On March 13^th, 2002, five months after the re-election of the Howard Government, the Federal Minister for Science, Peter McGauran, with considerable fanfare announced the formation of a new parliamentary committee, the House of Representatives Standing Committee on Science and Innovation.

"A dedicated Science and Innovation Committee has been championed by the Federation of Australian and Scientific Technological Societies and I congratulate FASTS on its advocacy which has resulted in this important initiative.

    "The committee's work will expand the Parliament's knowledge and support for research and development.

    "Australians have always benefited from advances in science and innovation and I look forward to the committee helping the Government work in partnership with the science community to deliver excellent results in the future."

Four months later Mr. McGauran made his second and so far final reference to the Science and Innovation Committee. A media release dated July 16^th advised,

Federal Science Minister Peter McGauran today announced the terms of reference for a parliamentary committee's inquiry into the Australian business community’s commitment to research and development (R&D).

Mr McGauran said the House of Representatives Standing Committee on Science and Innovation, Chaired by Liberal MP Gary Nairn, would consider key issues including the drivers of R&D in small and medium-sized businesses.

The Standing Committee will conduct public hearings following receipt of submissions, which are due by the end of August, before reporting to Parliament by early next year [emphasis ours].

Gary Nairn, Chair of the Committee, hopes to table the report during the June sittings of Parliament.

In the eight months since the Minister issued his directive for the inquiry the Science and Innovation Committee has received eighty-two submissions, and from September 2002 - February 2003 held twelve days of public hearings.

In seeking submissions the committee stated its terms of reference as:

 

With particular consideration of:

• the R&D drivers in small and medium sized business;

• the needs of fast-growing companies; and

• the considerations by which major international corporations site R&D investment,

 

the committee seeks to address three questions.

• What would be the economic benefit for Australia from a greater private sector investment in R&D?;

• What are the impediments to business investment in R&D?; and

• What steps need to be taken to better demonstrate to business the benefits of higher private sector investment in R&D?

However, it may be difficult for the committee to submit a substantive report. Analysis of the submissions made to the committee and the the evidence given in the hearings shows a plethora of generalities which accentuate the lack of specific recommendations substantiated by delineated examples. So for example while Canada was alluded to by a number of individuals, the only clear-cut example of one Canadian governmental initiative was given by Professor Sue Serjeantson in her testimony on September 16^th, 2002 in her role as Executive Secretary of the Australian Academy of Science:

In Canada, the federal government provides incentives through the taxation system to individuals and to companies that are performing scientific research and experimental development -- they call it SR&ED. Where SR&ED is conducted in Canada, the expenditures are deductible as a regular business expense but they also generate substantial tax credits. The tax credits can range from about 20 per cent of the expenditure, in the most favourable circumstances, up to 50 per cent because some of the provinces kick in as well. Often these credits are refundable even if no taxes have been paid, so they offer a critical source of funding for many start-up companies. We started to move to that in our legislation last year. In Canada, the SR&ED term is defined a little bit more liberally under their income tax act. The term is defined to mean a systematic investigation or research carried out in a field of science or technology by means of experiment or analysis. We think that might be really attractive to SMEs because we are not insisting it should be high risk; the work does not have to be high risk. It does not even have to be particularly innovative; eligible work includes incremental improvements to existing technology.

There is one additional feature of the Canadian scheme that I want to point out to the committee because it would not be very expensive to implement and it could be quite useful. It is called the Preclaim Project review, and that operates under the scientific research and development program. What it means is that people who are in small business can get advice from government officers before they start their R&D. The Preclaim Project review was introduced as one means of reducing an important risk associated with undertaking R&D. The government officers discuss in advance which R&D projects will be eligible for SR&ED tax credits. It is important to point out that the Preclaim Project review service is not an advanced tax ruling. The service simply gives an indication of the eligibility of the work and this is one simple, cost-effective way in which government can help encourage business investment in R&D, especially in small businesses.

This is in sharp contrast to the reply of the Chief Scientist, Robin Batterham, to a question posed by Martyn Evans, MHR (Labor) on December 2^nd.

Mr MARTYN EVANS -- ...perhaps we need a little R&D about R&D. ...this type of inquiry now is an exercise which we conduct in the public arena and they are basically, we might say, economic, political, public inquiries. They are not scientifically based R&D research into the actual motivating factors. They are not research in the scientific sense of that word, which might examine the multiple variables at work here, try to isolate some of the factors that are at work and look at the science behind the science of R&D. Do we need some of that to pin down some of the policy variables? If we are experiencing some of these changes, are we changing some of the variables here without actually understanding the underpinning science at work? While we might change the tax rates and boost the start grants and so on, are we doing that just a little bit more in the dark than we ought to be?

 

Dr Batterham -- It is a splendid question. There is no definitive work or answer in that area, which means that yes, it just has to be worthwhile looking at it more carefully. If I could perhaps suggest two broad areas where more understanding is required rather than less, the first is that I have come to the conclusion, after some years of looking at this, that there is no such thing as the best or a perfect national innovation system.

 

Mr MARTYN EVANS -- Sure.

 

Dr Batterham -- It is actually for a theoretical reason. It is a little bit like the uncertainty principle; the more you observe something, the more you don’t know what it is because you change it by observing it.

These are extreme examples in that Professor Serjeantson cited what she considered a specific worthwhile governmental initiative to boost interest in R&D by SMEs while the Chief Scientist suggests that analysing the factors involved would be an exercise in futility. No member of the committee, perhaps not surprisingly, referred to Professor Serjeantson's example two-and-a-half months before.

On the other hand so far as we know there has been no attempt by members of the committee to seek input from such individuals as the energetic Canadian Minister for Industry, Alan Rock, or his counterparts in OECD nations whose business expenditure on research and development is substantially greater than ours. At the very least that would seem a worthwhile exercise; that is if Martyn Evans' suggestion of  "perhaps we need a little R&D about R&D," is not damned as being a "bit like the uncertainty principle; the more you observe something, the more you don't know what it is because you change it by observing it."

Alex Reisner
The Funneled Web