Minority government and lack of detail in Tory innovation policy raise questions about new and existing programs

Guest Contributor
January 24, 2006

Canada's innovation agenda has a new captain but it's not clear where it's going to be steered. The Conservative Party has provided scant insight into how science and technology and R&D will factor into its agenda - a situation made more complicated by a strongly divided Parliament in which consensus will be essential to pass any major legislation or terminate existing initiatives.

After nine years of stoking the research engine, the Liberal vision of parlaying that base into a powerful, innovative economy is a work in progress, with key program and policy instruments yet to be implemented.

The most pressing initiative is the commercialization agenda and the work of the Industry Canada task force headed by Joseph Rotman. The task force was due to release an interim report before the end of 2005 but it was delayed, apparently due to disagreement between the task force chair and the Industry minister's office. The report will be presented to the new minister when he or she is appointed. But whether it will be released and its recommendations implemented will be up to the new Conservative government, which must work with a strong opposition led by the Liberals.

Speculation on who the new Industry minister might be has yielded at least two names - former Conservative industry critic James Rajotte (Edmonton-Leduc) and Jim Flaherty (Whitby-Oshawa), an Ontario Cabinet minister under the former Mike Harris government who headed up the short-lived Ministry of Enterprise, Opportunity and Innovation.

Uncertainty also surrounds the two new programs created from the sunsetting Technology Partnerships Program (TPC), the Transformative Technology Program aimed at small business (R$, September 20/05), and the Aerospace & Defence Technology Development program, which was to be funded in the next Liberal Budget (R$, December 9/05).

Then there are the regional development agencies, which have been consistent targets of Conservative criticism in the past, particularly during the era of the Reform Party. In recent years, the strident calls for their elimination have been reversed and the Conservatives now express support for their role in building regional economies. But it's clear their existence remains at odds with the business policies of the Tories which assert that the government has little or no role to play outside of framing the overall economic environment.

The can-do thrust of the Conservative election platform bears this out. It pledges to make changes to S&T-neutral areas of the economy such as a 2% reduction in the GST and lower business taxes. Perhaps most important for the high-tech sector, the Conservative Party election platform declares it will "eliminate the capital gains tax for individuals on the sale of assets when the proceeds are reinvested within six months". Such a move would go far towards addressing the concerns of investors and angels who have long contended that the federal tax legislation effectively penalizes their efforts to launch new companies and create jobs.

But many assert that there is a public role in building knowledge-based businesses, especially those that involve leading-edge technologies. Other nations have developed effective means for supporting their high tech sectors and high paying industries such as automotive, aerospace and forestry. Reducing or axing key assistance programs when global competition is becoming more intense could be counterproductive.

"I'm concerned. The innovation agenda is not going to be top of mind for any of the parties but we have some serious issues facing us," says Ron Freedman principal of The Impact Group and co-publisher of RE$EARCH MONEY. "The focus of this government is going to be on where the money is going to be spent rather on where the money is going is to be made - on political issues rather than economic issues. At the same time, many decisions affecting S&T are up in the air. People are waiting for their money."


The Conservative position on R&D and innovation - such as it is - does support increases to the the budgets of the granting councils and increases to indirect costs. But the amount ($500 million over five years) is not nearly the amount pledged in the Liberal's Economic and Fiscal Update (R$, November 25/05). That pre-election statement pledged $425 million to the granting councils and a whopping $1.2 billion for indirect costs over five years. The Bloc Qu‚b‚cois and the New Democratic Party also support increased support for university-based research.

The Conservative platform also throws its support behind the scientific research and experimental development (SR&ED) tax credit program, and commits to consulting with stakeholder to "explore expanding this tax credit" to cover more areas of innovative activity. The Canadian Advanced Technology Alliance made this a centrepiece of its election advocacy package (www.cata.ca/ Advocacy).

In its new role as the official opposition, the Liberal Party could push for additional innovation measures, such as building on established commercialization-focused organizations like the National Research Council and its Industrial Research Assistance Program.

The Liberal election platform is essentially a restating of initiatives announced in the Economic and Fiscal Update. Those measures include $500 million for the cash-strapped Canada Foundation for Innovation, funding for the Canadian Institute for Advanced Research ($30 million), $160 million for knowledge-based clusters such as the MaRS Discovery District in Toronto and additional support for the aerospace and automotive sectors by completing the transformation of TPC into two new programs.

"Increased promotion of basic and applied research, especially in science and technology, is an essential component of Canada's future economic well-being. It is unacceptable that Canada's expenditure on R&D, at 1.9% of GDP, is well below all other G-8 nations." - Conservative Party platform

Whether the Conservatives carry through with the latter initiative remains an open question. TPC has long been a target for the more right-wing elements of the Conservative Party, who have labelled it corporate welfare and attacked it for lack of accountability and failure to recoup costs.

Failure to carry through with the two new programs would not only incur the wrath of the Liberals, but the Bloc Qu‚b‚cois. The BQ demanded in its election platform that funding for the replacement to TPC be substantially increased. It also argued for the relocation of the NRC's Institute for Aerospace Research from Ottawa to Montreal, where some of the Institute's facilities are already located.

The Bloc expressed concern that the replacement program for the aerospace and defence portion of TPC had not been created when Parliament was dissolved and called for stable, predictable funding assistance equal to 20-30% of private sector R&D investments.

During the election campaign, the Liberals made two major regionally based pledges in Toronto and Winnipeg that are unlikely to be adopted by the new government. The Liberals responded enthusiastically to a bid by the Toronto Regional Research Alliance (TRRA) to establish two new NRC institutes in the Toronto region and boost funding for the Perimeter Institute for Theoretical Physics & Institute for Quantum Computing (R$, December 20/05).

In the West, the Liberals committed to expanding the facilities of the Canadian Public Health Agency, up to $100 million for a new grain cereal research centre, and $200 million over five years for an innovation fund for Manitoba and Saskatchewan. The latter is modelled on the Atlantic Innovation Fund and financing would likely flow through Western Economic Diversification.

The chances of either package being adopted do not appear positive, given that the TRRA proposals were made in the heat of the election and the western pledges were announced by Treasury Board president Reg Alcock (who lost his Winnipeg South seat). Expect another concerted round of lobbying to convince the Conservatives that the value of the proposals transcends party lines.

In the area of S&T policy, a large question mark hangs over the Office of the National Science Advisor (ONSA) and its head, Dr Arthur Carty. On the one hand, Carty and his small office are seen as a creation of the Liberal administration and one or both could be jettisoned as politically tainted. On the other hand, past Conservatives- most notably former Reform Party leader Preston Manning - have expressed support for a strong federal science presence and at one time called for the creation of a full minister of science position. If the latter sentiment prevails, the ONSA could possibly see its budget and mandate enhanced.

There's also speculation that the Conservative government may attempt to reverse the unpopular separation of the departments of Foreign Affairs and International Trade Canada. Although the split was enacted, the separation was never passed by Parliament, giving the Tories an opportunity to correct a decision that it vigorously opposed.


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