Griffin on Tech: Deck chairs, Titanic, and Budget 2024

We knew the cupboard would be bare when Nicola Willis unveiled her maiden budget yesterday.

It certainly was, with just a handful of sizeable budget increases in areas like health, education, and corrections, most of which amount to patching up under-resourced and stressed frontline services.

But boy, when it comes to budget appropriations related to technology and innovation, the supposed growth engine of the economy, government investment has gone backwards to the tune of hundreds of millions of dollars.

Discontinued digital initiatives have delivered desperately needed savings. Tech-related spending at government agencies has disappeared in the “back office” push to cut costs by $1.5 billion.

The lack of investment in anything forward-looking that has the ability to boost capability in the digital economy is deflating and in stark contrast to what we saw delivered the Australian Federal Budget earlier this month.

I have to agree with New Zealand Association of Scientists co-president Troy Baisden: "Today’s budget doubles down on a pattern spanning four decades, in which New Zealand’s governments have been world leaders in choosing not to invest in the future.

“Aside from 1991, I doubt there’s ever been such a clear case that we’re determined to fall behind peer nations with our investment in research, science, innovation and technology. The same goes for the tertiary education sector,” he wrote yesterday.

Or as futurist and Memia founder Ben Reid succinctly put it on Twitter:

Big initiatives that help tech companies innovate have taken a haircut in the cost-cutting drive too. It’s a bit depressing, but worth looking through where the dollars have disappeared.

R&D in-year loan scheme - gonzo

The biggest single hit taken is in the Science, Innovation and Technology portfolio overseen by Judith Collins. First up is the Research and Development Tax Incentive scheme, which offers businesses doing eligible R&D a 15% tax rebate on their spending.

There was a temporary “in-year payments loan scheme” to allow businesses to receive a temporary interest-free loan while they waited for their tax credit to be issued. The Herald reports that netted a saving of $8.9 million over four years.

“Due to administrative complexities the temporary scheme is providing low value for money,” the Government noted in the Budget appropriations. So it is being cut. IRD is apparently replacing it with something else. The money available via the R&D Tax Incentive itself remains, at around $772.1 million per year.

Science and innovation funding - slashed

Savings reductions have seen the major research funds all take a hit. Endeavour ($9.75 million from 2027/28), Marsden ($3.09 million from 2027/28), Health Research ($4.91 million from 2027/28) and Strategic Science Investment funds ($17.75 million from 2027/28).

As previously flagged, Science City is gone, saving the Government $462.8 million over four years.

Approximately $756 million total operating funding will remain across these funds from 2027/28. In real terms that a leap backwards. Those funds have invested in computer science projects, AI, health tech research and numerous other tech-related areas. It will now be even harder to get contestable funding for basic research.

With the National Science Challenges officially coming to an end on June 30, the Government was greeted with an irresistible opportunity to return $173.4 million in relating funding. Scientists’ hopes that the funding would be reallocated elsewhere in high-priority science-related areas were dashed.

Dismantling Te Pūkenga

More dollars have also been clawed back with the dismantling of Te Pūkenga, with a Crown loan of $220 million approved in Budget 2023 by the previous Government no longer needed for the tertiary provider’s digital transformation, so the appropriation is being returned. That’s one of the biggest government IT projects officially buried.

Ditching all of the ITPs

We knew the industry transformation plans were going and Budget 2024 banks those savings of “uncommitted funding” for the Tourism, Agritech and Digital Technologies Industry Transformation Plan programmes to the tune of $127 million over five years. As for all those initiatives already underway, such as the KiwiSaaS initiative, there doesn’t appear to be any reallocation to allow them to carry on.

Reallocations and reprioritisations galore

There are savings banked all over the place from IT projects the Government doesn’t want to proceed with in their current form. For instance, Te Whatu Ora had a contingency on the Government’s books of $186.8 million in operating expenditure and $50 million in capex for Data and Digital Foundations and Innovation.

“This contingency funding is returned pending work to prepare investment-ready business cases for future investment,” the Government notes.

The same goes for “Data and Digital Infrastructure and Capability – Enabling Health System Transformation” at Te Whatu Ora, where a $144 million contingency has been returned.

The Laptops for Teachers programme squeezed out $2 million in savings. It will continue to have $18 million per year of funding. The “Digitising Government Alternative Funding Options and Efficiency Savings” programme returned $8.5 million.

A further $5.7 million had been held in contingency “to expand the mandate of the Government Chief Information Security Officer (GCISO)”. That’s no longer going to happen.

School cybersecurity boost

I wrote in my Budget preview that if anything tech-related was to get a boost in the Budget, it would be cybersecurity. That happened to be the case, but it wasn’t where I expected, which was in core cyber capability for protecting critical infrastructure and boosting the cyber workforce within GCSB. GCSB does get a $500,000 “contingency” fund.

Instead we have funding “to maintain existing information and communication technology (ICT) infrastructure and services”. The initiative provides funding for email protection to block malicious emails to schools, domain name services to provide websites to schools, Microsoft and Google licensing, a Security Operations Centre to monitor and address security threats and Netsafe cyber safety training. That amounts to $93.6 million in opex and $69.3 in capex over four years, of which $22 million is new money.

The Network for Learning will provide these services on behalf of the Ministry of Education.

Elsewhere, there are a few budget allocations for IT projects at Oranga Tamariki, NZQA, Parliamentary Service etc, but it’s all really rats and mice allocations.

Is that it??

Yes, indeed, that is it. Seemingly no funding for digital skills training, digital equity, or rural broadband.

So businesses, NGOs, educational providers, start-ups, and students will have to do more with less, be resourceful, and innovative, and forge on with their plans and goals, in many cases without the support of the government. There is some truth to the idea that lean times make for more resilient and viable new ideas and businesses. That’s about the best spin I can put on it.

The cuts in areas like science and innovation also suggest that the Government didn’t have confidence that what was already on the cards for spending, wasn’t going to deliver the desired outcomes. That will require ministers and ministerial officials to go back to the drawing board and come up with something that will actually work.

At worst, we’ve gutted our science sector, lost any momentum to take a more cohesive approach in the tech space, and killed digital infrastructure projects that will damage efforts to digitise government. Think about that when you are sipping on the extra three or four trim flat whites per week your tax cuts will buy you.