John Key’s recent announcement that the hard won R&D tax credit will be wiped out under a National government demonstrates a deep lack of understanding by the party regarding the role of the State in stimulating innovation and encouraging improvements in terms of global competitiveness.

Oddly, only two weeks previous they were proposing only a reduction in the tax credit from 15% to 10%. Now they want to drop it altogether, as well as kill Labour’s Fast Forward programme. The supposed savings would then be applied to pastoral greehouse gas research and primary sector and food research. Those are precisely the areas Fast Forward was targetting already, which means their policy results in a rather poorly disguised net loss of funding available to research, science and technology.

And if you think that government funded innovation sounds oxy-moronic, I agree. The agencies that fund and support innovation and economic development are (ironically) amongst the most bureaucratic and tunnel-visioned in New Zealand – and to their credit National have clearly expressed a desire to work on improving that situation. After all, there is a core of good people working within those organisations and a bunch of passionate scientists who really do want to make a difference, but whom are sometimes stymied by silly rules, mountains of paperwork and funding inconsistencies.

And there certainly remains a role for State intervention in economic development because markets do not always resolve economic short-comings in an equitable fashion. In fact, other small, agrarian nations have surged ahead in OECD rankings and in global competitiveness partly through the wise use of state directed programmes, including tax incentives. The Nats would be well advised to get over their pathological revulsion towards government sector and instead open their minds to some fresh ideas.

Of additional concern is the fact that the National Party’s economic development spokesperson Dr Richard Worth has been notably silent on exactly what strategies the blue team have in mind to forge New Zealand into “an innovative, export-led and high wage economy”. In fact Dr Worth’s last press release about anything at all was almost a year ago. This illustrates how much of a cult of personality that National has now become. That’s a problem because of Key’s background. He made his fortune trading in financial futures and equities, not through being entrepreneurial and actually building something worthwhile. In fact Key and his ilk are precisely the reason why the global economy is in serious poo right now.

Next week: Did Labour Govt. Squander Economic Transformation Opportunity?