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CONCLUSIONS AND RECOMMENDATIONS

Much has happened to research funding in Canada in the last three years. The Canada Foundation for Innovation (CFI) was set up to strengthen the Canadian capability for research by funding R&D infrastructure improvements jointly with business and the provinces. The Foundation also offers some interesting programs aimed at establishing young researchers and setting up laboratories in new areas of study. The granting council budgets have been restored to earlier levels. In the last budget, three-year funding initiatives for health and for advanced research were announced, as well as an increment for the CFI.

These funding increases are welcomed by the research community in Canada. The government has reacted to the most pressing of problems, but research is a long term process that requires people and institutions to make long term commitments, and the government has not yet set out a forward-looking framework that would make Canada an attractive stable research base for our graduate students and star researchers. The Committee therefore recommends:

Recommendation 1

That the federal government set out a long-term plan for R&D (basic and applied) funding in Canada establishing strong growth targets for research spending by the research councils, the universities, and the federal departments as well as forecasts of tax expenditures and spending by industry.

Restoring funding for the granting councils to 1994 levels was necessary, but, as was shown in Table 3, over one third of research in the higher education sector was financed by the sector itself relying mainly on federal and provincial transfers. The picture is clear that humanities and social sciences are particularly reliant on these sources of support, but it is unclear if all the natural sciences differ in their needs for this type of funding, nor is it known how the relative amounts of basic and applied research have been altered by changes in the levels of federal and provincial transfers to universities. The Committee therefore recommends:

Recommendation 2

That the federal government seek ways, in consultation with the provincial governments, to safeguard and strengthen those research activities that are funded through the core university budgets financed by the CHST and provincial funds.

The Committee heard of the serious problems being faced in Arctic research and recommends:

Recommendation 3

That NSERC and SSHRC assign Arctic research as one of their priority research areas.

Basic research at the National Research Council is an important part of the innovation system in Canada and, unlike the granting councils, it has not had its funding returned to 1994 levels. To allow the NRC's basic research to attain a sustainable level, it requires at a minimum an additional $75 million added to its base funding. The Committee recommends:

Recommendation 4

That the federal government increase the base funding of the National Research Council by a minimum of $75 million.

The National Research Council is also ideally positioned to bridge the gap between the basic research undertaken in universities and the development and commercialization in industry. Canada must develop new innovative areas of research if it is to be in the forefront in the new millennium. The National Research Council has suggested five excellent initiatives, whose total cost is $300 million over five years, which could help Canada maintain an edge in these highly promising areas. The Committee recommends:

Recommendation 5

That the federal government fund the National Research Council's proposed major strategic research initiatives to take Canada into the 21st century.

The Committee also learned that the National Research Council is heavily involved with regional and community innovation across Canada. This important role, which is limited by a lack of resources, involves helping bridge the critical gap between knowledge and application. In the past, this has frequently led to the creation of centres of excellence to meet local community needs.

Recommendation 6

That the federal government provide the NRC with the necessary resources to be a key player in regional innovation programs to bridge Canada's critical gap between knowledge and application.

As the Committee was preparing this Report, the Advisory Council on Science and Technology (ACST) reported on the commercialization of university research in Public Investments in University Research: Reaping the Benefits. It recommends that the government invest an amount equal to 5% of its current university research funding for improving the university commercialization function. The Committee supports this recommendation, and notes that it is just as important to increase the capacity of the NRC in commercializing research in its Industrial Research Assistance Program (IRAP) and Canadian Technology Network (CTN) programs which will mesh successfully with the increased efforts from the universities. The Committee recommends:

Recommendation 7

That the federal government investigate other measures to address the issue of commercialization of university research by leveraging private sector resources.

The federal government, through its granting councils, funds the variable costs of research projects, and, with the CFI, is helping to fund the research infrastructure, but does not support indirect costs, the other major cost element for research. Witnesses pointed out that this is an area that is federally funded in the United States. The Committee recommends:

Recommendation 8

That the federal government urgently consult with the universities and research councils about fully reimbursing the indirect costs of federally funded research grants, and seek accords with the provinces to maintain the provincial share of university research funding if the federal government assumes responsibility through the research councils for indirect costs.

The Committee heard of the importance of basic research that is driven by the investigator's curiosity to make advances to our fundamental knowledge, but which, at that time, has no ready commercial application. Later, of course, it may spawn applied research, and eventually marketable products and services. The ratio between basic and applied research in Canada could be changing because of a reduction in university core funding and the pressures towards increased commercialization which might narrow the research community focus more towards applied research. But figures are not available. Canada is one of the few countries that does not produce a statistical breakdown between basic and applied research. In the next decade as new policies are tried, it is imperative that the effects can be fully monitored. The Committee recommends:

Recommendation 9

That Industry Canada and Statistics Canada estimate a breakdown of research into its basic and applied components.

The Committee heard rather disparate views about whether there was a skilled brain drain. Some witnesses reported a survey in one discipline while others had counter anecdotal evidence. Given the importance of knowing the effects of any brain drain, the Committee recommends:

Recommendation 10

That the federal government analyse transfers out, transfers in and transfers within Canada of knowledge-based workers, and the areas of skill shortages.

Another important element of the federal S&T Strategy is the R&D tax regime, which is one of the most generous in the world for research in the natural sciences. The Committee heard that some of the other OECD countries allow R&D in the health and social sciences to receive favourable tax treatment. At this time, the Committee recommends:

Recommendation 11

That the federal government investigate the widening of the R&D tax credit to apply to research in the health and social sciences.

During the hearings, the Committee was also informed that the general climate for innovative industry is important. With an increasing international trend for foreign test data to be allowed in domestic regulatory proceedings, the speed of regulatory proceedings becomes more of a factor in the decision on where to locate. One witness contrasted cost recovery here and in the United States. Health Canada removed a very substantial portion of the budget of the Health Protection Branch, including the therapeutic products program, and told the Branch to make up those monies from cost recovery. In contrast, the FDA in the United States applied cost recovery revenue to bringing in 300 additional evaluators and reviewers to dramatically improve assessment time. The Committee recognizes the importance to health research of a timely and efficient drug review process that maintains health and safety standards for Canadians and recommends:

Recommendation 12

That the federal government use cost recovery monies to improve service in regulatory agencies to provide a more attractive working environment for innovative companies.

Recommendation 13

That the federal government examine ways of reducing the regulatory burden and improving efficiency in the Health Protection Branch.

The current federal Science and Technology Strategy is based on cabinet responsibility. Ministers are individually responsible for the S&T performance of their own department and the S&T activities are mandate-driven. Each department with a science function has an outside advisory committee. The Secretary of State for Science, Research and Development chairs a committee of these outside advisors, with the mandate to look at cross-department science questions. The Assistant Deputy Ministers in the science-based departments meet to discuss cross-department issues of science management and coordination.

The government established an Advisory Council on Science and Technology, which is chaired by the Prime Minister and reports to Cabinet. The Minister of Industry publishes an Annual Report on the Federal Science and Technology Strategy.

As the Committee heard, implementing the strategy is the weak point. Although cabinet responsibility is an important doctrine, having two ministers cooperate in areas of shared interest is very common in the Canadian system. For example, Industry and DFAIT collaborate on trade issues, and HRDC and CIC work together on immigration. The Committee believes that science and technology is a key to our economic future and deserves to be raised to the status of a shared area ¯ shared between each department and the Secretary of State for Science, Research and Development who would be given stronger responsibilities to ensure the smooth progress of the federal Science and Technology Strategy. The Committee recommends:

Recommendation 14

That the Secretary of State for Science, Research and Development be given the responsibility to coordinate and implement the federal Science and Technology Strategy across all departments and report annually to Parliament.

Science, technology and innovation are the key to our future quality of life and prosperity and it is crucial to the successful implementation of the many government programs that Parliament maintain vigilant oversight. A full-time parliamentary committee is needed. The Committee resolves:

Recommandation 15

That the House establish a committee to oversee science, technology and the innovation system in Canada.

Canada is a relatively small country with substantial foreign ownership and a significant presence of multinational corporations. This part of our underlying economic structure may reduce our innovative capacity which is a concern to the Committee. The ongoing challenge Canada faces is to ensure that the new research environment attracts R&D away from the multinational headquarters abroad. The Committee recommends:

Recommendation 16

That the federal government review the impact of foreign ownership on investment in research and explore ways to encourage research by foreign entities in Canada.

The Committee recognizes the underlying importance to Canada of a strong and dynamic research base in the natural, the health and the social sciences and the humanities. A vibrant and well-funded basic research community provides the cornerstone for the strong innovation system that is needed for the knowledge-based economy of the 21st century.