Liberal govt unveils powerful yet uneven series of measures to enhance innovation

Universities could be big winners

University-based research and skills training dominate the S&T component of the Liberal government’s election-inflected Economic Update, with the largest single commitment going to the indirect costs of university research. The update is a major coup for the Association of Universities and Colleges of Canada (AUCC), which has lobbied hard to convince the government to continue investing in Canada’s research base (see chart page 2).

At this stage, the initiatives contained in the economic update are merely proposals and could be derailed by a change in government. Whether they survive the current political turmoil in Ottawa is a hotly debated question, as the Liberal administration is on the verge of falling. Finance minister Ralph Goodale has indicated his intention to bring down a full Budget in late February or early March, should the Liberals retain power.

“The proposals in the update would form the basis for Budget 06,” says a federal official. “The actions are consistent with the Plan for Growth and Prosperity and its long-term agenda (see page 5). These proposals are focused on the shorter term.”

The Liberal government is proposing to pump $1.2 billion into the indirect costs of research between FY06-07 and FY10-11, raising the level to 40% of the costs of direct federal research funding. The AUCC recently advocated additional funding for indirect costs and the Prime Minister’s Advisory Council on Science and Technology recommended boosting them to 45% in its September/00 report, Creating a Sustainable University Research Environment in Canada.

“We’re delighted. This has been a huge part of our advocacy message,” says AUCC president Claire Morris. “The last Budget was disappointing but this takes us to a minimum rate of 40% … It’s a recognition of what Canada has to do to lead in the global knowledge economy.”

The Economic Update’s proposed increases for the granting councils are modest in comparison, calling for an additional $425 million for all three granting councils over the same period, far short of what the granting councils have argued is required to meet growing demand. For Science and Engineering Research Canada (NSERC) and the Canadian Institutes of Health Research (CIHR), that means $35 million more each beginning in FY06-07, while the Social Sciences and Humanities Research Council (SSHRC) will receive $15 million more annually. Taken together, the new funding increases the base budgets of the granting councils by 5.8%, exclusive of flow-through funding to other programs.

“We’re pleased that there is money in the Economic Update but we’re not going to rush out and spend it,” says NSERC executive VP Dr Nigel Lloyd, adding that NSERC still hasn’t received its increase from the last federal Budget (R$, March 9/05). “It’s good news but is it the best balance? I don’t know. The Update has proposed money for graduate students in companies (research internships), but we already do that very well. Don’t reinvent the wheel.”

Also proposed is $1 billion for a novel Post-Secondary Education Innovation Fund (PSEIF), an additional $500 million for the Canada Foundation for Innovation (CFI) and $30 million for the Canadian Institute for Advanced Research (CIAR) to bolster its existing research networks and build new ones with researchers in emerging nations such as China and India. All three of these proposed initiatives will be financed with surplus funds from FY05-06.

The PSEIF is a one-time allocation of money that will be placed into a third-party trust fund accessible to provinces and territories on a per capita basis. It is meant to finance a variety of needs including new libraries, technological equipment and enhanced learning environments for remote communities. It is part of the legislation stemming from the Liberal-NDP agreement struck earlier this year.

To many in the business, technology transfer and applied R&D communities, the Economic Update’s emphasis on Canada’s research base may appear lopsided. Other than two small initiatives addressing the skills mix required for more entrepreneurial activity, there’s little to indicate that the government’s priorities include a concerted push towards commercialization and the need to penetrate global markets.

Immediately following the update’s release, the Canadian Advanced Technology Alliance (CATA) issued a call for the creation of a Canadian Commercialization Fund (CCF) with initial funding of $50-75 million. CATA argues that the CCF is the first step required to “adopt a total-war approach in building Enterprise Canada”, by providing a fund that businesses can apply to for advice and mentoring.

“CCF creates a visible entity focussed solely on increasing the rate of commercialization. It would provide funding for mentoring services, a screening process to avoid wasting tax dollars on ill-conceived ideas and create published data to measure success,” says CATA.

The most logical explanation for the failure to include more commercialization measures in the Economic Update is the delay in the interim report from Industry Canada’s Task Force on Commercialization, chaired by Joseph Rotman. Sources tell RE$EARCH MONEY that a disagreement between the chair and the minister’s office has pushed it back until the input of external reviewers can be incorporated.

To other observers, even a larger commercialization component would not have achieved the kind of response required for Canada to succeed as a globally competitive knowledge-based economy. Dr Douglas Barber, the former CEO of Gennum Corp, has been exploring the needs of knowledge-intensive businesses. He asserts that the Economic Update contains many positive initiatives with a strong focus on people, but it fails to address critical areas that are tied to Canada’s future competitiveness.

“Where are the things that will put us on track? This is more of the same,” says Barber. “Where we’re missing out is a strong culture of commerce and winning in the value competition. That’s where we’re failing and that’s where companies are failing.”

Barber asserts that this is a weakness of virtually every country aspiring to grow its knowledge-based economy, and can be traced to the pervasive influence of the scientific method on the education system.

“Methods of learning also need to be subjective and experience-based. That needs to be re-introduced into our learning environment,” he says. “The commercialization agenda tends to make assumptions. It assumes that the research we do in Canada is the basis for the value we create in the economy. It’s not ... We’re giving it a higher level of funding based on a belief that is not supportable and it squelches attempts to do something more radical. If we could be serious about this, we could excel.”

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