OTTAWA — The federal government is boosting funding for research and innovation while dramatically reorganizing how it doles out money to industry and academic institutions, reducing the number of grant programs from 92 to 35.
In its 2018 budget released Tuesday, Ottawa also said it was mulling ways to “simplify” the 22 grant programs administered by Canada’s five regional development agencies — a move that is likely to cause a rift between local agencies and the feds.
The changes come as part of broader efforts by the Trudeau government to spur innovation. The 2018 budget layers new, albeit smaller, funding increases on top of the massive spending on innovation introduced in 2016.
The moves announced in the budget are said to be the most significant streamlining in recent memory.
The 17 programs administered by the National Research Council of Canada will be reduced to around five programs; six programs under the Natural Sciences and Engineering Research Council of Canada will be consolidated into one “collaborative research and development” program.
The nine grant programs currently administered by Natural Resources Canada, including the Forest Research Institutes Initiative and the Energy Innovation Program, will be consolidated into three separate programs focused on forestry, energy and mining.
The government also said it was looking to reorganize the programs offered under Canada’s regional agencies to focus more directly on “helping firms scale up, develop new markets and expand.” The country’s five regional development agencies are locally governed and autonomous from Ottawa, unlike federal bodies that allocate subsidies for businesses.
Private firms have long complained that applying for funds is a difficult process, largely due to a confusing thicket of grant programs, advisory services and financial supports. Last month, the government set up its Innovate Canada online portal, which is meant to funnel all funding applicants through a single, centralized service.
Ottawa’s program reorganization comes alongside a spending boost.
Funding for academic institutions for research-related activities is set to rise $340 million in fiscal year 2018-19, for a total increase of $3.2 billion, or 25 per cent, from current levels. Direct research funding, excluding program costs, is currently around $3.1 billion every year.
“Researchers can make a big, long-term impact on our economy,” Finance Minister Bill Morneau told reporters Tuesday.
Meanwhile, direct funding to industry for innovation is set to rise $434 million in 2018-19, for a total increase of $2.5 billion over five years. Ottawa currently spends roughly $1.7 billion, excluding operating costs.
The federal government’s advisory council on economic growth, set up in 2016 and headed by Dominic Barton of consulting firm McKinsey & Company, called for spending on innovation to rise, coupled with a scrapping of many decades-old grant programs offered to businesses. Funding for innovation as a percentage of GDP has tapered off in Canada over the past 10 years, dipping well below two per cent. South Korea spends as much as four per cent of GDP on innovation.
“Doing more of the same is not going to create a successful Canadian innovation eco-system,” said Barton’s report released in February 2017.
A separate report last year by University of Toronto president David Naylor, who was appointed by Science Minister Kirsty Duncan in June 2016 to assess research funding in Canada, called for research-related funding to be boosted from $3.5 billion to $4.8 billion. Ottawa’s spending plans fell short of the higher end of that target.
The budget included little detail around how programs under regional agencies might be reshuffled, but simply said government officials would spend the next year exploring possibilities. It only said those agencies would “maintain their current functions that support communities in advancing and diversifying their economies.”
There are currently 22 innovation grant programs administered by Canada’s five regional agencies, including Western Economic Diversification Canada, the Atlantic Canada Opportunities Agency, and others.
Adjusting the structure of grant programs under regional agencies is a politically sensitive issue for the Trudeau Liberals. Oversight of the agencies was placed under the Innovation, Science and Economic Development department in 2016, but they have long said they need to maintain some level of autonomy in order to allocate funds in the most effective way possible.
Ottawa also announced new funding for some regional agencies, including an annual $20 million cash injection, beginning 2018-19, for the Canadian Northern Economic Development Agency and a $920 million cash injection, over six years, for the Federal Economic Development Agency for Southern Ontario.
It said it plans to introduce legislation to enable Western Economic Diversification Canada to “collaborate more effectively with the provinces” in its region.
Ottawa also declined to implement a recommendation by Barton to cut tax credits offered to corporations for innovative activities, which currently amounts to roughly $3 billion per year. The government is said to be currently assessing the recommendation.