Conservative Party platform views tax cuts as best way to stimulate R&D, innovation

Alliance-Lite Policies

A picture of the Conservative platform on S&T and innovation is emerging that places an Alberta-style emphasis on a low tax environment, frowns on public assistance to business and calls for an Auditor General (AG) “value for money” review of all federal granting programs. The AG review would aim at recouping up to $4 billion of the roughly $18 billion currently spent annually and the office’s authority would be extended to foundations and crown corporations.

Entitled Demanding Better, the new Conservative platform could best be described as Alliance-Lite, based on an examination of the platforms of the Progressive Conservatives and the Canadian Alliance from the 2000 election campaign (R$, November 3/00). Yet the costing of its platform reveals that the Conservatives are committing to $57.8 billion in new spending over the next five years, more than double the $26.3-28.3 billion contained in the Liberal platform.

For S&T and innovation, the Conservatives take aim at two national programs and the regional agencies serving Quebec, Atlantic Canada, Northern Ontario and the western provinces. The national programs — Technology Partnerships Canada (TPC) and the Industrial Research Assistance Program (IRAP) — are criticized, particularly in a June 2 speech by Conservative leader Stephen Harper to the Toronto Board of Trade.

TPC & IRAP TARGETTED

TPC is targeted for its low rate of return for a program that was originally supposed to recoups half of its investments. But the Harper address claims TPC has doled out $6.4 billion to date, which includes money leveraged by TPC investments. The actual figure is $2.3 billion. He states that only $50 million has been repaid – “less than one percent” – but the actual figure is more than $80 million or close to 4 percent.

For IRAP, Harper concedes that “it may be that some good projects were funded under this program”. But he quickly shifts focus to alleged fraud involving three IRAP industrial technology advisors and concludes “there are questions here of value for money”.

Instead of business assistance programs, the Conservative Party offers up a low tax environment as an incentive for private sector R&D. Assistance would be delivered through the federal R&D tax credit system, the elimination of capital tax, a competitive intellectual property regime and improved accessibility to private sector funds for small- and medium-sized businesses. The platform provides no details on the extent to which these mechanisms would be altered.

In his speech to the Toronto Board of Trade, Harper gave some indication of his approach to business. “We will only reduce corporate taxes to the extent that we can reduce corporate welfare. I call it the free enterprise vs. the Canada Inc. approach,” he stated. “If you want lower taxes, you must be willing at the same time to stop receiving government subsidies.”

One observer says the Conservative Party is shortsighted to consider eliminating TPC (a carry-over from the 2000 Alliance platform) and cut the business assistance aspects of the regional agencies.

“Their attitude about corporate welfare is wrongheaded. The US does this and it’s part of the engine that drives the US economy,” he says. “People in the party are saying things that show they don’t know which way is up. They don’t understand wealth creation.”

Reform of the regional agencies is a key Conservative platform plank, but the party has been sending out contradictory messages on exactly what that means.

Harper stated clearly in his June 2 speech that under a Conservative government “the regional development agencies will get out of the grants and subsidies game”. He says they will be reformed to encourage marketing and networking opportunities and to encourage the growth of clusters but is mute on the timing of such a move.

Conservative industry critic James Rajotte has opposed TPC, IRAP and the regional agencies since his days as an Edmonton West MP for the Canadian Alliance. But recently he stated that the party’s plan to move away from business subsidies would be over the long term and would not be a blanket policy.

PUBLIC R&D

In the area of public R&D, the Conservative platform says it will “uphold support” for “independent granting councils” but then infers that the granting councils are subject to political interference.

“We will ensure that a competitive review process, with enhanced transparency and accountability, determines who receives grants through these councils, not political or regional consideration,” states the platform document

There is no other information on university-based research, technology transfer or commercialization. But the platform says there will be more money for fisheries science and research, particularly for “sustainable harvesting”. The policy and science branches of the Department of Fisheries and Oceans would be transferred to the east and west coasts “to better understand and respond to the concerns of fishers”.

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