Business, academia and non-profits secure new research and innovation stimulus as Liberal government positions itself for Fall election

The Liberal government of Justin Trudeau — to no great surprise, considering its political troubles — has delivered a classic pre-election Budget, with targeted spending that extends to the research, development and innovation (RDI) file.

The Budget, Investing in the Middle Class, was presented March 19 by Finance minister Bill Morneau. It contains more than $1.7 billion in new funding for academic, not-for-profit and business assistance. Add in $824 million for assistance for First Nations, Inuit and Metis Nation post-secondary students, and the total soars to nearly $2.6 billion (see chart) – a respectable amount, but far short of the historic $6.4 billion that the 2018 Budget delivered in RDI support.[rs_related_article slug="fundamental-science-research-facilities-and-innovation-share-in-historic-6-4-billion-boost-in-funding]

Several of the initiatives, including the two largest investments — TRIUMF and forestry innovation — won’t be funded until next year after the fall election. In addition, a potentially large investment in a new Strategic Science Fund won’t get underway until 2022, to “respond to recommendations that arise during consultations with third-party science and research organizations.” Funding and other details will be provided in the coming months by Science minister Kirsty Duncan.

Strategic Science Fund

Described as a new approach for funding third party organizations such as Genome Canada or the Stem Cell Network, the Strategic Science Fund will use a principle-based framework “applied by an independent panel of experts, including scientists and innovators” to allocate funding through a competitive process, a marked change from the status quo. The move was welcomed by science advocacy organization Evidence for Democracy, which said it “should increase the transparency and accountability for how these research funding decisions are made.”

Forestry

Given the emphasis in last year’s Budget on academic and government research, this year has a strong emphasis on business and specialized skills, with nearly $1 billion in new funding. The forestry sector secured the Budget’s second largest RDI investment (after TRIUMF’s renewal funding), providing Natural Resources Canada with $251.3 million over three years starting in FY20-21. The money will be shared among four existing programs aimed at incentivizing innovation and market diversification: Forest Innovation Program for pre-commercial R&D ($91.8 million); Investments in Forest Industry Transformation program for industrial commercialization and technology adoption ($82.9 million); Expanding Market Opportunities Program ($64 million); and Indigenous Forestry Initiative ($12.6 million).

Space

The Budget provides more detail on previously announced new space funding related to the NASA-led Lunar Gateway project. The first funded program is the Lunar Exploration Accelerator Program, which will receive $150 million over five years to assist “small and medium-sized enterprises develop new technologies to be used and tested in lunar orbit and on the Moon’s surface.” Technology fields eligible for funding include artificial intelligence, robotics and health. On February 28, the government announced a $2.05 billion injection into Canada’s space program over 24 years.

Western Canada

Western Canada is the recipient of two new funding initiatives. The Budget provides $100 million over four years for the Clean Resource Innovation Network, a consortium of companies, not-for-profits and academic institutions working to reduce the environmental impacts of oil and gas extraction. Funding will flow through the Strategic Innovation Fund of the Department of Innovation, Science and Economic Development to leverage private sector co-investments.

The Budget also boosts the funding of Western Economic Diversification Canada by $100 million over three years on a cash basis to “increase its programming." The extra funding will provide the regional development agency with enhanced visibility and more photo ops in a region where the Liberals are struggling to increase their support.

Bringing innovation to regulation

More generically, the government is spending big on regulation, allocating $219.1 million for the implementation of an initial set of three Regulatory Roadmaps for agri-food and aquaculture, health and bio-sciences, and transportation and infrastructure. The funding will flow through the Canadian Food Inspection Agency, Health Canada and Transport Canada over five years. An additional $67.8 million over five years goes to Justice Canada to “strengthen the Government’s capacity to draft the legislative and regulatory changes needed to facilitate a new approach to regulations in these sectors and others."

“These Roadmaps … contain proposals for legislative and regulatory amendments as well as novel regulatory approaches to accommodate emerging technologies, including the use of regulatory sandboxes and pilot projects— better aligning our regulatory frameworks with industry realities,” states the Budget Plan.

Key SR&ED change

On the small- and medium-sized business front, the government is making a key change to the Scientific Research and Experimental Development (SR&ED) Tax Incentive Program’s treatment of Canadian controlled private corporations (CCPCs). CCPCs currently receive an enhanced (35%) fully refundable tax credit for “up to $3 million of qualifying SR&ED expenditures annually.” For businesses scaling up, however, company, the limit has long been cited as a disincentive for firms seeking to grow and go global. In response, the Budget pledges to “repeal the use of taxable income as a factor in determining a CCPC’s annual expenditure limit for the purpose of the enhanced SR&ED tax credit”.

“As a result, small CCPCs with taxable capital of up to $10 million will benefit from unreduced access to the enhanced refundable SR&ED credit regardless of their taxable income,” states the Budget Plan. “As a CCPC’s taxable capital begins to exceed $10 million, this access will gradually be reduced.”

Young Entrepreneurs

The Budget allocates $38 million over five years through Futurpreneur Canada to expand its mentorship and startup financing initiatives. The funding will be used to match funding that young entrepreneurs receive from other government and private sector partners. Budget documents note that Futurpreneur Canada has helped launch nearly 9,600 new businesses over the past two decades. In 2018, 40% of the companies it assisted were owned by women, double the national average. Of the $38 million in funding, $3 million is reserved for Indigenous entrepreneurs through outreach, access to business tools and training for up to 175 additional businesses.

Academic letdown?

The Budget contains a handful of funding initiatives targeting academic institutions, but many of the measures proposed during the pre-Budget consultations were not acted upon. Unsuccessful proposals include:

• Raising the portion of project funding provided by the Canada Foundation for Innovation from 40% to 60%. This recommendation originated from the Fundamental Science Review and was supported by groups as diverse as the Canadian Association of Physicists, Evidence for Democracy and CMC Microsystems.
• CMC Microsystems’ appears to have failed in its attempts to find an alternative funding source after losing support from the Natural Sciences and Engineering Research Council.
• A Productivity Tax Credit advocated by the Northern Alberta Institute of Technology
• Boosting the Strategic Innovation Fund to $2 billion annually with the additional funding used to support manufacturing innovation. This was recommended by Canada Manufacturers and Exporters (CME).
• CME’s call to match corporate tax cuts introduced last year by the US Trump administration.

Not all pre-Budget proposals were ignored. MDA (a subsidiary of San Francisco-based SSL MDA Holdings) asked for $1.2 billion to be devoted to the next generation of the Canadarm, a recommendation that is addressed by the government’s $2-billion investment in the Lunar Gateway project and the Lunar Exploration Accelerator Program.

CME was more successful in its advocacy for a Regulatory Bill of Rights accompanied by predictable and focused regulations with funding to support the implementation of an initial set of three Regulatory Roadmaps.

There were some notable successes on the academic front, most notably renewed funding for TRIUMF, which received $292.7 million over five years, including $96.8 from the National Research Council, "to build on its strong track record of achievements.” The funding represents the largest single investment commitment in TRIUMF’s history. Its last five-year commitment in 2014 was $222 million. Most of the funding will be spent in academia.

Genome Canada was also successful in attracting new funding — $100.5 million over five years — to support operations and ”launch new large-scale research competitions and projects, in collaboration with external partners."

The granting councils followed up last year’s successes with additional funding for graduate research scholarships. The three councils will share $114 million over five years, with $26.5 million per year ongoing, ”to create 500 more master’s level scholarship awards annually and 167 more three-year doctoral scholarship awards annually through the Canada Graduate Scholarship program”. Universities Canada says the scholarships funding “builds on the Fundamental Science Review’s call for better support for Canada’s next generation of researchers and innovators”.

Other academic-based investments include:

• $150 million over five years for the Terry Fox Research Institute;
• $45.1 million for military-related research into chronic pain and overall health
• $40 million for the Brain Canada Foundation
• $18 million to the Stem Cell Network (traditionally funded through the now defunct classic Network of Centres of Excellence program)
• $10 million for Ovarian Cancer Canada and,
• $10 million for Let’s Talk Science.

Skills Training

The Budget contained a host of measures designed to assist those seeking skills training or extending their time in the workforce. A highlight is the Canada Training Benefit worth $815 million over the next five years. The credit is a “refundable tax credit aimed at providing financial support to help cover up to half of eligible tuition and fees associated with training. Eligible individuals will accumulate $250 each year in a notional account which can be accessed for this purpose,” states the Budget Plan.

The Budget also commits $1.7 billion to make student loans more affordable and introduces a Paid Parental Leave benefit providing s $37.4 million over five years “to the federal granting councils, to expand parental leave coverage from six months to 12 months for students and postdoctoral fellows who receive granting council funding.”

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