Govt has only recovered $20k of $5.2m in Callaghan Innovation grants to failed businesses

Monday, 17 April 2023

Callaghan Innovation works to encourage research and development activity.

More than $5 million in Government grants is still to be recovered after the businesses the money was given to failed.

In answers to written parliamentary questions from ACT, Research Science and Innovation Minister Ayesha Verrall, said $5.2 million had been given as Callaghan Innovation grants to businesses that did not succeed, since 2017.

Callaghan had the ability to claw back grants, but only $20,813 had been returned from one company which was given a repayable grant of $450,000.

Three companies could not afford to return the grants. A fourth went into liquidation in 2021 and two last year. This year, another two were in the liquidation process.

* State funding agency resumes support of ASX-listed tech incubator, Powerhouse

* Kirk Hope: The lessons for business from Team New Zealand America's Cup win

For exploited employees who've been underpaid, the Employment Relations Authority is their best hope of justice.

Crown entity Callaghan Innovation is tasked with making New Zealand business more innovative.

It has issued grants to more than 4700 recipients since 2017.

Callaghan Innovation chief executive Stefan Korn said the grants were paid out on a reimbursement basis, so the companies had already spent the funds on research and development (R&D) before they were reimbursed from Callaghan Innovation.

Callaghan Innovation's core purpose was to support and promote the development of early stage, high-risk and R&D-intensive businesses.

“By definition this means that quite a few of these companies will fail and others will go on to create the high-wage, low-emissions jobs Aotearoa New Zealand needs,” Korn said.

“This is not a failure of the programme, but the reason it exists, and the benefits of this use of funds far outweighs the risks.”

Recovering grant money from companies going into liquidation was dependent on the insolvency practitioners’ efforts to realise the assets of the company, he said.

“If enough money is recovered to make payments to unsecured creditors, Callaghan Innovation will receive its appropriate share.”

But ACT spokesperson James McDowall said it was a waste of taxpayer money.

“A successful economy is one in which resources flow to their most valuable uses. Taxing successful businesses and giving it to unsuccessful businesses only makes us poorer,” he said.

He said the schemes and grants represented attempts by ministers to “pick winners”, but instead undermined market incentives and glamourised projects over those which could “generate real economic growth”.