Education and Science Committee. 2016/17 Estimates Examination. Vote Business, Science and Innovation. Minister of Science and Innovation
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1 Education and Science Committee 2016/17 Estimates Examination Vote Business, Science and Innovation Minister of Science and Innovation Questions 1-18 June 2016
2 Callaghan Innovation Question 1 We note the deferral of capital expenditure for Callaghan Innovation. What is the Innovation Quarter Programme, and how does it affect Callaghan Innovation s capital expenditure plans? As part of the Callaghan Innovation s establishment, an appropriation was allocated to facilitate the remedying of underinvestment including the Gracefield Innovation Quarter. Callaghan Innovation is currently completing a Treasury Better Business Case to redevelop this site. This Business Case is expected to be completed in the financial year, with construction commencing within 18 months. Both the Ministry of Business, Innovation and Employment (MBIE) and Treasury are actively providing input into this business case. Question 2 What infrastructure investments are now being considered by Callaghan Innovation, in what time frame, and how are they intended to advance Callaghan Innovation s services and outcomes? The following infrastructure investments are planned for 2016/17: Information technology services $2.2 million Research and technical services (RTS) $3.1 million RTS commercial services $2.0 million Gracefield site redevelopment $12.4 million Property/site $4.4 million The Gracefield site redevelopment expenditure includes the phase one cost of transferring the Measurement Standards Laboratory from an obsolete building to new facilities on the Gracefield site. The cost of this first phase is estimated at $5.9 million. Ongoing capital expenditure is essential to maintain scientific plant and equipment and buildings and facilities. Commercial revenue expectation Question 3 We note that the expectation for commercial revenue by Callaghan Innovation has reduced from $6 million in 2015/16 to $3.3 million for 2016/17. Why has the expectation for commercial revenue by Callaghan Innovation almost halved between 2015/16 and 2016/17? The committee appears to be quoting performance standard measures from Callaghan Innovation s Statements of Performance Expectations. Callaghan Innovation commercial revenue is forecast to increase from $17.4 million in 2016 to $19.2 million in Callaghan Innovation commercial revenue is made up of domestic commercial revenue (2017 budget $8.3 million) and international commercial revenue (2017 budget $10.9 million). In 2015/16 we measured commercial revenue from domestic customers and the $6 million figure in the 2015/16 Statement of Performance Expectations refers to what we estimated total domestic commercial revenue would be for the 2016 financial year. To align with our focus on NZ businesses, this year we introduced a new measure which referred to NZ business customers. This new measure excludes commercial revenue generated from New Zealand based government institutions such as Crown Research 2
3 Institutes and Universities. The figure of $3.3 million in the 2016/17 Statement of Performance Expectations relates to the amount of commercial revenue we are aiming to receive from New Zealand business customers in the 2016/17 year. The two numbers measure revenue from different customer groups and therefore are not comparable. A breakdown of the year on year commercial revenue budget is shown below. Commercial Domestic International Total Commercial 2015/16 Budget ($ M) /17 Budget ($ M) Question 4 To what extent does Callaghan Innovation expect to rely on commercial revenue in its future funding model? Commercial revenue assists in funding output class 2 (Research and Development Services and Facilities for Business and Industry). Callaghan Innovation has an expectation going forward commercial revenue will continue to play an important part in funding Callaghan Innovation s research and development services. Strategic Investment Fund MCA Question 5 We note that the move of Crown Research Institute Core Funding to a multi-category appropriation Strategic Investment Fund Programmes, the purpose of which is to fund research organisations to undertake longer term programmes of mission-led research. What arrangements are in place to ensure that this annual appropriation will continue to address the needs of longer term research programmes after the current five-year contracts have expired? Crown Research Institute (CRI) core funding contracts have been renewed for one year to 30 June 2017 while the Strategic Science Investment Fund (SSIF) is being developed and implemented. From 1 July 2017, strategic funding for CRIs will be managed under the SSIF Programmes framework. SSIF Programmes contracts with CRIs will be seven years to provide even longer certainty of funding than the current five year contracts. The strategic priorities, that will be published in the upcoming SSIF investment plan, are yet to be developed. The priorities will be developed to ensure that critical, long term, underpinning research programmes are funded. This is likely to include programmes that are already underway. 3
4 Question 6 What range of providers, other the CRIs, will receive funding under the category, Strategic Investment Fund Programmes? Any provider or collaboration of providers best placed to deliver on the government s strategic priorities could potentially receive SSIF funding. The process for allocating funding is still being developed. CRIs are currently major recipients of SSIF Programmes funding, and I expect that to continue in future. Question 7 How was support for the research vessel Tangaroa, and the CRI nationally-significant collections and databases, previously provided? Crown support for Tangaroa was provided through funding from Vote Business, Science and Innovation: Science Collections and Infrastructure ($7.6 million p/a 2015/16), and was and will still be occasionally supported by agencies such as the Ministry for Primary Industries and LINZ for commercial purposes such as fisheries and hydrographic surveys. Until the end of 2015/16, CRI nationally significant collections and databases were supported by Vote Business, Science and Innovation: CRI Core Funding. Two other collections/databases that are not in CRIs were supported from Vote Business, Science and Innovation: Science Collections and Infrastructure. Question 8 What was the estimated actual expenditure for Genomics Research Infrastructure in 2015/16, and how is any under-spend of the 2015/16 appropriation being treated? No funding was paid under the terms of the current contract with New Zealand Genomics Limited in 2015/16. The actual expenditure from the appropriation for 2015/16 was $0.000 million. $0.641 million was transferred to Vote Business, Science and Innovation: Science Collections and Infrastructure in 2015/16 to support the Dunedin Multidisciplinary Health Study. Application for the transfer into 2016/17 of any remaining unspent monies will be made through the standard budget process to support future funding arrangements for strategically important genomics research and infrastructure services under the Strategic Science Investment Fund. AgResearch business plan Question 9 We note the recent shareholding ministers approval of AgResearch s updated Future Footprint Programme business case. Please provide detail of the provision that will need to be made in 2016/17 and out years for the implementation of AgResearch s updates Future Footprint Programme. AgResearch will receive no funding directly from Vote Business, Science, and Innovation for its implementation of the updated Future Footprint programme. AgResearch s investment will be funded from cash reserves, asset sales and debt. Regional investment Question 10 4
5 We note the announcement of the $40 million new initiative funding in Budget 2016 for regional research institutes. We understand that this is a contingency item, and that it increases the $25 million contingency item for this purpose in Budget Does the $40 million announced in Budget 2016 for the regional research institutes include the $25 million announced in Budget 2015 for the purpose, or is it additional? The $40 million announced in Budget 2016 for regional research institutes adds to the $25 million announced in Budget 2015 so that funding for the initiative now totals $65 million over four years beginning in 2016/17. Question 11 When will the contingency items for the regional research institutes be appropriated, and by what mechanism? It is anticipated that contingency items will be appropriated in October Appropriation of funding will be based on completion of a mandated Better Business Case process which will form the basis of a request for Cabinet approval. Question 12 We also note that the appropriation of $2 million a year for 2016/17 and out years is sought for the Regional Business Partners Programme, which is in the economic development portfolio, to be used by New Zealand Trade and Enterprise and Callaghan Innovation. What arrangements will be put in place for the administration and use of the Regional Business Partners Programme funding by the two agencies: New Zealand Trade and Enterprise and Callaghan Innovation? The Regional Business Partner (RBP) Network is jointly funded by New Zealand Trade and Enterprise and Callaghan Innovation. The funding is contracted to 14 Regional Agencies who employ 45 FTEs as business advisors to work with business owners seeking to innovate and grow their business. Business advisors use their local knowledge and links to the business community to work with each business, identifying their development needs and increasing their ability to carry out key activities. The role of the RBP Network includes delivering NZTE s Capability Development Vouchers Scheme and Business Mentors New Zealand s Mentor Matching services and helping customers understand and access Callaghan Innovation s suite services. The additional funding from Budget 2016 will allow the RBPs to support more businesses to grow, benefiting communities in regional New Zealand. To increase the impact of the RBP network, this funding will be invested in: i. increasing the number of businesses that benefit from training (through more capability vouchers) ii. increasing the scale of the network (through additional business advisors) iii. improving the customer experience by upgrading RBP systems. Question 13 What will be used to measure increased engagement with more export-oriented businesses in the regions, and impact on level of exports? The Regional Business Partner (RBP) programme does not focus explicitly on exporters and therefore does not measure this. The RBP targets those firms with growth potential. Firms can use the capability vouchers for a range of business capability needs including export readiness. There are a range of measures including the number of businesses the RBPs engage with, the number of vouchers and R&D grants issued and the satisfaction of firms 5
6 with the service provided by the RBP. As part of the measurement of engaged firms, the RBPs do keep track of both the number of firms who are exporting and state they have ambitions to export in the future. Research funds Question 14 We note that $ million is sought for the establishment of the Contestable Research Fund, and that the sum of the appropriations in 2015/16 that made up the Contestable Research Fund appropriation was $ million. Please provide a reconciliation of the establishment appropriation with the sum of constituent appropriations. Please refer to Table 1.4 on page 32 of the 2016/17 Estimates of Appropriations for Vote Business Science and Innovation. The figure $172.33m is what was budgeted for the contestable research fund (now the Endeavour Fund) in 16/17 before any new money was taken into account. The injection of additional funding raises the total of the fund in 16/17 to $183.23m. This climbs to $200.40m in 2019/20. As indicated in previous Budgets, the total amount available to the Endeavour Fund was planned to decrease due to some money being transferred to National Science Challenges each year for several years. As that money is transferred to National Science Challenges, it continues to be part of the overall science appropriation, and does not contribute to any overall decrease in science spending. Budget 2016 increases investment in the Endeavour Fund by $113.8M over four years, and that results in an increasing trajectory for the fund. The committee can find a table that sets out the previous baseline for Endeavour and the effect of the Budget 16 funding in the MBIE Budget factsheet for Endeavour ( funding/pdf-library/endeavour-fund.pdf). Question 15 We note that $10.9 million of new initiative funding is sought for 2016/17 for the MBIE Contestable Science Fund (within the Contestable Research Fund). What research does the MBIE Contestable Science Fund support that differs from the rest of the Contestable Research Fund, of which it is part? There is no difference. They are the same fund. Question 16 We note that the development of the framework which will be used to assess performance of the three new research funds is still in progress. How will the quality of the research undertaken within the three new research categories be measured? The performance of funds will be measured through a combination of bibliometric measures and complementary, qualitative, information. As noted, the development of the framework is in progress. MBIE will supply the requested update as soon as it is complete. 6
7 Question 17 Please provide an update of the framework when it is complete. A copy of the framework will be provided to the Committee when it is complete. Co-funded research and development Question 18 We note that two of the three science and innovation multi-year appropriations (the two that are co-funded with private businesses) will expire on 30 June Will the initiatives currently being co-funded to encourage investment in research and development by private businesses be funded after 30 June 2017, and if so, how will this be achieved? There are two multi-year appropriations for Callaghan Innovation s business R&D grants which expire on 30 June Budget 2016 provides for Government co-funding to continue in 2017/18 and future years through two annual appropriations of $145.6m per year for R&D Growth Grants and $37.5m per year for Targeted Business Research and Development Funding (which co-funds R&D Project and R&D Student Grants). [1] [1] See pages of the Supplementary Estimates for Vote Business, Science and Innovation. 7
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