Canada’s budget lacked innovative ideas

Dr. Stephen Murgatroyd                

EDMONTON, AB, Mar. 5, 2010/ Troy Media/ — Will yesterday’s budget improve innovation in Canada? Let’s remember that Canada’s performance when it comes to innovation is woefully inadequate.

Let’s start by looking at the numbers:

• $108 million to support both young workers, through internships and skills development to help them find jobs, and Aboriginal students.
• Over $600 million to help develop and attract talented people, to strengthen our capacity for world-leading research and development, and to improve the commercialization of research.
• Canada becomes a tariff-free zone for manufacturers with the elimination of all remaining tariffs on machinery and equipment and goods imported for further manufacturing in Canada.
• A Red Tape Reduction Commission is established to reduce paperwork for businesses.
• Measures to support investment in clean-energy generation will be implemented.

The $600 million for innovation unfortunately looks like it is headed to universities rather than to business. This is how the money will flow:

• $45 million over five years to establish a post-doctoral fellowship program to help attract the research leaders of tomorrow to Canada.
• $222 million in funding over five years to strengthen the world-leading research at TRIUMF, Canada’s premier national laboratory for nuclear and particle physics research.
• $32 million per year increase to the combined annual budgets of Canada’s research granting councils, plus an additional $8 million per year to the Indirect Costs of Research Program.
• $75 million to Genome Canada for genomics research.
• $15 million per year to the College and Community Innovation Program, which doubles its budget.
• $135 million over two years to the National Research Council Canada’s regional innovation clusters program.
• $48 million over two years for research, development and application of medical isotopes.
• $497 million over five years to develop the RADARSAT Constellation Mission.
• $40 million over two years to launch a new Small and Medium-sized Enterprise Innovation Commercialization Program.
• $49 million in annual funding for the regional development agencies to support innovation across Canada.

While it looks impressive, it isn’t. It is largely cosmetic: The federal government is actually restoring funds it previously cut to granting councils. While it is adding capacity to the college and polytechnic sector, which are the engines of applied research in Canada and a direct route to real innovation, it is also increasing funding to organizations such as the moribund Western Economic Diversification and ACOA.

At best, this is a “touch up: job – painting over the cracks in the existing innovation system caused by past decisions. At worst, this budget shows a lack of courage at the national level and will do little to move Canada from 14th place out of 17 countries when it comes to innovation, according to the Conference Board of Canada.

What should the government have done? To be bold, evne within the constraint budget of $600 million, it should have allocated half of the funds to the Industrial Research Assistance Program (IRAP) and half to the college and polytechnic sector – organizations closest to business. This would have sent a signal to business that innovation is about business, not about researchers pursuing their own interests. While university-based research is not unimportant, it is not the engine of innovation that Canada.

The good news, however, is that the government ise taking positive action to stimulate productivity. The budget announced that Canada will become a tariff-free zone for manufacturers, by eliminating all remaining tariffs on machinery and equipment and goods imported for further manufacturing in Canada. This will enable firms to invest at a lower unit cost in equipment needed to improve productivity and competitiveness and to lower the costs of renewal of business processes requiring technology.

It is also good news that the government is investing $108 million into placing people with skills inside firms. Co-op programs, industrial placements, post-doctoral positions could all be supported, although the funds are inadequate to the challenge and opportunity.

On balance – is this a good budget for innovation? The answer is a reluctant possibly. It shows little imagination, no courage and no effective response to Canada’s declining competitive position in innovation. Some of the above investments will accelerate commercial activities, but most will not lead to new products and services or accelerated access to new markets. Innovation requires sales of new products and services to occur and new jobs to be created as a result – this budget will have a very modest impact.

Channels: The Calgary Beacon, March 7, 2010