Thank you, Mr. Chair.
We have focused our amendments on substantive changes to this omnibus bill, Bill C-45, because we believe that Canadians would want us to debate the substantive issues here.
We're very concerned about the changes to the SR and ED tax credit, the research and development tax credit, in clause 9 and later on in clause 27. In essence these changes will cut $500 million annually to research and development for business in this country. We already know that our business expenditure on research and development intensity, which is a key factor in productivity growth, is less than half of our U.S. neighbours and well behind the OECD average, and it is declining.
We live in a challenging global economy and we must innovate in order to compete, but sadly the Conservatives are taking Canada in the opposite direction. These changes will hurt innovation in Canada, and as we've heard from companies, it will drive them to reduce the research and development activities dramatically or shift their activities to other jurisdictions.
The changes we are proposing will give more time for consultation and a more balanced approach to improving the SR and ED program and other government supports for innovation. There has been talk about offsetting the changes to the SR and ED program with possible future funding, but, sadly, we haven't seen that, and businesses are making decisions right now. We think that any attempt to try to balance the books at the cost of innovation, at the cost of research and development, will just harm our economy and is short-sighted and poor economic management.
Some of the specific changes that are included here in these cuts, for example, would eliminate the eligibility of capital expenses and reduce the eligibility of contract payments to just 80%. These cuts will total more than $100 million by the Department of Finance's estimate, but as we've heard from the Canadian Manufacturers and Exporters, they believe the true cost might even be as high as double that amount.
In our proposed amendments NDP-1, NDP-2, and NDP-3, we would delay the Conservative changes by five years. We disagree with the Conservative rush to impose these major cuts to support business research and development at a time when our economy needs greater investment in innovation.
The cut to the amount of contract payments for eligible SR and ED credits from 100% to 80% will hurt specialty research and development businesses and contractors. It will also increase the cost of R and D initiatives for companies and could push the marginal projects to other jurisdictions, which would cost Canadians jobs, reduce our innovation outcomes, and further erode the business expenditure on research and development.
We also oppose the cuts to capital eligibility, which we believe will disproportionately hurt sectors that depend on capital-intensive R and D, such as pilot plants, and given the increasing competition from low-wage countries, Canadian manufacturers must increasingly innovate.
We've heard from the Canadian Manufacturers and Exporters, who conducted a survey of their members, that 69% would reduce their R and D spending and 18% would relocate R and D activities outside Canada as a result of these Conservative cuts. That's why we believe these cuts should be postponed. We need to consult more and we need to have a practical plan to boost research and development and innovation and not cut business opportunities and jobs here in Canada.
Thank you, Mr. Chair.