If innovation is the name of the game for improving Canada’s economic prospects, who is paying for the research and development (R&D) that contributes to the effort? Last week we saw that business is losing interest. It seems the next biggest funder, the federal government, is getting out of the business too.
Statistics Canada reports that federal expenditures on R&D for this year will be significantly lower than they were two years before, the peak year for federal spending. Even if the short-term R&D bump provided by federal stimulus funding through the Knowledge Infrastructure Program is removed, federal investment still fell by 7 per cent. If forecasts for inflation in the economy are correct, the inflation-adjusted reduction amounts to 11 per cent.
Federal government research agencies account for most federal R&D expenditures and absorbed the biggest hit – a 22 per cent decline in investment after inflation. The biggest “extramural” recipients of federal support – higher education and business – also saw less money from the federal government since 2010.Taking a longer view, federal agencies’ spending is down 10 per cent, support for post-secondary institutions is barely 2 per cent higher and federal funding for business R&D (including incentives and tax breaks) rose by 18 per cent. This last figure is troubling, since last week’s OCUFA Report revealed that private R&D investment in Canada has been falling steadily.
Everyone agrees that research and development is essential for economic success. So why won’t the private sector and federal government invest in it?
Sources: Statistics Canada, Federal Scientific Activities 2012/2013; Industrial Research and Development: Intentions 2012
September and October forecasts, Canadian financial institutions, Policy and Economic Analysis Program
This article originally appeared in the OCUFA Report. To receive stories like this every week in your inbox, please subscribe.