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Can the 2021 Budget Reform Canada’s R&D/Innovation Performance?

By 28/04/2021April 30th, 2021No Comments

Canada has seen a sustained decline in public and private R&D investment over the last two decades, which has threatened our standing as a leader in R&D performance. Since 2000, Canada’s national expenditures on R&D have decreased steadily to the point where there is now a $22 billion gap between us and the OECD average, despite six federal innovation strategies developed between 2002 and 2017.

The Canadian government released the 2021 Federal Budget on April 19th, and the ambitious 739-page document contains unprecedented spending. At $77.6 billion in new spending proposed over the next two fiscal years, it is the largest Budget since World War 2, with as many as 270 initiatives. By comparison, it is 46 times larger than Stephen Harper’s Conservative Party’s fourth Budget in 2015.

However, according to GACG analysis, over the next two fiscal years only about $4.7 billion, or 6% of the total is targeted for research, development and innovation initiatives, while $2.4 billion, or 3.1% of the total, is earmarked for clean economy measures.

R&D/innovation investmentThe question: Is R&D/innovation-targeted spending outlined in the 2021 Federal Budget enough to boost economic growth?

We suggest five arguments on whether the Budget improves Canada’s R&D/innovation performance.

  1. The Budget does not appear to contain a long-term economic growth and strategy. How will the government work to achieve results?

Out of the totality of programs, economic expenditures make up just under 20% of investments. The 10 largest programs account for $100.5 B, or 7% of the $142.9 billion net fiscal impacts in Budget 2021. Only 4.4% ($4.5 B) of that is designated as economic expenditures, while the rest ($95.5 B) is social spending. Is this enough for Canada to come out of COVID-19 stronger and sustain long-term growth?

  1. We’re not investing money in the right initiatives to achieve our RD/I targets

We identified a total of 31 initiatives for RD/I in the Budget for a total of $10.7 B in spending over the next five years. Most of the funding ($6.2 B) is earmarked for initiatives that aim to spur economic growth. Environmental initiatives ($3.48 B) and health measures ($1.04 B) comprise the rest of the spending. Are these expenditures over the next five years enough to rewire and clean the economy?

  1. New structures are needed to work with the academic sector and the business community

These structures must be permanent. The Federal Government is not supporting RD/I activity with permanent collaborative structures that can respond continuously to the speed of change, and emerging risk and opportunities, such as COVID-19. We argue that this Budget is inward-looking and narcissistic with no insurance plans for future risks.

  1. We need to integrate services for implementation

The Federal Government needs to co-ordinate and integrate better their hundreds of programs and services through dozens of Departments, Agencies and federally funded Not-for-Profits that provide:

    1. R&D/Innovation programs,
    2. Industrial support programs,
    3. Trade support programs,
    4. Skills and training programs.
  1. The Government will have a challenge implementing these new programs

The Federal Budget 2021 just contains the words and numbers of the Government’s intentions– it does not identify the processes, activities and schedules to actually build and implement 270 new programs!

 

Planning is great, but the Federal Government must still implement effectively with metrics to establish milestones, take stock, assess risks and adjust priorities and schedules. The Federal public service needs help to deal with the complexity and implementation of these programs.

COVID-19 has enabled Canadians to examine the assumptions we’ve taken with regards to R&D/innovation. A dialogue must begin on how to improve the ecosystem, and government must be included in those discussions in collaboration with all economic sectors.

Global Advantage Consulting Group’s team of experts can assist in developing strategies and plans to further your organization’s RD/I targets and plan for future risks and opportunities. Find out how Global Advantage Consulting Group can help you by contacting us today.