The Unfinished Business of Budget 2022

The Unfinished Business of Budget 2022

Our Senior Economist, Viet Vu shares his thoughts on last week's Federal Budget
Viet Vu
Senior Economist
April 13, 2022
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Finance Minister Chrystia Freeland tabled the first government Budget following the 2021 federal elections. Focus was on tackling immediate issues facing Canada, from the housing crisis, domestic & international security, as well as inflation.

Throughout the budget are various investments in addressing Canada’s innovation challenges. While not as monumental for innovation policy as the 2017 Budget, many of them are steps in the right direction.

In this post, we’re highlighting areas that could be expanded upon to ensure Canada can harness the power of innovation to ensure long term economic prosperity.

A split CARPA: the CIIA and the Canada Growth Fund

Budget 2022 moves away from the original Liberal platform commitment to create “CARPA”, a Canadian version of the American DARPA (Defense Advanced Research Projects Agency).

Instead, Budget 2022 proposed $1 billion over 5 years for a Canadian Innovation and Investment Agency (CIIA). While details on the CIIA are scarce, given the examples cited (the Finnish Tekes and the Israel Innovation Authority), the CIIA will likely have at least two arms, one funding arm that funds both university and private sector research, and an advisory arm that coordinates between various innovation apparatus within the government.

In parallel with the CIIA are $15 billion in funds reshuffled from previous budget commitments (thus no new spending announcements) on a Canada Growth Fund, with a significant portion specifically tied to making Canada a zero carbon economy. 

In developing parameters to these programs, some lessons we outlined in crafting Canada’s moonshot innovation policy are relevant, especially those that inform the design of an independent agency to coordinate innovation, and methods to support the full continuum of innovation.

From Super to Global: A Status Quo on Clusters

In a subtle shift, the Superclusters are now called the Global Innovation Clusters. The funding commitment represents a more modest continuation of the program, with $750 million in funding renewed (allegedly half of what was requested by the Clusters themselves), with each of the Clusters having to compete to receive funding.

The Clusters initiative was slow to start up, and only recently started being on track to achieve many of the targets set out in the program’s inception in 2017. The funding likely signals a wait-and-see approach from the government, not closing future funding opportunities for the program, but needing to see more concrete results.

In observing program performance during this budget cycle, we urge governments to independently review the program’s efficacy, including and up to whether there are values in creating additional clusters.

An Inclusive Innovation Agenda(?)

While not as explicit as in some previous budgets, there are still initiatives aimed at supporting those excluded from Canada’s innovation economy. The budget includes new funding for the Tri-Councils to create specific scholarships and funding opportunities to Black student researchers. New funding for Canada Excellence Research Chairs (CERC) is governed by an existing EDI strategy that covers federal research chairs. The continued commitment in focusing on workforce access for disabled peoples in Canada is notable and praiseworthy.

A specific consideration that was missing however, is commitment towards programs that specifically focus on removing barriers for Indigenous peoples in Canada to participate in the innovation economy. Our previous research shows that Indigenous peoples are severely underrepresented in Canadian tech work, and specific programs and strategies to remove those barriers are instrumental.

A Review on SR&ED Tax Credit: more of the same, or teasing something new?

The Scientific Research & Experimental Development tax credit is one of the oldest standing federal policies in its arsenal of innovation policy. It is almost half a century old (the program first started in 1977) and has gone through several minor iterations while the core design of the program has shifted little.

This review announcement is vague about its scope, and its desired resolution, and at the moment, could end up only with small tweaks to the program. However, potentially large changes in the program are not explicitly ruled out either, a significant news as SR&ED is the single biggest innovation policy done by the federal government, responsible for $3 billion in expenditure.

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In specific sectors (such as technology), job growth has far outpaced the Canadian recovery, and a robust skills development framework is still needed in ensuring talent needs for the country.

VIet Vu, Senior Economist, The Brookfield Institute for Innovation + Entrepreneurship

No (New) Commitments on Skills

While Budget 2021 announced many funding commitments on improving skill resiliency and initiatives to improve digital literacy in Canada, Budget 2022 had much fewer explicit commitments surrounding skills training, development, and job transitions. This likely reflects general moods and sentiments of a tight labour market in sectors deeply affected by the pandemic. 

The labour strategy seems to focus instead on reducing frictions and streamlining immigration policies to allow foreign workers and potential new Canadians in being able to to fill the labour gap.

At the same time, the federal government ought not to lose sight of the structural nature of the current labour shortages.

In specific sectors (such as technology), job growth has far outpaced the Canadian recovery, and a robust skills development framework is still needed in ensuring talent needs for the country.

For media enquiries, please contact Nina Rafeek, Marketing + Communications Specialist at the Brookfield Institute for Innovation + Entrepreneurship.