Is Canada's Budget 2010 Good for Innovation?

The Federal budget is out and the decisions are made and, as expected, no imagination is shown.

Just focusing on the innovation agenda, the Government of Canada announced these decisions:

• $108 million to support young workers through internships and skills development to help them find jobs and to support 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.
• Making Canada a tariff-free zone for manufacturers, by eliminating all remaining tariffs on machinery and equipment and goods imported for further manufacturing in Canada.
• Establishing a Red Tape Reduction Commission to reduce paperwork for businesses.
• Measures to support investment in clean energy generation.

The $600 million for innovation looks like it is headed to Universities rather than firms. Let us just document how this money will flow:

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

This is largely cosmetic. They are restoring cut funds to granting councils, propping up agencies they have cut in the past. They are adding capacity to the College and Polytechnic sector, which should now be seen as the engine of applied research and a direct route to real innovation, as well as increasing funding to organizations like 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 the lack of courage at the national level and will do little to move Canada from 14th place out of 17 countries, according to the Conference Board of Canada.

What should the Government have done? To be bold, eve within the constraint budget of $600 million, they should have allocated half to IRAP and half to the College and Polytechnic sector – organizations closest to firms. This would have signaled to firms that innovation is about firms, not about researchers pursuing their own interests. While university based research is not unimportant, it is not the engine of innovation that Canada needs – at least, not as we are doing this work right now.

The good news here is the action the Government are taking positive action to stimulate productivity. The budget announces 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 enables 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. This will be helpful.

Also good news is the recognition that we need more and more people with skills inside firms, withv$108 million going to this work. Co-op programs, industrial placements, post-doctoral positions inside firms could all be supported, though these funds are small relative 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 the innovation league table. Some of these investments will accelerate commercial activities, but most will not lead to new products and services or accelerated access to new markets. My definition of 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.