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CAUT Bulletin Archives

November 2010

New Federal Panel Tasked to Improve Business Investment in R&D

Gary Goodyear, Minister of State for Science & Technology, announced Oct. 14 that a panel is reviewing federal support for business innovation. [Photo: Brian Gardiner]
Gary Goodyear, Minister of State for Science & Technology, announced Oct. 14 that a panel is reviewing federal support for business innovation. [Photo: Brian Gardiner]
The federal government has announced the creation of an advisory panel to make recommendations on how to improve business investment in research and development in Canada, after a report by the Council of Canadian Academies found investment persistently lags despite more than $7 billion of government support each year.

The CCA report also found that business R&D investment was lacking in spite of healthy corporate profits, with Canadian business profitability outpacing the United States in most years since 1961.

“We are sceptical that yet another report is being commissioned on a subject that has been studied to death,” said CAUT executive director James Turk.

According to the CCA’s report, released last year, Canada is “virtually an outlier” internationally in its reliance on tax-based incentive schemes, mainly in the form of generous R&D tax credits.

Ottawa’s federal Scientific Re­search and Experimental Development Tax Incentive Program represented $3.7 billion in foregone tax revenues in 2007 alone, while most provinces provide additional tax credits.

Turk noted that while three of the six panel members are from the university sector, one is a university president who was, until recently, part of a coalition that advocates expanding the controversial federal R&D tax credit program.

“We are concerned the panellists will simply recommend that universities be tied more closely to industry,” he said. “That wouldn’t solve the problem and would un­dermine the vital contribution of university research.”

He said the private sector with their short-term outlook and em­phasis on maximizing the bottom line aren’t really interested in the tradi­tional focus on basic research.

“Historically, it’s been discoveries in basic science that have fuelled advances in innovation and led to the majority of important new applications with commercial significance,” Turk said.

“Ottawa risks the long-term development of R&D in Canada by under-investing in basic research through the three federal funding agencies — the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council and the Canadian Institutes of Health Research.”

Funding for the agencies was cut in 2009 by almost $148 million as part of a mandated strategic review, while modest increases announced in 2010 were insufficient to keep pace with inflation, nor nearly compensate for the previous loss.

“The unbalanced reliance on tax credits in Canada stands in stark contrast with the American approach to funding innovation where long-term investments in basic research are actually made,” Turk said. “This is why CAUT advocates that the federal government match, on a proportional basis, the basic research funding provided by the U.S. government.

“Bringing tax credits in line with what is being spent in other countries such as the U.S. would provide revenue for proper funding of vital basic research. This move is what will help ensure a prosperous future for Canada.”

Congress provided $13 billion in new funding last year for the two major U.S. scientific agencies — the National Institutes of Health and the National Science Foundation. The Obama administration has proposed a further six per cent increase in the NIH and NSF budgets.