Sweeping changes proposed for R&D programs

Ottawa has announced sweeping changes to its flagship $3.6 billion a year research and development program for business.

Noting that Canada continues to lag other developed countries in business innovation, federal Finance Minister Jim Flaherty said the government needs to overhaul the way it promotes private sector productivity. “As part of our plan for jobs and growth, our government has made very substantial investments in science and technology,” Flaherty said in his 2012 federal budget speech to the House of Commons Thursday. “Such investments are necessary to help sustain a modern, competitive economy. They encourage innovation — new ideas, which lead to new products and services, and ultimately to new, highly skilled, well-paying jobs.

“The key is to leverage private sector investment in research and development. In spite of our efforts so far, Canada is not keeping up with other advanced economies on this crucial front.”

While the overall amount Ottawa spends supporting corporate R&D will remain largely unchanged, the government is dramatically rewriting the rules of the game, business groups said.

Among other things, Ottawa will reduce by $1.3 billion over the next five years the amount it spends on tax credits under its Scientific Research and Experimental Development (SR&ED) program for business. In its place, Ottawa will hand out $1.1 billion in direct grants to businesses involved in R&D. The government will also plow $500 million into venture capital funds to help startups convert new ideas into commercial products.

Ottawa will also double spending on R&D by small- and mediumsized business next year to $220 million under its Industrial Research Assistance program. The moves, which follow a review of Ottawa’s R&D programs by a blueribbon panel headed by Opentext Corp. chairman Tom Jenkins, will make the federal R&D program less complex and more efficient, the government said.

However, business groups fear it will give Ottawa more control over who gets to benefit from the program. “Ottawa has a terrible track record of picking winners,” noted Dan Kelly, a national vice-president with the Canadian Federation on Independent Business.