Finance Committee on Oct. 27th, 2011

[John Hyshka]

Well, I would say that in regard to Saskatoon and the great province of Saskatchewan, we're very lucky, because people are creating wealth, and they're investing within the province. So I'm very excited, and I think Phenomenome is very lucky to be located in Saskatoon.

But for the rest of the country, excluding Alberta, because of course Alberta's always doing well, there is difficulty. I find that at all levels the ability to raise capital is not as good as it was 10 to 15 years go, especially in the life science sector. I don't see a very rosy future for us, and that's why it's important to have SR and ED. I cannot say how important SR and ED is to the Canadian biotech sector.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you. It is true about family, friends, and fools, although the investment industry told us that sometimes people fill two of those categories.

We'll go now to Mr. Mai for a five-minute round.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you, Mr. Chair. It's my pleasure to speak here again.

I understand we've been having a conversation with the member opposite, and it's not the first time we've talked about choice and vision.

I agree with the Edmonton Chamber of Commerce that it's really important in terms of tax implications. We won't go into that, but we really agree, and I think the other side agrees too. We agree also with the fact that when we talk about corporate tax cuts, in the end, it's individuals who pay. We agree with that.

In terms of choosing between corporate taxes benefiting companies that are making a lot of profits versus the small businesses, here in the opposition we have been suggesting reducing the tax rate for small businesses. We believe that's where you actually create jobs, and that's how you create jobs that stay in Canada, rather than having corporate tax rate cuts, and seeing businesses leave. For example, Electrolux was a company in Quebec that benefited from the corporate tax rate and actually went to the U.S.

Also when you look at how much money is being given...Mr. Marston mentioned the profits being given to the CEOs, but also, if you look, right now you have $500 billion in terms of private sector money not being reinvested. So what we're saying is that you have to reinvest. You have to have incentives, and right now, just by going with a corporate tax rate cut giveaway, you're not reinvesting in the economy.

Ms. Kozak, can you expand on that and give us your views on how we should invest in Canada, and how it will help if we reduce small business tax rates?

[Carla Kozak]

Again, I would be speaking not as a representative of the National Council of Women, but from my own experience in business.

As you say, it's the small and medium-sized businesses that are the engine to our economy, and anything you can do to help create the employment rate in those businesses is going to benefit the Canadian economy very much. As I see it, creating increased confidence in our Canadian economy is one of the biggest jobs this committee actually has—the committee, the minister, and the government itself. Canada is a great place to live. It's a great place to do business. It's a great place to invest.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

I'd like to hear from the Chamber of Commerce.

[James Merkosky]

We have 3,000 members in the Edmonton Chamber of Commerce, and 80% are small businesses, so I can't disagree with you that tax reductions for small business will drive the economy. We're not suggesting that tax cuts at the large corporate level go below what they are, but it is significant to represent that our corporate tax rates in Canada now are far below U.S. corporate rates. So it gives us a competitive advantage, when countries or other companies are looking to invest, that investment can happen in Canada. The fact that companies are sitting on millions of uninvested dollars doesn't have to do with the tax rates right now. It has to do with the uncertainty of the economy. So the question is, how do we get those companies to invest?

[Hoang Mai, NDP, Brossard—La Prairie, QC]

We spoke about the vision, and how we should change the current tendency we have in terms of how we make our economy evolve and how we look forward. I think that's what we're trying to study here, in terms of vision, in terms of the next budget--how we can change things.

Mr. Pekrul, you mentioned that minimum wage is one thing we can move forward. Do you have other suggestions?

[Ray Pekrul]

Yes, well, I had indicated the minimum wage, but certainly any cuts in income tax could easily become tied to job creation as a way to boost the economy. Certainly the idea that higher taxes are hard on the poor.... I think if our ancestors in this country had adopted the idea that the taxation system was not going to be a vehicle for redistributing the wealth, or services in kind, then we wouldn't have had universal education programs, universal health care, employment insurance, or the Canada Pension Plan.

So what is the equitable distribution of the wealth in the country? I have no other comments, not at this point.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Mai.

I'm going to take the final wrap-up round as the chair. I think we've had a very good discussion here about a number of issues, especially about the tax rates. I just have to get into that debate a little.

If we go to the OECD and look at the federal-provincial combined corporate tax rates, we're in about the middle, maybe a little more toward the bottom.

If anyone wants two studies to look at, the Canadian Manufacturers and Exporters did an excellent study in terms of the positive benefits, as did Jack Mintz from the University of Calgary.

In terms of small business, the Chamber of Commerce mentioned that the majority of their members are small businesses. But the small business rate is 11% and the larger rate federally is 16.5% and you add on a 10% rate in Alberta. But that rate kicks in at $500,000 of business income. So anyone making over that would be considered a large corporation by Canadian standards. That needs to be kept in mind as well.

The last point I want to make--and perhaps I'll get the chamber to comment on this--is the link between corporations and average citizens. I think we have to move to the point where we don't see corporations in one place and ourselves in another.

I'm going to use the example of my father, a retired school teacher who went to school here in Saskatchewan at Notre Dame College. He talks a lot like Wayne Marston, frankly. All the retired school teachers get together and tell me these big corporations are making money over here and the poor school teachers are over there.

Dad and I went to the Internet and looked at the Alberta teachers' retirement fund investments--TD Bank, Bank of Nova Scotia, Goldcorp, Suncor, Canadian Natural Resources, Talisman Energy, CIBC, CN, PotashCorp, Apple, Encana, Teck Resources, RBC, BCE, TD Capital Private Equity, Johnson & Johnson, PepsiCo, Wells Fargo, UBS, Pfizer, GE, Power Corporation of Canada, National Australia Bank, Rogers Communications, Novus Energy, Royal Dutch Shell, Goldman Sachs.... The pension of a retired school teacher is directly linked to the health and vitality of these companies. We have to recognize that. And after he said that, I told him he was a very powerful guy, controlling all these companies.

So perhaps I'll get the chamber to offer a comment on that, but I think we have to stop separating ourselves from the well-being of corporations in this country.

Martin, do you want to comment on that? I know it's a very tough question for you.

[Martin Salloum]

I think you're looking for a very generalized answer to that. And I know that Hollywood right now.... I was watching a television show last night with my parents. They were looking for a criminal and the person said a business person and a psychopath were really the same thing, so they started looking at a list of business people and found the criminal. I doubt even Mr. Marston would go that far.

But I think the overdramatization in our entertainment system has painted a picture that's very far from correct. We talk about the amount of money a bank will make in a given year. They don't talk about how much that is over the amount of capital they have invested. They talk in terms of gross dollars.

I'm going to go off a little bit, James, if you don't mind, and take the opportunity to answer your question, based on a lot of the comment here when we talk about corporate tax cuts and have some questions about vision. A number of years ago, when my good friend Jim Dinning was the provincial treasurer of Alberta, he noted that we spent more money in Alberta on economic development than we brought in on corporate taxes. He suggested eliminating corporate taxes and eliminating spending money on economic development. We would be further ahead and probably wouldn't have to advertise Alberta as a place to go. And that's maybe something for the folks in Saskatchewan to think about. If we did that in Alberta and eliminated corporate taxes, would that have an impact on the jobs in Saskatchewan and the reverse effect in Alberta? I would imagine it would.

So if you don't think those things impact jobs and wealth and poverty, imagine what would happen if Alberta decided they weren't going to have corporate taxes any more. Or imagine what would happen if Canada did that.

That's just a little fantasy. I don't want to give you any indigestion, Wayne, but....

[The Chair, Conservative, James Rajotte]

On that note, I want to thank all of you for being here. I want to thank you for your ideas this morning in presenting and for responding to our questions. It was a very good session.

Colleagues, we'll suspend for a couple of minutes and we'll bring in the second panel.

[The Chair, Conservative, James Rajotte]

I would ask our colleagues to take their seats, please. We'll begin the second panel.

I thank all our guests for coming in and being with us here today. We have a number of organizations presenting in this session.

The first organization is the Investment Industry Association of Canada. We also have CropLife Canada, the Saskatchewan Institute of Applied Science and Technology, the Grain Growers of Canada, the Saskatchewan Association of Rural Municipalities, and the University of Saskatchewan.

Thank you all for being with us. You will each have five minutes for an opening statement.

We'll begin with Mr. Russell from the Investment Industry Association of Canada.

[Ian Russell, President and Chief Executive Officer, Investment Industry Association of Canada]

Thank you, Mr. Chairman.

It's a pleasure to be here this morning in Saskatoon.

I represent the Investment Industry Association of Canada, which is the trade association for the Canadian securities industry. We represent 200 investment dealer firms coast to coast across the country. We provide advice to retail and institutional clients, we provide corporate finance advice to corporations, and we structure and raise equity and debt financing for governments and corporations.

My presence here in Saskatoon is indicative of the national framework of the association. Our members are located in all parts of Canada and play a very important role in strengthening the regional economies by raising local capital and advising investors right across the country.

This budget is going to take place in difficult circumstances. Investors in Canada are under a lot of strain and stress. We're seeing low rates of interest, a lot of market turbulence, investors concerned about their portfolio values, and a need for income for retirees. These deflationary conditions are quite difficult.

On the issuing side, similarly, the evidence suggests that companies are increasingly having difficulty attracting capital. Overall, in common equity financing, we're down 54%, third quarter over the second quarter, and we don't think that circumstances will change much in the fourth quarter. Small and mid-sized companies are having a great deal of difficulty raising financing.

We recommend that the government stay the course to meet its G-20 targets for deficit and debt reduction. I think this is the linchpin in ensuring confidence. It is very important for the government to continue with the final year of reducing the corporate tax rate in Canada. This government has withstood a lot of pressure in holding to its reductions in corporate tax rates, and that is very important. There are three reasons. First, it's critical to growth. Second, it's important, particularly in the corporate tax rate side, to get those rates competitive, because there are huge opportunities for Canada to attract business from abroad. Third, our track record of managing our finances, holding growth, and minimizing the impact of the financial crisis in 2008 is the envy of the rest of the world, and it's given Canada, with its open economy, a lot of leverage in encouraging our other partners in the G-20 to get their houses in order. This is important, in light of what we've seen with the problems in Europe.

Finally, I have a couple of recommendations that I could explain later in questions.

We've argued for a number of years that there should be an incentive to help small and mid-sized businesses raise financing, especially in these conditions. When companies reach mid-size, say $500 million in market cap, that's when they really run into problems raising capital. This would be an important incentive, which could take the form of a lower capital gains tax rate, extending flow-through shares beyond resource companies, or extending the advantages of the preferred corporate tax rate to these companies.

On pension reform, group RRSPs are an important retirement program for small companies. It's cost effective and it's the fastest-growing component. There's $40 billion outstanding and about three million Canadians with these programs. The employers who offer these programs should be on an equal footing with employers who offer other defined benefit plans, which is to say that they should be exempt from payroll savings tax.

Finally, we commend the government on increasing the arsenal of retirement plans through the PRPP. We have a number of specific recommendations to improve the effectiveness of that instrument, some of which are still in discussion.

Thank you for the opportunity.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from CropLife Canada.

[Dennis Prouse, Vice-President, Government Affairs, CropLife Canada]

Thank you, Mr. Chair. CropLife Canada thanks you and the other committee members for inviting us here to testify today.

CropLife Canada is the national trade association representing manufacturers, developers, and distributors of plant sciences innovation, including pest control products and plant biotechnology for use in agriculture, urban, and public health settings.

We are committed to protecting human health in the environment and providing a safe, abundant food supply for Canadians. We believe in driving innovation through continuous research.

CropLife Canada is a member of CropLife International, a global federation representing the plant sciences industry in 91 nations.

Our mission is to enable the plant sciences industry to bring the benefits of its technologies to farmers and the public. Those benefits manifest themselves in many different forms, including creating jobs, driving agricultural exports, strengthening the rural economy, and increasing tax revenue for governments.

The increased yields farmers get when they use crop protection and plant biotechnology products do more than just improve the bottom line for farmers. They stimulate economic activity that ripples through the entire Canadian economy. Crop protection products and plant biotechnology lead to quality and yield enhancements that lead to 97,000 additional full-time Canadian jobs in more than 20 different sectors, including manufacturing, wholesale, retail, and financial.

Increased crop production due to plant science technology generates $7.9 billion in value for farmers of field fruit and vegetable crops and creates $385 million in tax revenue for the three levels of government.

Plant science technology has also enhanced Canada's standing as a net exporter of food. About 65% of Canada's food surplus can be attributed to increased yields because farmers had access to our technologies.

Canadian families save 58% on their weekly grocery bill thanks to modern crop protection and plant biotechnology tools. In fact, Canadians currently spend only 10% of their household income on food, compared to over 18% in the 1960s.

The pace of innovation in plant biotechnology is increasing. Between April 2010 and March 2011, 177 new varieties of peas were registered by the Canadian Food Inspection Agency. Seventy-nine percent of those varieties were registered by private sector feed companies. Biotechnology was a strong driver of this growth.

Globally companies invest about 11% of the profits directly back into research and development.

CropLife Canada would encourage the government to keep three key policy priorities, which we believe will grow the economy as a whole as well as the knowledge-based economy in particular.

The first would be to continue to negotiate and ultimately implement a comprehensive economic trade agreement with the European Union and to aggressively pursue new trade agreements with other major trading partners.

Collectively the EU represents the largest economy in the world. Outside of the United States, the EU represents Canada's most promising growth market for both commodities and value-added products. Our industry is strongly supportive of all efforts by the government to open global markets and to pursue trade agreements that will allow Canada's agricultural sector to grow and prosper.

Second would be to finish the work of the red tape reduction commission, ensuring that there are clear measurements of success across every government department and agency. Our industry made a submission to the red tape reduction commission, identifying a number of easily remedied regulatory issues across agencies and departments such as the Canada Food Inspection Agency, the Pest Management Regulatory Agency, and Environment Canada.

The commission holds great promise for improving efficiency and fostering innovation, but only if every department and agency is held accountable for addressing the recommendations made to it by participants.

Finally, Mr. Chair, would be to set down clear markers for success in the work of the Regulatory Cooperation Council. Improving market access to the United States and knocking down regulatory barriers between the two nations will grow jobs and improve prosperity. The United States is our largest customer for agrifood exports, and will continue to be, due to proximity and a shared commitment to science-based regulations.

Canada's access to the United States market is vital to Canada's plant sciences sector and to many of our stakeholders. We look forward to clear progress being made on a host of regulatory inefficiencies and access choke points that hurt prosperity on both sides of the border. If these three key policy recommendations--increased trade, smarter regulations, and a reduction in Canada-U.S. border irritants--were struck, they could all make immediate, tangible contributions to enhance prosperity and competitiveness in the Canadian economy.

Thank you, Mr. Chair. I look forward to participating in the question period.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from the Saskatchewan Institute of Applied Science and Technology.

[Dr. Robert McCulloch, President and Chief Executive Officer, Saskatchewan Institute of Applied Science and Technology]

Thank you, Mr. Chairman.

Again, thanks to everyone on the panel for the opportunity. It's just wonderful to have you in the great city of Saskatoon in the great province of Saskatchewan. It's a two-block walk from my office to here, so it's a delight.

As the previous speakers have done, please allow me to set the context of my remarks and our recommendations in our brief. I proudly serve as the president and CEO of the Saskatchewan Institute of Applied Science and Technology, more commonly known as SIAST. We serve nearly 26,000 distinct students each year, and nearly 3,000 of those students declare they're of aboriginal ancestry. We serve these students through our four urban campuses: Mr. Hoback insisted I start with the great campus in Prince Albert, which is our Woodland campus; our Kelsey campus in Saskatoon—Kelly, I hope you don't mind going second; Wascana in Regina; and Palliser in Moosejaw. And, panel members, please know we're proud to serve international students around the world through our online, web-based programming.

We are one of more than 150 colleges and technical institutes in Canada, and we are part of that acronym ACCC, the Association of Canadian Community Colleges. We are responsible for technical education, skills training, and applied research across the country.

Our overall theme in our recommendations—and we have three in our report—really is about the federal contribution in education and post-secondary education. Our recommendations are that notwithstanding provincial and federal criteria on this, we hope the federal government will continue, and in fact increase, its strong commitment and involvement in education and post-secondary education in Canada.

You can count on us in the college sector to support the training of skilled workers in our country, but we need to work together. We need all aspects of government working in that. We note with interest that HRSDC has projected a need for nearly seven million college graduates over the next seven years, along with nearly five million university graduates over that same time period. It's a wonderful challenge for us, but again, we need to be working together to meet those challenges of successful graduates.

You can count on us at SIAST, and you can count on the colleges for the HQP—those highly qualified persons—and the applied research our country needs. We work at the training, testing, and the application levels that are key to small and medium enterprise and to manufacturing in this country. I look forward to questions or comments on that.

If I may, I will just make a brief comment in the reverse order that was in our submission, because I would like to close with the aboriginal point. We need to look back to the future with regard to the federal government's involvement in the establishment of technical institutes. The first recommendation simply is that we endorse the recommendation by the Association of Canadian Community Colleges to the standing committee to establish a separate fund for post-secondary education transfer with accountability requirements directly to Parliament. We recognize that Parliament needs that accountability standard, and we fully support that.

We also are involved in applied research. That's the key. Our work is in applied research. For example, on Monday of this week I attended a meeting of industry and NGOs, where we were looking at water resources and water quality and how we could work together to make sure water quality across our country is maintained and in fact improved. So the second recommendation in our brief is that SIAST supports the ACCC recommendation to allocate 5% of federal research dollars to applied research.

Last but not least, I would like to leave the committee with the import of aboriginal education. Again, we are proud to serve 3,000 aboriginal students. We have implemented an aboriginal student achievement plan, and I look forward to describing that to you. Please don't forget aboriginal students, particularly in western Canada.

Thank you, Mr. Chairman.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We will now hear from the Grain Growers of Canada.

[Todd Hames, Director and Farmer, Grain Growers of Canada]

Thank you for allowing the Grain Growers and me, a farm owner, to be here to testify today.

I'd also like to give farmers' support to what CropLife's goals are. I think farmers do support what CropLife is doing and their goals of smart regulations and better innovations.

I'd also like to thank the Harper government for the beautiful weather this fall for harvest. As we know, the Harper government's responsible for just about everything that happens in the world, according to CBC.

[Voices]

Oh, oh!

[Todd Hames]

My name is Todd Hames. My wife and I farm 4,700 acres in the Marwayne area. It's about three and a half hours northwest of Saskatoon.

I am representing tens of thousands of successful farmers for the Grain Growers of Canada, from Atlantic Canada to British Columbia. Today I will focus on public research and innovation.

I think most of you know that farmers are divided on many issues, but this is one issue that unites all the farmers across this country. We appreciate that the federal government has started putting more money into research in the last few years. We also recognize that there has been an effort to have actual commodity associations, like pulse and canola growers, have more influence on our research priorities through science clusters and DIAPs.

The public sector does research on agronomics and diseases where there may not be an immediate commercial return, but the private sector doesn't always do this. Bayer, Syngenta, BASF, Dow, and others are huge investors in our research and innovation in Canada, but mostly just in three crops: corn, soybeans, and canola. Obviously, you see some big crops missing out of there--wheat and barley.

As farmers we see the need for both sectors, public and private. The United Nations forum on food has said that farmers will need to produce as much food in the next 50 years as has been produced in the last 10,000 years. The world's population will expand to 9.1 billion from the current 6.7 billion or 7 billion, depending on what number you're using, and yet Agriculture Canada's core research funding is far lower today than it was in 1994. Allowing for inflation, it would take an increase of $26 million per year for the next 10 years--that is, each and every year the government would have to add $26 million--to take us back to 1994 public research levels.

Farmers know the reality of trying to achieve a balanced budget on our farms, and we appreciate the same budgeting for the government, so the Grain Growers of Canada have proposed for you changes in the accounting for the royalty income within Agriculture Canada. Currently, income royalties from successful innovation that comes to Agriculture Canada go into the departmental budget. But--and this is important--it simply displaces government funding; it does not add to it. So all the royalties just come out of the funding. For example, if Agriculture Canada develops a new variety of wheat that earns millions of dollars a year in royalties, the next year the government simply reduces its budget. We suggest that in the absence of increased direct federal contributions, at a minimum, the federal government should lock in the current Agriculture Canada research budget as it is today and then tie it to inflation.

Next, the government should allow all royalty streams generated by Agriculture Canada discoveries to be added onto the current research budgets. This is a simple way to increase the Agriculture and Agri-Food Canada research budget because it is the royalties paid by the private sector that will increase funding.

The other important effect of this change would be to send a strong signal to Agriculture Canada scientists that if your projects and your research align with what farmers or food processors or end-use customers are looking for, then more money would flow back into their programs. Today, this would put between $5 million and $6 million into additional research each year. And we predict that this incentive would easily double or triple the new money annually within 10 years.

It is a win-win situation. The government only needs to match inflation, and the scientists who do good work see their programs grow. It's one way to start getting back to those needed research levels.

Thank you, and I look forward to your comments and questions.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from the Saskatchewan Association of Rural Municipalities.

[David Marit, President, Saskatchewan Association of Rural Municipalities]

Thank you, Mr. Chairman.

On behalf of the Saskatchewan Association of Rural Municipalities, I'd like to thank the committee for allowing us to appear and participate in this year's pre-budget consultation. My name is David Marit and I'm president of the organization, and with me is my good friend and colleague, Ray Orb, our vice-president.

SARM is an independent association that represents all 296 Saskatchewan rural municipalities. Our membership is strictly voluntary, and our strength comes from our membership, whose collective voice guides us in policy. We appreciate the occasion to discuss the three recommendations that we put forth in our written submission to the committee for consideration in the development of the 2012 federal budget.

You'll find the issues that are of the greatest importance to SARM members are the issues that impact the quality of life and productivity of key industries in rural communities. Industries thriving in rural areas include natural resources, manufacturing, and agriculture and agrifood. Therefore, our three recommendations centre on the access to reliable and well-designed road infrastructure that industries depend on to allow them to efficiently reach their suppliers and markets.

Legislative updates will further support development and program improvements meant to advance the competitiveness of Canadian business. Municipalities are responsible for the development, maintenance, and renewal of local infrastructure that connects rural industry to the larger primary highway system. Recognizing that 50% of Canada's exports are the natural resources, energy, agricultural products, and raw materials extracted from rural areas, municipalities need federal funding to improve local infrastructure that connects rural industries to the rest of the country.

Our first recommendation, therefore, is threefold. First, we recommend that infrastructure funding be earmarked solely for rural communities, so rural projects are not competing with cities and towns for the same funding package. Second, we recommend that federal funding also be allocated to improve north-south road corridors and ports that allow Canadian industries access to U.S. market opportunities. Third, we recommend that the federal government consult with groups like the Federation of Canadian Municipalities and SARM when designing new municipal infrastructure programming for 2014 to replace the existing and current Building Canada fund program.

We realize the depressed fiscal capacity of the federal government, but we believe that through funding more infrastructure programs, the potential exists to continue to stimulate and grow the economy, which benefits everyone. Municipalities are also facing a regulatory road block when building roads and bridges. The Navigable Waters Protection Act adds unnecessary costs to roads and bridges construction projects because of its outdated definition of a navigable waterway. Conducting a review of this legislation and enacting relevant amendments will not cost the government but will act as an economic driver in regions across Canada.

Our second recommendation, therefore, is that government conduct a review of the Navigable Waters Protection Act, with the end goal of changing the definition of a navigable waterway.

Because agriculture continues to be one of the driving forces behind the livelihood of rural communities across Canada—including Saskatchewan, where in 2008 it accounted for nearly 13% of the provincial gross domestic product—the importance of this sector must be mentioned here today. Adequate federal funding has been allocated to the agricultural sector, but it is important to ensure that the programs being designed under Growing Forward 2 work for the benefit of farmers.

Our third recommendation, therefore, is that there be an increase in funding for agriculture via Growing Forward 2 programming to ensure programs offered under the current Growing Forward are modified and improved in ways that help improve the competitiveness and success of Canada's agriculture sector.

In closing, I want to once again mention the need for the importance of transportation infrastructure and agriculture in the economy, not only for the province of Saskatchewan but for Canada as a whole.

In closing, I want to thank the committee again for having us appear here today. We will be glad to answer any questions.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from the University of Saskatchewan, please.

[Dr. Karen Chad, Vice-President, Research, University of Saskatchewan]

Thank you, Mr. Chair and my fellow Canadian colleagues.

First, the University of Saskatchewan wishes to thank the finance committee for this opportunity to present as part of their pre-budget consultations for 2011.

Perhaps you might let me start by saying that Canadian universities have a significant impact on Canada's innovation agenda and its ability to compete in the global economy. Universities are a $30 billion enterprise, which is comparable with the Canadian utilities sector and larger than the primary and fabricated metals or transportation sectors. So in short, universities' success is Canada's success.

As one of Canada's 15 medical doctoral research-intensive universities, we were extremely pleased to be able to provide three recommendations in our written submission to committee members.

Recommendation one is to invest in programs that support the ability of students, be they domestic or from across the globe, to obtain an affordable high-quality and relevant university education in Canada, with particular attention to recruiting aboriginal students and ensuring their success. The committee might be interested in a few quick statistics and facts that support the context for this particular recommendation. University graduates typically earn over $1 million more than those without post-secondary or college certificates. Higher incomes and academic accomplishments mean increased social and economic sustainability.

The Centre for Study of Living Standards estimates that closing the educational gap between aboriginals and non-aboriginals by 2026 would lead to income increases of $36.5 billion, government revenues of $4 billion, and a decline in government expenditures of approximately $14.2 billion. Additionally, international students contribute $6.5 billion to Canada's economy annually, and by 2030 the number of people in Canada over 64 years of age will double with little growth in the number of working-age people.

I'll go on to recommendation two. Continue to invest in Canada's major university research programs through Tri-Council, the Canada Foundation for Innovation, and other federal department and agency research funding programs. Expand the Canada excellence research chairs program to include additional sectors that are critical to Canada's economic future and raise indirect costs support for university research to levels that are more comparable to those of other developed countries.

Currently, the federal government spends $3 billion annually on R and D, but investment as a percentage of GDP has decreased while most of our world's innovating countries and nations have increased R and D support. We are also low when we look at supporting the indirect costs of research, and I'd draw your attention to a couple of quick statistics. Our current support is just over 23%. Compare that with the U.S., the U.K., and our Australian counterparts, where it ranges from 40% to 60%. So to be internationally competitive, Canada must increase or at least maintain our current levels of R and D funding and raise indirect costs support for university research to levels that are more comparable.

The last recommendation is to invest both financially and strategically in programs that enhance efforts to transform university research into commercial products and services and supports. Specifically, support development and funding of best practice technology transfer offices and fund more internships and fellowships with a commercial focus.

Canada does high-quality research, but this doesn't necessarily translate into knowledge transfer or commercialization. I think we have a collective role here. Governments can increase productivity by reducing administrative barriers and focusing on how best to support early stage high technology. We at the university can help by removing cultural barriers to commercialization, improving and simplifying technology transfer processes, and building better strategic partnerships with industry.

We need to look at things like providing early stage funding for university start-ups, pre-seed for continuing development of commercial applications of technology, or through internships, fellowships, and I just thought you'd be--