The Government ignored Treasury advice when it removed the research and development tax credit, the Labour Party said today.

Spokeswoman Moana Mackey said the Treasury expressed the same concerns her party had been raising since the election.

Instead of heeding the advice, funding initiatives for research and development were cut in the May budget and the tax credit was abolished, she said.

Ms Mackey said the Treasury's report, included in thousands of pages of pre-budget papers issued last week, concluded that the weight of evidence pointed to private sector research and development being critically important to productivity.

"They also highlight the link between innovation performance and the growth potential of the economy," she said.

"The Government has failed miserably on both fronts."

Ms Mackey said she questioned Research and Development Minister Wayne Mapp in Parliament last week.

"The minister was defending the move, even going so far as to claim that New Zealand was not at a competitive disadvantage being one of the few OECD countries with no tax incentives for research and development," she said.

"When asked whether or not he had done any analysis on the numbers of jobs lost because of research and development work shifting overseas the minister said he had not, and in fact he seemed to think that such an idea was a joke."