In terms of what's been missing, first of all, let's go back to the issue of neutrality. People make investments. Right now we have a general RRSP system that encourages people to invest in whatever they wish to invest in, but in the case of the labour-sponsored venture capital credit we have a special credit that is provided for investments that are supposed to go to venture capital. However, it doesn't necessarily go into venture capital. In fact, again I encourage you to read Jeffrey MacIntosh's paper, but just to quote from him, he said that with $4.2 billion—and this is in 2011—of the $8.8 billion that Solidarity had, $1.5 billion was invested in public companies—you should be getting a relatively good return if you're just making the market return on that—hedge-fund units, $216 million; bonds, $2.3 billion; and money-market instruments, $154 million.
The other part of the money, $4.27 billion, which are called developmental capital assets, are not all venture capital. In fact, in the end only a small part of that is actually invested in the private equity of smaller firms. Then the question is, why do we give a 15% credit for that to encourage savings? Why not just give 15% for everybody to invest savings if that's the idea?
The problem is, what we're doing is directing funds into relatively low rates of return, and that goes back to my point about venture capital. We're trying to encourage more venture capital in this country, and venture capital is risky. If you were making a relatively good economic return on venture capital, then because of the risk you have to earn more than, let's say, a treasury bill, which is a government riskless rate of return of say just 3% or 4%. We should be making in venture capital at least 8% or 10% on average over time, but that's not been the experience in Canada. We've been getting money in venture capital firms that are earning very low rates of return. Clearly, the policy is not working. It's not creating jobs as much as we think. In fact, if you just have money that's being invested in public companies or bonds, that's not really doing much either.
If we're misdirecting funds into low rates of return, then we're actually hurting productivity in this economy because what we're doing is directing capital into the wrong investments, and that's why neutrality is often very important because the market will sort out what are the best places to invest. If we feel that we need to play out some direct action on venture capital, and I think those are questions that need very careful examination, I think what many experts have concluded over time is that scale is very important. What's been achieved so far has been a lot of very small VC firms earning very low rates of return, and we're not achieving what we really think we were hoping to achieve. So it's been a failure of policy, and Ontario recognized this in getting rid of the same credit, and some other provinces haven't had it, including my own, Alberta. Frankly I think we do need a better approach, and this credit is not the one that's going to achieve it.