialise so it is right we take a long-term view."
Local R&D might not happen - or happen to the optimal extent - without the Government's assistance, Woods said.
"I absolutely refute that this is a reinstatement of the Callaghan Growth Grant," Woods told the Herald.
"There are more than twice the number of businesses being supported on the RDTI [R&D Tax Incentive] scheme as on the old Growth Grant and the uptake continues to increase.
"When I introduced the RDTI the intention was always to give extra support to complement business R&D support. These new grants will now ensure that businesses have an easy approach, if they are just getting started in R&D, and will then have more support to develop their innovation further. With the old Callaghan Growth Grant, businesses that were rapidly scaling up suddenly found they were no longer eligible for support. The combination of the RDTI and the new grants means that businesses will now be supported throughout their innovation journey."
National opposed the abolition of the Callaghan Growth Grant in favour of the R&D tax break, despite political pain caused by a number of offshore sales of tech companies that have received the subsidy - which was tweaked in its later days to include a provision that R&D spend must remain in NZ in the event of a sale to an offshore buyer.
The R&D tax break announced by the Labour-led Government in 2018 was the second time the party had introduced the policy. Helen Clark's Government introduced an R&D tax break, but it survived only months before being abolished as John Key came to power in 2008.
Startup Council members named
Woods, with Economic and Regional Development Minister Stuart Nash, also named the members of a new Startup Council, which she said will: "Help identify and address the opportunities and challenges facing high growth start-up businesses."
Nash said the Small Business Council, formed in 2019, had influenced Government policy, including the $100m small business growth fund announced with Budget 2022.
"I anticipate the Startup Council will drive similar positive action."
The Startup Council members are:
• Phil McCaw (chair), managing partner at NZ's largest venture capital firm, Movac • Suse Reynolds, chair of the Angel Association New Zealand
• Marian Johnson, chief executive of Christchurch-based business incubator the Ministry of Awesome
• Grant Straker, (Ngāti Raukawa), cofounder of Straker Translations and a prominent advocate for Māori in technology
• Mike Carden, founder of a number of start-ups including Sonar6 and Joyous
• Imche Fourie is co-founder and chief executive of Auckland-based Outset Ventures which works with deep-tech startups
• Carl Jones, MD of VC firm WNT Ventures