Coherent strategy emerging for linking S&T investments to jobs & growth agenda

Budget 2013

This year's austerity-driven federal Budget maintains the status quo for support of research and innovation but beneath the standard verbiage there appears to be a new coherent strategy emerging to support the government's emphasis on commercial outcomes from its investments. The Budget's S&T funding is largely reallocated or follow-on investments in existing organizations — the exceptions being a suite of investments in college R&D and skills training (see page 3) and new money for Sustainable Development Technology Canada (SDTC) and Genome Canada.

The Budget's continuing and repurposed funding is coupled with several bold strokes to incent commercialization by matching industry needs with skills and targeted research capacity. Manufacturing was given particular attention, with a new Advanced Manufacturing Fund (AMF) for Ontario and an Aerospace Technology Demonstration program, as well as a two-year extension of the accelerated capital cost allowance for machinery and equipment, and a host of skills, training and internship measures designed to boost R&D and technical expertise in industry.

Taking a decided back seat to the Budget's industry-facing, outcomes-driven agenda is basic research. Curiosity-driven research came up empty-handed, with modest increased funding for the granting councils (to offset a second-year of deficit reduction-mandated cuts) that once again is directed towards targeted areas of investment.

The Budget's support for the Canada Foundation for Innovation (CFI) is but one example of the resourceful yet low-cost approach the Harper government is taking towards support for innovation. The $225 million CFI received is actually its own money — the remaining portion of $1.6 billion in interest the organization accrued between its launch in 1997 and 2006 when the then-Liberal government funded CFI through large infusions of year-end cash from an unprecedented series of Budget surpluses.

Prior to the Budget, the CFI proposed several areas in which the interest could be spent: boost the funding available under the next Leading Edge/New Initiatives Fund competition; funding for high-performance computing; operations for the next 10 years; support for projects undertaken in collaboration with the granting councils; and, dealing with future pressures such as the one created by NSERC's moratorium on its Major Resources Support (MRS) program (August 31/12).

"For the (academic) institutions, it's really new money. We've added it to the investment programs we currently have although we don't have a clear idea on the details at this point," says CFI president and CEO Dr Gilles Patry. "From the universities' perspective, it augments the money we provide to institutions and gives a signal to the provinces, as they co-invest. Our premise is we need state-of-the-art research equipment, so starting in 2016 my objective is to say — and the government can say — we have annual, predictable and sustainable funding for research infrastructure."

NRC

The National Research Council (NRC) also received a major endorsement of its ongoing transition to a research technology organization with $121 million over two years. Following $67 million in support in last year's Budget, the funding is most likely a re-allocation of NRC's former Technology Cluster Initiative program which sunsetted at the end of FY11-12. The NRC appears to have successfully addressed Cabinet concerns over the strategic plan for executing its transition and the Budget tied the funding to recommendations contained in the Expert Panel Report on Federal Support to Research and Development (known as the Jenkins Report, October 17 & 21/11). There was no information on how the latest funding will be spent but the government has committed to releasing details "in the coming year". At that time, the NRC may also announce its new name. Rumours swirled before the Budget's release that it would announce a re-branding, which was speculated to be "Advantage Canada" or "Canada Innovates". In the meantime, the NRC's traditional logo has disappeared from its re-vamped web site.

genome canada

The 2013 Budget brought good news to Genome Canada. It receives $165 million to implement its strategic plan with five years of stable, multi-year funding, leveraging an additional $280 million from its various partners. The funding is half of what the agency had requested in last year's Budget when it received $60 million in stop-gap funding, and again when it appeared before the House of Commons Standing Committee on Industry, Science and Technology last fall (R$, November 21//12).

Genome Canada president and CEO Dr Pierre Meulien says it's "totally in line with what we want do to at the moment" and doesn't preclude making further funding requests as its new plan is implemented. The funding will allow Genome Canada to hold a large-scale competition, launch its Genomic Applications Partnership Program, support the regional genome centres and S&T innovation centres and pay for ongoing operations.

"We're absolutely delighted … we have been able to really plan to maximize the value of the $165 million until 2017," says Meulien. "It means we can commit to new initiatives and as soon as we allocate the money we can go back for more to complete the plan."

The other organization that benefitted from new money is Sustainable Technology Development Canada (SDTC), which receives $325 million over eight years. Like Genome Canada, SDTC failed to secure new funding in last year's Budget (R$, April 17/12) but its success in 2013 means it can move forward and launch a new competition of its depleted SD Tech Fund (see page 6).

The initiatives which were successful in the Budget are largely direct support programs — a key recommendation of the Jenkins panel which concluded that Canada's support for innovation relies too heavily on indirect support measures such as the tax system. Last year's Budget took action to reduce the cost of the massive scientific research and experimental development (SR&ED) tax credit program, freeing up funds that could be used for direct support initiatives.

The elimination of capital costs eligibility related to industrial R&D and a decrease in the level of support for larger firms from 20% to 15% is intended to free up between $500 million and $750 million annually for direct support measures once it takes effect in 2014. Many groups have opposed the changes, including the Information Technology Association of Canada (ITAC), which noted that the Budget contained "no reversal on the changes introduced in 2012".

"Our industry is deeply concerned with the health of the innovation ecosystem, including measures to incent research and development," an ITAC press release stated. "We will continue to press for measures that lead to the best outcomes in terms of R&D investment and high value job creation."

feddev ontario

The government is clearly intent on following through on several recommendations of the Jenkins Panel, introducing a host of direct support initiatives:

The largest renewal is a $920-million, five-year commitment to the Federal Economic Development Agency for Southern Ontario (FedDev Ontario), which has become a key industry assistance tool since its launch in 2009. The renewed funding kicks in FY14-15 and includes $200 million for the new Advanced Manufacturing Fund to support prototyping, demonstration projects and product testing by southern Ontario-based manufacturing firms.

The Budget also commits nearly $1 billion over five years to the Strategic Aerospace and Defence Initiative (SADI). The renewal comes with the proviso that up to $20 million will be directed to support a new Aerospace Technology Demonstration Fund, which will receive $110 million over four years beginning in FY14-15 and $55 annually thereafter.

The fund responds to a recommendation in last year's Aerospace Review headed by David Emerson, as well as the government's decision to review SADI's "administration and operation over the coming year to ensure that it continues to respond to the needs of this dynamic sector" (R$, December 6/12).

Up to $225 million has been available annually since SADI's launch in 2007, but it has been under-utilized with many citing a slow, cumbersome application and approval process. To date, 25 projects worth $826 million have been approved of which $411 million has been disbursed.

Irap vouchers pilot

NRC's Industrial Research Assistance Program (IRAP) continues its impressive run as the government's go-to organization for new business R&D support. Following on last year's Budget announcement of a concierge service for small- and medium-sized enterprises (SMEs), Budget 2013 invests $20 million over three years in a pilot program for vouchers (re-branded as credit notes). The pilot will provide SMEs with vouchers to help commercialize products and services by contracting researchers at universities, colleges and other non-profit research institutions. Details are pending.

The Business Development Bank of Canada (BDC) is another innovation mechanism favored by the government. This Budget provides $60 million over five years to assist "outstanding and high-potential incubator and accelerator organizations" expand their services to entrepreneurs. A further $100 million will be devoted to firms "graduating from business accelerators", with details to follow.

The Budget also builds on last year's support for forestry innovation and marketing, when it announced $105 over two years. Beginning in FY14-15, a further $92 million over two years has been committed in support of Natural Resources Canada's Forest Industry Transformation Program.

granting councils

The Budget wasn't nearly as kind to basic research and its support of the three granting councils. Like last year, the Budget provided $37 million to the three councils in targeted, industry-relevant funding, effectively replacing the amount they will lose to deficit reduction measures aimed at eliminating the deficit by FY15-16.

The Canadian Institutes of Health Research (CIHR) received $15 million for its Strategy for Patient-Oriented Research. The Social Sciences and Humanities Research Council (SSHRC) received $7 million, in part to "support research related to the labour market participation of persons with disabilities". The Natural Sciences and Engineering Research Council (NSERC) received $15 million, of which $12 million goes to expand its College and Community Innovation Program.

The government also announced a review of the Indirect Costs Program "to ensure that the program is meeting its objective of reinforcing excellence in post-secondary research". The review will be conducted in conjunction with the Association of Universities and Colleges of Canada.

AUCC president Paul Davidson says that despite the paucity of new spending for the granting councils, there are university-relevant initiatives sprinkled through out the Budget in the areas of aging, youth, commercialization, basic research, links to SMEs and attracting talent .

"Universities are central to addressing these issues so it's encouraging given the fiscal climate and a no-new-spending Budget," says Davidson. "The government has reached out to get expert advice and they are now working through those pieces."

Davidson says Budget included significant investments in college R&D and skills development, which should be welcomed by all members of the post-secondary education sector.

"This isn't an either/or scenario, it's both/and. There are needs across the sector. The colleges worked hard, were disciplined and they had success," he says, adding that there are encouraging signs that the time for new investments in basic research are not far off. "Skills in the trades are the sharpest need but in the near future there will be jobs requiring university degrees. The Budget recognizes you need both ... We're still in discussions with government on the importance of discovery research and we're hearing the language of more to come."

Research Canada is also unperturbed by the Budget's lack of new funding for basic research. Like Davidson, Research Canada president and CEO, Deborah Gordon-El-Billety, points to other Budget initiatives that will engage academia, including the health sector her organization represents. She says the odds of obtaining new investments will be enhanced if the government develops a comprehensive health research and innovation strategy.

"Money will flow once the evidence is in place ... Investment in basic research is not intuitive to this government," says Gordon-El-Bihbety. "It doesn't benefit anyone to decry the government without demonstrating the benefits of their investments. The community has a responsibility to address the government's concern that the investments made thus far have not paid a dividend in products and services in the community and the market."

international education

The Budget also fleshes out the government's international education strategy, once again turning to Mitacs with $13 million over two years. The funding will go to Mitacs' Globalink program to attract international students to Canadian institutions and to allow Canadian students travel abroad to pursue their education.

"Mitacs will be able to send Canadians abroad to study, which is a first," says AUCC's Davidson. "There's potential for this to grow as the fiscal climate improves."

An additional $10 million has been set aside for the marketing of Canadian education abroad. The funding will be allocated to the Department of Foreign Affairs and International Trade for "targeted market plans for priority markets, better promotion of a cohesive Canadian education brand, and a sophisticated web marketing strategy". DFAIT commissioned a report that encouraged the government to re-group grants and scholarships aimed at international students under one brand (R$, August 31/12).

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