Budget takes cues from S&T Strategy with modest increases for science & technology

Previous fiscal commitments limit options

The federal Budget has announced new and continuing support for a wide range of R&D and S&T initiatives ranging from targeted university research funding and new graduate scholarships to genomics and nuclear research. But the modest amounts of new funding reflect the limited fiscal room in which the government finds itself after committing to major tax cuts in the 2007 fall economic update and reductions in the Goods and Services Tax from 7% to 5%.

Pledging to maintain a set of balanced books, Finance minister James Flaherty's Budget continues a cautious fleshing out of the government's S&T Strategy with $300 million over the next two years for what it terms investments in knowledge. These are augmented by the new George Vanier Canada Graduate Scholarships and a new suite of research chairs that will provide $10 million over seven years to 20 world class researchers when fully implemented.

Atomic Energy of Canada and Genome Canada (see page 3) were the big-ticket winners receiving $300 million and $140 million respectively. But other organizations were also provided with significant levels of new funding including the International Development Research Centre for a new Development Innovation Fund ($50 million) and the recently created Mental Health Commission of Canada ($110 million).

Others areas such as the indirect costs of research and R&D tax credits (see page 3) received nominal increases that were little more than cosmetic.

Research managers have been near unanimous in commending the government for the Budget's S&T initiatives. Many have echoed Flaherty's oft repeated refrain of prudence in the face of a slowing economy, smaller projected surpluses and continuing pay-down on the national debt.

"In the research areas of the Budget, the numbers are not as large overall but there are a number of new initiatives. Increases to the granting councils and indirect costs are clearly not as much as we would like," says Robert Best, VP national affairs branch of the Association of Universities and Colleges of Canada (AUCC). "The government was clearly dampening expectations for weeks before the Budget. The commitments of the past two years are starting to bite and reduce the government's room to maneuver."

"It's a tentative Budget reflecting the taking stock that is on going. While it's in the throes of reorganizing, we take them (government) at their word," says Dr Michael Julius, vice-chair of Research Canada (a health research advocacy organization) and VP research Sunnybrook Health Sciences Centre. "The Budget is incremental at best but it's welcome ... These are guarded investments until they figure out how to keep the ship afloat."

The government's cautious approach is reflected in all aspects of the Budget's research initiatives, particularly the granting councils which received a total of $80 million or about 4% added to their A-bases. The granting council funding also comes with well-defined strings attached, calling for targeted funding often in support of the government's industrial policies.

For the Natural Sciences and Engineering Research Council (NSERC), its $34-million increase must be allocated towards "the knowledge and innovation needs of Canada's automotive, manufacturing, forestry and fishing industries".

NSERC president Dr Suzanne Fortier acknowledges that the new funding is modest but stresses that granting council funding must be seen in the context of the other S&T initiatives addressed in the Budget. She says the government is leveraging off the thrusts of the S&T Strategy and taking a systems approach to funding R&D, adding that it's understandable that the funding is targeted given the difficulties being experienced in the industrial sectors for which the new money is intended.

"We are seeing various parts of the S&T system being called upon to address certain challenges and be part of the solution," says Fortier. "The targets come from above (government) but we also view these areas as important."

Social betterment objectives define the $34 million in targeted funding provided to the Canadian Institutes of Health Research (CIHR) — health needs in northern communities, health problems associated with environmental conditions and food and drug safety. For the Social Sciences and Humanities Research Council, $12 million in new funding is for research on "how the environment affects the lives of Canadians and of the social and economic development needs of northern communities".

Although CIHR's funding base has been increased for past eight consecutive Budgets, the latest increase does little to enhance its low success rate for meritorious research grants, which has been stuck at an average of 36% for the past three years. Interim president Dr Pierre Chartrand says the government appears to be supportive of S&T but it is only one of a number of priorities it must address.

"We can only support a certain fraction of excellent research and with the $34 million we will only be able to maintain that rate of support … We would need at least $50 million more to fully fund them or be at a level where we capture the most excellent applications," says Chartrand. "The rate of growth of the granting council budgets has not kept at the same pace of growth in direct cost support so there's an imbalance. We need to be better at harmonizing the programs."

Chartrand notes that in one of CIHR's new priority funding areas –— health problems associated with environmental conditions — it is developing a research plan in collaboration with the other granting councils. It will work in conjunction with Health Canada on the research component of the food and drug safety issue.

Many observers have noted that by taking cues from the S&T Strategy, the government is at long last beginning to take a systems approach to S&T. Research Canada argues that for S&T and health research in particular there is "an immediate need to equilibrate the current system" by developing a formula employing a functional innovation system model.

"The S&T Strategy is more descriptive — a framework to discuss how to achieve goals. The right elements are there but how are they related and how do they interface?" says Julius. "We need a framework that articulates a path and the functional innovation system model is a reflection of the need for balance between the push of research creation and market pull."

The program for the indirect costs of university research received a nominal $15-million increase, which will essentially maintain the current level of support at 26%. The program now has a budget of $330 million annually. The AUCC and others have been calling for indirect costs support to rise to 40%. NSERC's Fortier acknowledges that the additional funding is essentially an inflation increase but says comparing Canada's support to that provided in other countries can be misleading.

"How we compare with other countries is not terribly informative," she says. "There are many different contexts and we need to determine what is the appropriate rate in the Canadian context."

scholarships and chairs

For university research, the Budget is far more generous in the area of scholarships, with two new programs designed to address the need to attract top-flight talent and nurture both foreign and domestic graduates.

The George Vanier Canada Graduate Scholarships will provide $50,000 annually for three years to 500 Canadian and international doctoral students. The new scholarships will cost $25 million when fully implemented.

Perhaps even more important is the creation of a new suite of research chairs called the Canada Global Excellence Research Chairs. When fully implemented, the program will provide $10 million over seven years to 20 successful candidates at an annual cost of $28.6 million. The new chairs will be awarded to researchers in the S&T Strategy's four priority areas and are considered among the most generous in the world.

In addition, the Budget is providing a $20-million endowment in year-end funding to the Gairdner Foundation, which supports health research. The Foundation will rename its awards to the Canada Gairdner International Awards, increase their amount and also expand its outreach activities.

Canada Graduate Scholarship recipients who wish to study abroad will be able to apply for a new stipend. The Budget provides $3 million over two years for 250 students at a rate of $6,000 each.

Big science

The Budget was largely silent on the growing chorus of calls to increase operating funding for major science facilities. One exception was the Canadian Light Source (CLS) which received $10 million over two years "to strengthen operations". The shortfall in operating funds had become so acute that NSERC stepped in last fall to provide emergency funding.

CLS executive director Dr Bill Thomlinson says the additional money will give the synchrotron facility some financial stability until FY09-10 and sends an important message to CLS staff.

"My staff needed to see this. We passed their (government's) test so our people have reason to believe we're in it for the long haul," says Thomlinson. "It gives us a platform which we can work with government to continue to engage the long-term sustainability issues."

The Budget also provides additional funding for the beleaguered automotive sector with $250 million over five years for an Automotive Innovation Fund. The Fund will support large-scale R&D projects aimed at developing "greener and more fuel-efficient vehicles".

Details on the new fund are to be developed over the coming months. But Industry Canada will be establishing a dedicated project office to coordinate automotive research supported by the Fund with relevant research conducted by the National Research Council, NSERC, SSHRC and the Canada Foundation for Innovation.

carbon capture & storage

The Budget is providing $240 million for large-scale carbon capture and storage (CCS) technologies in the coal-fired electricity sector. The funds will go to Saskatchewan and will be placed in a third-party trust.

The announcement follows the January 31/08 release of the Canada-Alberta- ecoENERGY Carbon Capture and Task Force report that identified technological hurdles facing the acceleration of CCS technologies. To that end, the Budget provides $50 million to the Univ of Calgary's Institute for Sustainable Energy, Environment and the Economy. The ISEEE will work with stakeholders on these issues. Another $5 million was provided to match an investment by the Government of Nova Scotia to examine the potential for carbon storage in that province.

AECL

The Budget's biggest S&T item was $300 million for AECL, which is currently under review for possible sale, joint public-private ownership or status quo as a Crown Corporation. A portion of the funding is to be spent on completion of engineering work for the ACR-1000, which is slated for a 2016 in-service date. The next-generation power reactor is years behind schedule and over budget, with 75-90% of engineering completed to date. The year-end funding is also targeted towards upgrading AECL's Chalk River research facilities, which are in urgent need of attention and should flow by the fall once Treasury Board approval is granted.

The size of the AECL assistance package has led to speculation that the government may be fattening up the corporation for eventual privatization.

In contrast, this year's Budget provided just $10 million for scientific research and analysis of biofuels. The research will apply to biofuels emissions to support development of regulations and demonstration projects for verifying the safety and effectiveness of blended renewable diesel. The funding will presumably go to Natural Resources Canada although the Budget does not provide any details.

The Business Development Bank received $75 million to support its participation in a privately run venture capital fund. No details are available on what types of companies are eligibly for this funding and what leverage ratio the funding is expected to achieve.

R$