Finance minister proposes major changes to funding and management of S&T

Business priorities given prominence

Let the speculation begin. The Conservative government is embarking on a major departure from the status quo, proposing significant changes to how it funds and manages S&T. In last week's Economic and Fiscal Update, Finance minister Jim Flaherty unveiled a new approach, intended to push business priorities further into the policy realm more than ever before while maintaining Canada's G7 leadership in public sector R&D investment.

Flush with coded references to new initiatives and increased spending to boost science capacity, the Update also recommits the government to develop and release its S&T strategy, although no timetable for its release was provided.

Set within the parameters of excellence, priorities and targeted investments, the changes Flaherty announced will have far reaching implications for the way S&T is conducted, funded and exploited. Asserting that "business innovation truly distinguishes an economy" and acknowledging the weak performance of Canadian private sector R&D, the Update proposes a series of major changes designed to increase business R&D output.

Citing value for money, accountability and the need for greater industrial R&D spending, the Update's measures are certain to spark intense debate throughout government, academia and business.

The generic description of the proposed changes are also open to interpretation, raising critical questions that likely won't be answered until the government releases its new S&T strategy or tables its next Budget, whichever comes first. For some, however, the S&T component of the Update is "revolutionary" and a welcome signal that S&T is now among the government's top priorities.

"This is the kind of perspective that is needed to deal with issues like commercialization. I'm quite enthusiastic. What the government has done here is excellent and quite outstanding," says Joseph Rotman, chair of the Expert Panel on Commercialization that reported to Industry Canada earlier this year (R$, April 28 & June 22/06). "This is structured like a conceptual framework to think about the economic agenda — in particular commercialization — as a strategy rather than piecemeal items. That is a huge step forward."

The Update contains a series of policy commitments to further boost the ability of post-secondary institutions to provide students with world-leading knowledge skills.

These include investments in research equipment and facilities, which bodes well for the Canada Foundation for Innovation's bid for renewed funding. Also proposed are increased graduate scholarship support, exposing students to private sector R&D through internships and targeted collaborative research, and attracting greater numbers of top-quality foreign students.

The measures — contained in a separate document entitled Advantage Canada: Building a Strong Economy for Canadians — also aim to give the private sector a greater say in the kinds of basic research conducted in universities, encouraging greater interaction by making future funding increases more targeted in nature.

In prepared comments made to the House Standing Committee on Finance, Flaherty clearly stated the objective of the new measures: "(The S&T Strategy) will allocate government funding and resources to the highest research priorities, better align post-secondary research with the needs of business, and fully prepare young Canadians for work in a knowledge-intensive economy."

Referring to the recently concluded review of the granting councils, the Update states that the government, "while maintaining its G7 leadership in public sector R&D investment", will increase the value stemming from those investments by "consolidating the range of funding mechanisms (and) allocating funding to the highest priorities"

"Over the past nine years, we have seen the introduction of several new programs … It's been remarkable, but now it's time to step back, take stock and ask how they relate to one another," says Dr Howard Alper, visit executive at the International Development Research Centre and former VP research at the Univ of Ottawa. "Are there overlaps or are there gaps that require new tools or investments? If there are gaps, we may need new programs but others can be combined."

Alper views the changes proposed in the Update as significant yet evolutionary, building on academic research capacity developed in recent years. The idea of transferring the management of non-regulatory federal labs to the university sector is a case in point. He contends that the direction and priorities for government science must be better articulated.

"It's high time we took a look at science in government and examined programs to determine which are essential to government and which are best conducted in the university milieu," he says. "It's also time to demonstrate to scientists in government that support for essential R&D needs to be robust."

The agency most likely to be effected by the transfer of management of non-regulatory government labs to the university sector is the National Research Council. Few of the NRC's 20 Institutes conduct R&D that could be classified as regulatory, although most possess strong ties to business and target their R&D accordingly. (RE$EARCH MONEY contacted the NRC for comment but a spokesperson was not available).

LEANING TO US MODEL

The practice of universities managing government labs is well established in the US where the management and operation of several key national laboratories have been contracted out to the university and/or private sector.

"The wording in the Update is leaning toward the US model … It's a move in the right direction. It provides synergy with university professors and government scientists and possibilities with graduate students," says Dr Yvon Hardy, chief scientist at Natural Resources Canada. "The Update is the most forceful I've ever seen in the past 10 years. The Clerk (of the Privy Council, Kevin Lynch) has been quite supportive bringing this together as a system (but) the government must be like a conductor for an orchestra. Our federal laboratories are good and we have great university scientists but who is going to play the different instruments together instead of having a bunch of soloists?"

Hardy notes that Canada is one of the few remaining countries where research is still carried out by line departments. In other advanced nations, the funding, execution and evaluation of research have been separated. He says the consolidation of funding sources that the Update proposes could be the beginning of such a realignment.

"How far the government will go, I don't know," says Hardy. "Finland has made the biggest changes to the traditional R&D model. It has just two funds, one for basic research and another for applied research. And it doesn't discriminate who can access them. Industry can apply to the basic research fund if it wants to, although it doesn't happen that often."

Another existing program that may experience changes is the Networks of Centres of Excellence (NCE). Flaherty has raised the prospect of creating several business-led centres in which the private sector both leads and manages.

Canada already has an R&D program in which business figures prominently in all its projects. Precarn Inc requires all projects to have a private sector participant and a receptor for the project's outputs. The UK has introduced similar networks.

Absent from the proposed measures are enhancements to the scientific research and experimental development (SR&ED) tax credit, far and away the single biggest S&T issue for business in the lead-up to the next Budget. The omission was noted by the Information Technology Association of Canada and Canada's Research-Based Pharmaceutical Companies (Rx&D), which both reiterated their previously released recommendations for enhancing the credit.

Rotman says the absence if any reference to SR&ED is consistent with the Update's emphasis on establishing broad strategic parameters rather than dealing with specific initiatives.

"Why separate this from other tax issues? This is one of several that should be under debate," he says. "We need to look at the whole tax structure … Flaherty understands that this is beyond S&T. S&T is the vehicle through which you create economic growth, which requires tax and integration issues and an integrated, conceptual framework. This is broader than S&T. It's economics."

While the Update's commitments are welcome, many point out that its approach is not new in a global or even a Canadian context. Many of the new approaches such as program consolidation and the transfer of government lab management to the university sector have been tried in other nations. Here at home, Ontario has shown considerable leadership with its new innovation and commercialization strategy.

"The MRI (Ontario's Ministry of Research and Innovation) is not offering just one-off programs. It reflects the long term with a suite of programs and some thought on how they play together," says Dr David Wolfe, a professor of political science at the Univ of Toronto and co-director of the Program on Globalization and Regional Innovation Systems at the Munk Centre for International Studies. "This is a huge step forward. MRI's regional and sectoral focus is quite sophisticated."

PROOF IN THE EXECUTION

Rotman agrees and says that, while the federal Finance minister "gets it" with regard to S&T, there's much distance to be travelled before the Update's conceptual framework is actually implemented.

"As excited and as proud as I am for what the government has done, the question is one of execution. Everything in here (the Update) has been written about for 40 years and many other countries already do this," he says. "We need to stop talking. This is an opportunity to get this agenda going but it will all depend on execution."

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