History of Innovation in the Federal Budget Part 3: 2008 – 2011 NDP Election Sweep

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Did a shifting global economy and Canadian political dynamics impact innovation in Canada?

More information on past budgets can be found in our previous overviews of the budgets ranging from 1995 – 2001 and from 2002 – 2007.

In order to understand the stance on innovation in federal budgets between 2008 – 2011, it is important to establish the budgets within a larger context. The 2008 – 2011 years featured significant changes in North American business and politics–these changes had a discernable impact on the place of innovation in the Canadian federal budget.

Some Background on Developments between 2008 and 2011

Economic Dip & Nortel

In 2007, the U.S. housing bubble burst. This burst had global repercussions for stock markets, shaking investor confidence. A wave of decline in international trade and increasing credit restrictions followed. The official “end” of the U.S. economic crisis is set somewhere between late-2008 and mid-2009.¹

During the latter portion of the U.S. economic dip, Northern Telecom Limited (Nortel) was forced into liquidation. Although Nortel is an international telecommunications company, its headquarters are located in Mississauga, Ontario. While the company is technically under bankruptcy protection until mid-April 2012, Nortel has been undergoing a lengthy liquidation process since early 2009:²

On January 14, 2009, Nortel filed for protection from creditors in the United States, Canada, and the United Kingdom, in order to restructure its debt and financial obligations. In June 2009, the company announced it would cease operations and sell off all of its business units. The period of bankruptcy protection has since been extended to April 13, 2012. As part of the bankruptcy proceedings, Nortel Networks Inc. publishes monthly operating reports outlining cash receipts and disbursements.

2011 NDP Sweep

Although Canada’s 2011 federal election was initially criticized as unnecessary by the Conservative government and political pundits alike, it culminated in a surprising sweep by the NDP–103 seats in the House of Commons. This achievement was further bolstered by the Party winning an unprecedented 59 out of 75 seats in Quebec, effectively overpowering the historically Bloc-loyal province. ³

Despite the fact that Jack Layton was still overshadowed by Stephen Harper’s win, the significance of the NDP sweep in the 2011 Canadian federal election should not be underestimated–especially considering that Harper and the Conservative government had otherwise ruled without official opposition since 2006. Furthermore, the election also moved the Liberal position from second to third in command, an equally important turn in the Canadian political sphere.

As a final note on the NDP’s impact, the Party takes a decidedly different stance than the Conservatives when it comes to innovation. The NDPs tend to adopt a “Father Figure” role, favouring direct funding. Alternately, the Conservative Party generally prefers indirect contributions to universities or creates research grants that stimulate innovation through arms’ length funding.

2008 Federal Budget

Conservative Party

Echoing the 2006 budget, Minister Flaherty delivered a budget with a similarly practical tagline: “Responsible Leadership“. As with past budgets, 2008 also placed great importance on R&D activities in the form of university research and green technology development. The budget promised $440 million over three years to “secure Canada’s leadership in the global marketplace through research and innovation”, $80 million of that going directly toward research in the following industries: automative, manufacturing, forestry and fishing. ⁴

Flaherty praised the auto industry as a “major driver of the Canadian economy”. The budget allotted $250 million for an Automotive Innovation Fund ⁵ that would create jobs through the development of fuel-efficient/greener vehicles. The Minister cited the fund as part of the government investment promised in the 2007 Science and Technology Strategy. ⁶

2009 Federal Budget

Conservative Party

The 2009 budget picked up on the previous year’s emphasis on green technology development and the necessity of targeted support for key industries. Flaherty referenced both Canada’s commitment to the G20 leaders’ summit and the global economic crisis as motivations for investing in “foundations of long-term economic growth.”

To aid in this long-term growth, the budget called for Immediate Action to Build Infrastructure, an investment of nearly $12 billion dollars to create a modern, greener infrastructure for Canada. The funding for this “immediate action” was outlined as follows:

• $750 million to the Canada Foundation for Innovation ⁷
• to support leading-edge research infrastructure.
• $50 million to the Waterloo University Institute for Quantum Computing ⁸ for a new research facility.
• $1 billion for clean energy research, development and demonstration projects.
• $110 million over three years for space robotics research and development.

Additionally, the budget slated $7.5 million for “targeted support for the auto, forestry and manufacturing sectors, as well as funding for clean energy. ⁹

2010 Federal Budget

Conservative Government

The aim of the 2010 budget was to sustain the momentum of previous years by expanding the breadth of government-supported research. The budget featured a laundry list of activities, institutes and research councils that would receive funding from federal research grants. Included on this list were the following:

• $13 million per year to the Natural Sciences and Engineering Research Council, including $8 million per year to strengthen its support for advanced research, and $5 million per year to foster closer research collaborations between academic institutions and the private sector through its Strategy for Partnerships and Innovation;
• $15 million per year to the College and Community Innovation Program to support additional research collaborations between businesses and colleges;
• $222 million over five years to support research and commercialization activities at TRIUMF, Canada’s premier national laboratory for nuclear and particle physics research;
• $75 million in 2009–10 to Genome Canada to allow it to launch a new targeted research competition in a priority area and sustain funding for the regional genomics innovation centres, and more.

Finally, the budget also indicated that the government would make a concerted effort to review federal support for R&D in order to “improve its contribution to innovation and economic opportunities for business”, saying that these reviews would factor into future budgetary decisions. ¹⁰

2011 Federal Budget

Conservative Party

Delivered on June 6, 2011, the federal budget featured 4 main pillars for innovation, stressing the importance of education and research. As in 2010, the budget targeted extremely specific institutions, research facilities, etc. rather than referring to broad industries such as environmentally-friendly technology or the auto industry. The 4 pillars are as follows:¹¹

1. Investing in innovation, education, and training

Supporting SMEs through the Industrial Research Assistance Program to create collaborative projects with colleges that would “accelerate their adoption of key information and communications technologies”; increasing federal granting council contributions; expanding Canada Student Loan eligibility; funding for international studies, including tax relief for students studying abroad and $10 million to develop/implement an international education strategy to draw international students to Canada, etc.

2. Driving Innovation: Canada’s Digital Economy Strategy

Making Canada a “leader in the creation, adoption and use of digital technologies and content”; $60 million over three years to support student enrollment in targeted digital disciplines; $100 million/year to the Canada Media Fund.¹²

3. Strengthening Canada’s research advantage

“New resources to support leading-edge research, international collaborations, health research of national importance, and the creation of world-class research centres in Canada.” This support would include $53.5 million over five years to be used toward created 10 new Canada Excellence Research Chairs,¹³ up to $100 million to aid in establishing the Canada Brain Research Fund; an additional $65 million for Genome Canada,¹⁴ amongst others.

4. Fostering commercialization and business innovation

These funds included support for marketplace demonstrations of new technologies, including those of Sustainable Development Technology Canada. ¹⁵ and the National Optics Institute.¹⁶

A comprehensive overview of how SR&ED features in each federal budget since 1995 is available on our SR&ED in Federal Budget (Summaries) page.