Finance Committee on Oct. 3rd, 2017

[The Chair, Liberal, Wayne Easter]

Thanks very much, Pamela.

We'll turn to Mr. Davidson of Universities Canada.

Welcome out of Ottawa, Paul.

[Paul Davidson, President, Universities Canada]

Thank you very much.

I am very pleased to be here with you today.

I'd like to begin by acknowledging that we're on Treaty No. 6 territory and the homeland of the Métis.

Last October I met with this committee in Fredericton, where we heard from farmers, fishers, and foresters about the value of research in their lives and in their communities. Today I'm very pleased to be with you in Saskatoon, a community that has leveraged higher education, research, and innovation to enhance the lives of people.

Most of you know Universities Canada. We've been active since 1911, and in every decade, Canada's universities have contributed to Canada's success. We represent 96 universities across the country.

We prepared a written submission and we're delighted to be with you today. It's great to be here in Saskatoon. The University of Saskatchewan is an outstanding example of the ways in which universities benefit all Canadians with research that saves lives, drives social innovation, and makes our communities stronger.

Universities improve quality of life by promoting prosperity, creating better opportunities, improving public transit, helping businesses to innovate, and advancing reconciliation.

I was thinking about this this morning. Whether it's the global challenges we read about in the paper of climate change, mass migration, changing trade rules, or the local issues you face when constituents come through the door of your constituency office, university research is helping. On such local issues as how you get to work, how to become more competitive or more profitable, or how to care for aging parents, the universities' research is leading the way.

I want to do a brief shout-out to the last couple of budgets.

Budget 2015 included transformative infrastructure investments that you're seeing roll out on campuses across the country, improving the learning environment for students and the research capacity of universities.

Last year's budget, budget 2016, included the CRC 150 competition, a competition for top-level talent. More than 200 world-leading scholars are trying to come to Canada. There's funding available for about 35 of them. Immigration changes are making it easier for students and top talent to come to Canada, and in the innovation clusters competition that's on right now, more than 20 universities are participating in 55 proposals that are business-led, making the connection between research, innovation, and prosperity.

Within your theme of enhancing Canadian productivity, I hope you'll see that universities are central. Let's start with the students, again, people you care about as MPs. One million Canadians are pursuing their first degree at universities on campuses across Canada. The experiences they have will determine Canada's prosperity for the next 50 years, which is why universities are working to provide research-enriched learning environments, work-integrated learning opportunities, and international outbound opportunities, a chance to study abroad.

Today's students get a 21st century education to prepare for the knowledge economy by learning from top researchers on campus, and we all know that innovation enhances productivity and that fundamental research is the fuel of innovation. Fundamental research generates knowledge contributing to breakthrough discoveries that lead to new products, services, and policy solutions.

You've heard a number of examples already this morning, and I know Jamie will provide more, but just think about Saskatoon 20 years ago, before Light Source existed. Think of the business that's been attracted to it. Think of the new solutions that have been developed. Think of the advances that have been made in agriculture, in health, and other fields. Think about the international vaccine centre lab built here, by virtue of which just one project is saving over $400 million for the swine industry in North America. Jamie can provide more examples, I'm sure.

Another example of university hubs as hubs of innovation comes from the Université de Sherbrooke.

Its innovation, partnership, and entrepreneurship strategy provides the right environment for business. It promotes collaboration with industry and entrepreneurship, as well as competitiveness and productivity.

Sherbrooke's partnership with global tech companies and research centres is pushing the limits of quantum-based research. Companies, including Google and Microsoft, strategically position universities to broaden their reach on the global stage.

We heard earlier about the very real impact of artificial intelligence on the agricultural sector. It's interesting to see that this was discovery-led, investigator-led research spanning 40 years, and now it's creating new jobs and transforming our country.

Let me get to my main conclusion, which is that Universities Canada recommends the federal government endorse full implementation of the Naylor report over a multi-year period, beginning in budget 2018, with a significant increase in support for discovery research through the federal granting agencies, and an inclusion of support for the associated industries for costs of research.

The Naylor report was authored by nine eminent Canadians who spent a year and a half looking at what the needs were. They found that investigator-led research had fallen 35%, that Canada had fallen out of the top 30 in the world in terms of research intensity, and that Canada was becoming less competitive and missing out on the economic benefits that research investments could bring.

Let me close by saying that we live in a time of closing borders and closing minds. We live in a time of disruptive technology. The changes that are happening in the U.K., in Europe, and in the U.S. are having immediate impacts on the nature of the Canadian research environment.

Now is the opportunity for Canada to lead. Now is the opportunity for Canada to shine. I ask this committee for its support in making strong, clear, and bold recommendations to the Minister of Finance and your parliamentary colleagues.

Thanks very much.

[The Chair, Liberal, Wayne Easter]

Thanks very much, Paul.

We'll now turn to Mr. Miley from the University of Saskatchewan. Welcome.

[Jamie Miley, Senior Strategist, Public Affairs, President's Office, University of Saskatchewan]

Thank you.

I'd like to start by pointing over your shoulder where you will see the University of Saskatchewan.

[The Chair, Liberal, Wayne Easter]

I already pointed it out to a couple of members this morning.

[Jamie Miley]

Did you add that it is Canada's most beautiful campus?

[The Chair, Liberal, Wayne Easter]

No, no. I come from Prince Edward Island.

[Jamie Miley]

You did not, and apparently, I'm not allowed to say such things because we need empirical evidence to support that, but trust me, it is.

Welcome to you all.

First of all, I too would like to acknowledge that we are on Treaty No. 6 territory and the homeland of the Métis. We pay respect to the first nations and Métis ancestors of this place and reaffirm our relationships with one another.

My name is Jamie Miley. I am senior strategist of public affairs at the University of Saskatchewan. I bring greetings on behalf of the president and vice-chancellor Peter Stoicheff, who unfortunately is unable to be here today as he is travelling on business.

There are three points I'd like to convey from the U of S, a member of the U15 Group of Canadian Research Universities. Some of this has been said before, but it bears repeating.

First of all, the Naylor recommendation that is most important to the university at this time is the call for greater federal support for major scientific infrastructure, as Paul already said. The current situation is that 40% of the funding for these critically important major scientific research facilities comes from the federal government, matched by 60% from the public and private sources. This allocation funding needs to be reversed to at least 60% from the federal government and up to 40% from other public or private sector contributors.

Given that our university alone, through its Canadian Light Source synchrotron and VIDO-InterVac infectious disease facilities, accounts for 23% of all CFI major science infrastructure funding, it's extremely important for us that this Naylor report recommendation be followed. These unique in-Canada synchrotron and infectious disease research facilities are enormous economic drivers. Not only did the creation and construction contribute to local economies and industries, but also these unique in-Canada facilities bring people from around the world to Saskatchewan. That's to say nothing of the economic spinoff that results from these discoveries and facilities.

The second point I would like to make is that we support federal review of federal funding for access to post-secondary education for indigenous students. The U of S has placed itself at the forefront in addressing the needs of our first nations people, in helping them find a place at our university where they can feel welcome, and in helping them to achieve their goals.

We understand that the 2018 budget will contain some short-term ways of addressing improvements to the PSSSP. Our president, Peter Stoicheff, chairs the Universities Canada education committee that is supporting the federal government's review of post-secondary funding for indigenous students. Because of the large number of indigenous students at our university and in this province, we feel that this review is extremely important.

Studies by a professor in our economics department have shown that the education gap costs the province and beyond billions of dollars. In his latest study released last week, Professor Eric Howe noted that just raising the indigenous high school diplomas to be the same proportion as for non-indigenous populations is a $21.9 billion benefit. This alone is equal to more than one-quarter of the highest value of provincial GDP recorded in Saskatchewan's history, and the largest payoff of all is for a university degree.

The third point I want to make is that the federal government's innovation agenda is an initiative that the U of S can help advance. The University of Saskatchewan is an economic powerhouse in this province. We contribute $1.3 billion to the provincial economy every year.

Consider this: In the 1970s, nearly half of the arable land was summer fallow. Through investments in science and innovation, our colleges in agriculture and engineering have developed new crops and seeding technologies that have turned that number into 100% use of these lands in any growing year. What does that mean? It means that since 1970, innovation alone has produced a net yield of nearly $50 billion.

The impact of that number is truly staggering. When you compare the amount of money that has been invested through provincial grants to the university, roughly in the neighbourhood of $9.5 billion in investment with a $50-billion return, I think we'd take that business deal any day of the week.

The strengthened connections with the federal government that is fostering links between university research and industry to help find solutions to local and global challenges are, indeed, valuable to the regions and to the country as a whole. The superclusters program is an excellent example of why we are optimistic about what can be achieved through this innovative initiative.

Thank you for taking the time to hear our views. At the University of Saskatchewan, we look forward to continuing to work with the federal government in building a more prosperous and globally competitive Canada.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Jamie, and thank you all.

I would say to anybody who has not seen that infectious diseases facility, I have been there, and it is really unbelievable what it does, as well as the engineering in the facility itself. It is something to be quite proud of. I can say that without a doubt.

Now, we will turn to questions. We can go to six-minute rounds, starting with Mr. Fergus.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you very much, Mr. Chair.

I want to thank everyone for their presentations and for welcoming us here in Saskatoon. I am used to saying, “Welcome to the House of Commons”.

I am very pleased that everyone is taking part in this initiative to present their ideas on how we might improve the next federal budget.

I want to add to the Chair's comments. I want to commend not only the work of the University of Saskatchewan, but also that of Canadian Light Source. I had the pleasure of seeing it at the last minute during my last visit. I want to thank Mr. Norris and his team at the University of Saskatchewan for welcoming me. The centre is extraordinary. That brings me to the questions I wanted to ask.

Many of you raised the issue of the federal government's disinvestment in science and research. All of you mentioned it with regard either to the Canadian Institute of Nuclear Physics or materials research.

Mr. Root, I have a question for you. If I am not mistaken, you mentioned that your recommendation is to invest $24 million over three years to eventually end up with an annual investment of $19 million. You also said that that was a lot less money than is being invested in Chalk River. Did I understand you correctly?

[Dr. John Root]

I believe I understood the question.

Thank you for your question.

The stated reason that the NRU reactor is being shut down is a financial reason, because the cost of running the NRU reactor is in excess of $100 million a year. Shutting down the reactor is a bit of a shock to the scientific system and perhaps the impact on materials researchers who come to use the beams at the NRU reactor was not realized. What can we do to preserve that capability, while Canada takes a breath and thinks about the future, rather than throw the baby out with the bathwater, by accident perhaps?

What we are proposing is that we ramp up a national program that uses access to other neutron sources temporarily, perhaps for 10 years, so that the scientists and the thought leaders can maintain a Canadian program and a Canadian community. This would enable science to continue and young people to be trained, rejuvenation of the community, and also have a pool of expertise that can inform future government decisions about possibly investing in a replacement for the NRU reactor. This is something that seems to be very far down the road, but if you lose that expertise now, you have a voice missing at the time you're thinking about that kind of investment.

There's a twofold benefit that we're trying to preserve and it's not just because we're old guys with a little bit of white in our beards and we want to keep doing the same old thing. There's a true belief that the knowledge you get from neutron beams research on materials benefits every part of Canadian society and delivers benefits to the world in health, safety, transportation, communication, and all sorts of things that affect the lives of everyone.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you, Mr. Root.

I believe I have four minutes remaining or I still have four questions to ask.

Mr. Huber, Mr. Davidson, Mr. Miley, and Mr. Bouchard, as far as investments are concerned, you all talked about the Naylor report and said that it was important for the federal government to increase spending by $400 million. That is very good and I understand why.

To support this point, can you explain to the committee how Canada has truly lost ground and why it is so important that we regain this ground in order to be part of the economy of the future? That is my first question.

My second question has to do with the arts. I am very pleased that the Naylor report also mentions a need for increased investment in research agencies. What role does the arts play in research and social sciences? Can you explain that to us?

Perhaps we could start with Mr. Davidson, followed by Mr. Miley and then Mr. Huber.

[Paul Davidson]

We've lost ground in two ways. People heard me before the committee in the previous government that there were incremental investments over that period, from 2006 to 2012, but in real terms, the granting councils lost about 7% of the value of what had been received.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Mr. Chair, on that, I want to thank my colleagues across the way. Having worked in the university setting, I must say that former Prime Minister Harper and his government always maintained minimal investment even in the era of cutbacks. I thank them for that. It is important to give credit where credit is due. This is not a partisan issue.

[Paul Davidson]

There were increases, but the real value fell. The shift was toward more applied, more commercialized, and more directed research, so when we speak about the loss in research dollars for investigator-led discovery research, the loss of 35% that the Naylor commission reported, is a huge falling behind.

The other aspect is other countries are investing further and faster, and this is where the gap is going to grow. In 2005-06, we were third in the world in research intensity. We've slipped to seventh in the OECD, and now we're falling even further behind. In total research expenditures, we're now out of the top 30. That's unacceptable for Canada and for Canada's future.

I want to touch very quickly on the role of the arts and social sciences, because we believe in investing across the disciplines. The Naylor report indicated that the Social Sciences and Humanities Research Council has been disfavoured over the last decade and that investments there would be worthwhile. Let me just put it in the context of the nature of the problems we're facing in society: reconciliation, mass migration, rules of trade, and rules of international order. These are issues that we get at through studying the social sciences and arts.

[The Chair, Liberal, Wayne Easter]

We'll have to leave it there. We're substantially over.

Mr. Kelly.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you for your presentations.

I'm going to begin with Ms. Lindbjerg. Thank you for that presentation. You mentioned a number of things. You touched on your theme of competitiveness, and that the taxation system is a key part of competitiveness for the Canadian economy. The measures that were proposed in the white paper on July 18 certainly present some challenges to competitiveness and to understanding how they will impact competitiveness if any or all of those recommendations are enacted. You mentioned simplification. The government had promised to simplify the income tax process. Did any of your members comment on simplification, or raise concerns about the proposed reasonableness tests that may be applied to the payment of dividends to related parties?

[Darla Lindbjerg]

Yes, we've had a lot of comments from our membership around simplification. Our members feel the proposed changes are vague. They are surrounding a very complex system, and not a lot of clarity is coming from the government as to what the impacts will be, so it's a case-by-case scenario. They're going to their accountants and their tax professionals and having these conversations. The impacts they're seeing for their businesses are huge.

They would like to see a simplified tax system in place. That would be great. Right now, our current tax system is fair, it's intentional, and the whole purpose behind taxation is to incentivize innovation and investment in business to propel our economy into the positive. If we take that away, we're setting ourselves up for failure.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Even without debating the individual merits of some of the proposals, how have the general language used and the explanation for the reasons behind these changes made your members feel?

[Darla Lindbjerg]

They are frustrated, angry, and confused. The emotions coming from our business members are not good. A lot of them have done their tax planning around the current tax system. Their retirements are at stake. Their children's educations are at stake. It's not a game to them. They have spent a lot of years working up, investing in their businesses, and planning for their future as well as their family's future, and with a flick of a pen, they are seeing that dissipate. That's not what they want to see.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

You mentioned vague and unclear statements, concern, and confusion. What are the effects of this anxiety on business itself? Have members commented on setting aside plans for expansion, new hiring, or any plans for movement of capital, or any plans for movement of businesses themselves either to other jurisdictions within Canada or outside Canada?

[Darla Lindbjerg]

The majority of comments I have heard have all been negative in that regard. Our members, our businesses in Saskatoon, are looking at closing their doors, taking on full-time employment, or moving across the border. We have everything from a mom-and-pop type shop in our community to specialists in the health care field being impacted by this. We have specialists over at our hospital. We have a children's hospital being built, the first in Saskatchewan, which is great for our community and great for our province; however, we have general practitioners as well as specialists being impacted.

Specialists here in Saskatoon are being contacted by the U.S. one to seven times per week. I have been in consultation with members, and I have had conversations with them, and they have friends or know people who are specialists who were in the United States at that moment doing interviews, looking to move their practices.

That's not going to help our economy, and that's not going to help our quality of life.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Medical specialists in this city are not only being recruited by American hospitals or American employers, but some have already moved in anticipation of the worst.

[Darla Lindbjerg]

I have not followed up with that member to see if the individual accepted the job offer, but the indication was that it was very attractive, that they were getting a lot of benefits and a higher income. They were getting tax breaks they wouldn't otherwise get here with the proposed changes.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

What about in the smaller communities? In the larger cities or in a city even like Saskatoon, which has a medical research facility and and teaching hospitals, the talk is often around specialists. What about in the smaller communities? Have there been comments from either your members or the public about the concern of smaller communities to retain medical professionals?