Health care, climate change and higher education drive impressive range of innovation and research initiatives

Special Edition — Budget 2003

The Liberal government is investing billions of dollars of the federal surplus in research and innovation as part of a Budget built around the twin themes of health care and Kyoto. The fiscal generosity directed toward an expansive range of new and existing S&T activities will almost certainly cement innovation, education and university research as pillars of the so-called Chrétien legacy (see pages 3& 4 for more details).

The Budget was less successful , however, in addressing the business climate surrounding innovation. It failed to respond to the high-tech sector’s key demand — an overhaul of the scientific research and experimental development (SR&ED) tax incentive program.

Overall, program spending for FY-02-3 is up 11.5% to $138.6 billion and is slated to rise another 3.2% in FY03-4 to $143 billion. The outpouring of cash from federal coffers was spread widely and found its way into the budgets of everyone from the granting councils and Canada Foundation for Innovation to the Polar Continental Shelf Project and the Industrial Research Assistance Program. And universities are once again the beneficiaries of a major new program providing financial support to graduate students.

Government documents peg the Budget’s research and innovation measures at $1.7 billion between FY02-3 and FY04-5.

“It’s certainly a very significant investment and when you look at the research spread it becomes even more exciting,” says Dr Rey Pagtakhan, secretary of state for science, research and development. “It has the breadth and depth of what we would like to do in research for the nation.”

The Budget’s measures indicate that many of the 18 recommendations stemming from last year consultations on the Innovation Strategy have already been acted upon. The connection was reinforced in a joint open letter from the ministers of Industry and Human Resources Development Canada on February 18, the day the Budget was tabled. Allan Rock and Jane Stewart outline the Budget’s “specific actions in support of the National Summit Action Plan” — a document that has yet to be released.

“Improving Canada’s innovation capacity continues to be a major priority of the Government of Canada. We hope you share our satisfaction that the results of your hard work and commitment ... are yielding concrete action,” states the letter.

Rock and Stewart outline the various areas in which the innovation strategy recommendations were addressed, including the business environment. But the high tech business community is underwhelmed, particularly the Canadian Advanced Technology Alliance. It blasted the Budget as “disappointing” and was critical of the decision to phase out the federal capital tax over five years instead of eliminating it immediately. CATA also noted the Budget’s failure to address changes to SR&ED or invest in Government on Line and broadband access.

The Information Technology Association of Canada (ITAC) also expressed displeasure at the gradual elimination of the capital tax, dubbing it a “slow death” and noted, without comment, the absence of measures to alter SR&ED.

“There was no mention of SR&ED so we have some work to do there,” says Linda Leonard, ITAC’s VP communications and research. “If the government is serious about equipping the Canadian economy for the demands of the knowledge economy, it has to revisit old practices. SR&ED is a mechanism that should work in both good and bad times.”

Leonard says that other initiatives in the Budget were positive, including $600 million for health-related information and communication technology and support for the environment. “There’s certainly enough in there for everybody but the government has to get more focused and strategic to ensure that there is a return on federal investments,” she says.

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