Conservatives unveil policy to boost innovation
• The federal Conservatives on Wednesday laid out their new innovation policy ahead of an expected election call, part of an effort by the party to distinguish itself as an alternative to Prime Minister Justin Trudeau that could dependably navigate the post-pandemic economic recovery.
The Conservative proposal, if fully realized, could mark a departure from years of Liberal innovation policy, which many observers say has become unfocused and weighed down by a long list of incongruous subsidy programs.
Still, the plan represents only a broad framework to boost Canadian innovation and secure intellectual property — a crucial goal that has eluded policymakers for years.
The plan, announced by Conservative leader Erin O'Toole, includes efforts to slash by half income tax rates on new technologies patented in Canada, review and potentially trim back Ottawa's bloated subsidy landscape, streamline a key innovation tax credit, and create a dedicated government agency to fund research into next-generation technologies like electric car batteries, modular nuclear reactors, pharmaceuticals and carbon capture and storage, among other things.
A spokesperson for O'Toole did not respond to a request for comment, and the policy outline did not provide finer details as to how the proposal would be enacted.
The policy is largely representative of what has been recommended in recent years by industry groups, who warn that a failure to streamline Canada's innovation space could increasingly put it at a disadvantage to other countries.
“Today's policy announcement from the Conservative Party of Canada puts forward a serious plan for boosting the Canadian innovation economy,” Ben Bergen, executive director of the Council of Canadian Innovators, said in a written statement. “The focus on driving Canadian competitiveness in the 21st century demonstrates that the Conservative Party has listened to our members and understands the policies that would have a meaningful impact on the Canadian innovation ecosystem.”
The Conservative policy also proposes the introduction of flow-through shares for technology companies, effectively expanding a tax deduction that was first granted to mining companies in Canada in the 1980s as a way to spur investment.
Flow-through shares allow investors to write off a portion of the shares they purchase. The policy was widely viewed as successful in boosting investment to the mining sector, but is often criticized as inefficient because it encourages investment into potentially weak or non-established companies.
The innovation plans also involve an attempted streamlining of the Scientific Research and Experimental Development (SR&ED) tax credit. The SR&ED, which hands out roughly $3 billion to companies each year, is popular in the industry but is widely criticized for subsidizing mediocre companies who depend on the program for survival.
Perhaps most notably, the plan also proposes to establish the Canadian Advanced Research Agency as a dedicated body to develop cutting-edge technologies.
Some observers, including Robert Asselin, senior vice-president of policy at the Business Council of Canada, have been calling on Ottawa to develop a body similar to the U.S. Defense Advanced Research Projects Agency (DARPA), which acts as a bridge between industrial and military research.
In a briefing for the C.D. Howe Institute in March, Asselin said DARPA “provides a useful model for government leadership in basic and applied research,” saying it could be “a key ingredient in a complex recipe” to reshape Canada's innovation policy.
Founded in 1958, the agency was initially created in response to the Soviet launching of Sputnik 1, and has since played a crucial role in developing a range of new technologies.
“Its projects created the building blocks for GPS and the protocols that underpin the Internet,” Asselin wrote. “More recently, DARPA was at the forefront of the COVID-19 vaccine race.”
The new policy proposal comes as industry groups warn that federal parties have been lacking in their broader proposals to grow the economy post-pandemic, saying leaders should be presenting clear outlines as to how they plan to replace jobs and establish new markets.
“Conspicuously absent in the election ramp-up to date is a serious, sustainable, and bold plan to grow our economy, despite the fact the economy is concern number one for Canadians according to recent polls,” the Canadian Chamber of Commerce said in a statement Wednesday.
The chamber called on political parties to wrestle with the question of why economic growth in Canada has “flatlined” for 25 years, and how Canada can establish “21st Century opportunities” for Canadians.
“We cannot borrow our way to prosperity, nor should we confuse government spending with actual economic growth,” Perrin Beatty, president of the Canadian Chamber of Commerce, said in the statement. “Our political leaders cannot, and should not want to go back to where we were before COVID when Canada lagged our competitors in investment and growth.”