The Politics of Angel Investment: Pete Hodgson on Labour policies

This week we continue our series on political party policies on investment and innovation.

Pete Hodgson has been described by Helen Clark as the “Minister of Innovation”, as he’s responsible for Economic Development, Research Science and Technology, and Tertiary Education.

With respect to innovation and investment, Hodgson has been described as one of the very few people on the Parliamentary campus who “gets it”. Since coming to power nine years ago, Labour have developed a significant number of schemes around innovation. I’ve heard complaints that segments of the innovation framework are just another Wellington-based bureaucracy, with the cost of application and compliance often outweighing the benefits of accessing the available funding. That said, much funding under the various schemes is clearly getting to its intended destination, and the current government clearly understands that the future of New Zealand’s economy totally depends on innovation and entrepreneurs to drive the economy into new markets.

Is state intervention too heavy-handed and/or inefficient? Hodgson believes that taxpayer funding spent in these areas is a good investment for the general public.

While there is more policy yet to be announced, Hodgson would like to stand on Labour’s record, saying that none of the current innovation framework was even being thought about under the previous government.

Hodgson expresses the the following key points in the podcast:

• Science is good, commercialisation is not up to scratch. We have a lot to be proud of in our inventiveness in our society.
• There is a very low rate of private sector investment in R&D, but the government has initiated a number of schemes to address this. The 15% R&D tax credit which was introduced earlier this year should have a big impact – IRD predicts that by 2012 they will be foregoing $330m per annum, which means that the amount of R&D undertaken by the private sector will have doubled in four years.
• NZ VIF is based on a model where the government shares the downside but private sector takes all the upside.
• Over the last few years, angel investment has started to become formalised with VIF and SCIF; these enable angels to spread their risk.
• Labour’s broadband plans have been announced, and are part of the record. “We’re not concerned with any philosophical ‘crowding out’ argument, we’re just trying to get as much glass into the ground in the right places as quickly as we can without overallocating from an investment efficiency perspective.”
• “We have no secret plans to tax capital gains.” Internationally, it’s unusual not to have a capital gains tax, and that’s a good thing.
• Tax cuts as a way of promoting economic development is not something that is sustained by the empirical evidence around the world. It’s the quality of the spend that matters. No further tax cuts are in the works, and the current differential between the personal and company tax rates will stay.

Listen to (or download) the podcast: