Industry Committee on May 28th, 2015

[John McKay, Liberal, Scarborough—Guildwood, ON]

Again, it would be helpful if that information were tabled, because on the face of it, there seems to be a contradiction between what the minister says and how Bloomberg is ranking it.

The final question has to do with a statement that was put before this committee by Professor Martin. He said:

If I could make a recommendation, it would be to not stop supporting the existing people and the ones who are out there, but to focus a little bit more attention and energy,...on supporting the smaller companies and ideas and entrepreneurs and helping them move through the process so they can become the bigger companies. As a researcher, I have no mechanism to do that now. I have to find a big company that is willing to give me a big amount of money....

Apparently Mitacs invests in innovation but not in the start-up phases that universities are advocating, yet there's an increase in support for Mitacs of 50%. What's your explanation of what the professor is recommending versus the decision by the government to increase the funding for Mitacs? I don't think he's actually objecting to the increase in funding to Mitacs.

[John Knubley]

No, I don't think he actually is. I think what he was raising, if I understood your question, was the question of what we need to do in Canada to grow firms.

I think, as I indicated earlier, the data actually shows, consistent with the minister's remarks, that we're very good at growing and supporting small firms. I think the minister referenced yesterday the new accelerated capital cost allowance in budget 2015 to support small business. We also changed the Canada small business financing program to help small business. The government has invested $14 million over two years in Futurpreneur Canada.

Indeed there's a whole series of investments in small business in budget 2015.

[John McKay, Liberal, Scarborough—Guildwood, ON]

What specifically addresses—

[John Knubley]

Then on the side of growing firms, I think if you look at budgets 2015 and 2014 you will see that the Government of Canada has invested in what we call incubators and accelerators, which are specifically designed to help small firms grow and to participate in global markets and to move to that medium-sized range. I think the government has taken steps to address the issue that Professor Martin has identified.

[John McKay, Liberal, Scarborough—Guildwood, ON]

The final question has to do with CANARIE. There's a reduction of $26 million to CANARIE programs. What's behind that?

[John Knubley]

I think this is simply reflecting changes in terms of cash disbursements.

CANARIE and Futurpreneur were renewed in budget 2015 and will get additional funding for that in supplementary estimates (A). The decline you're seeing is just reflecting the changes in grants and contributions and the expenditures related to that. As typically happens as we move through the supplementary estimates and beyond the main estimates, you'll see that the funding is replaced.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I'm just a little confused. You're reducing it in the main estimates and expecting to get it back in the supplementary estimates.

[John Knubley]

I'll let Lawrence Hanson, who knows these numbers upside down—

[John McKay, Liberal, Scarborough—Guildwood, ON]

Where does that leave the universities that are pretty dependent upon this virtual digital network?

[John Knubley]

Again, in budget 2015, there is further commitment to CANARIE. Perhaps Lawrence can speak to that.

[Lawrence Hanson, Assistant Deputy Minister, Science and Innovation, Department of Industry]

The numbers you see in the main estimates are just a result of the fact that this was the year in which existing funding for CANARIE was going to sunset.

When the estimates where tabled, in theory, going into the new fiscal year, that money would be gone, but given the fact that CANARIE has been renewed in the budget for the next five years, there is no reduction in CANARIE funding as a result.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you.

[The Chair, Conservative, David Sweet]

Thank you very much.

Mr. Daniel.

[Joe Daniel, Conservative, Don Valley East, ON]

Thank you, Chair.

Thank you, witnesses, for being here.

Clearly, the aerospace and space industries are a huge part of Canadian industry. They employ hundreds of thousands of people, and they have a significant role to play in the aerospace and space sector across the globe. Obviously we had the Emerson report that came up with a number of recommendations to be implemented. I just wondered if you could actually expand or explain a bit more on what has been done on these recommendations.

[John Knubley]

Yes. I'll let Philip Jennings elaborate, but I will just make a few basic points before I turn it over to him.

I actually joined Industry Canada in September 2012, just eight months after the review was launched and just two months before Mr. Emerson tabled his report. I was quite involved at the time in terms of working with him as well as with the industry that supported the committee. I was struck with how the industry supported the work that was being done by Mr. Emerson and his panel. I think it's almost a model for the kind of work we need to do with industry in that regard.

Since the tabling of the report we have moved forward to implement the recommendations. They were actually tabled, because of this process that was followed, in a way that was very practical and allowed for quick implementation. Phil, could you explain some of the things that we've done?

[Philip Jennings]

Sure. It's actually a pretty long list of recommendations that were made in the Emerson report and we have an equally long list of responses from the government. I'll focus on some key ones.

I'll start with what was announced in the most recent budget, which is really a commitment to work with the Aerospace Industries Association of Canada and other industry stakeholders and provincial stakeholders to develop a national aerospace supplier development initiative, which is essentially tailored off a successful model called MACH, which is with Aéro Montréal.

The government has committed seed funding that would begin next fiscal year and the balance of the funding toward that initiative would come from industry. It's meant to develop a world-class supply chain in Canada. The funds are geared toward small and medium-sized enterprises, where we're trying, for one thing, to bring up their performance. A lot of the funding that's provided is really about trying to make sure that people can rate and understand their performance and they can take action on where they feel they're underperforming, as well as a rating system so that the larger companies can rest assured that when they're dealing with a certain supplier they have a certain rating in terms of the quality of their work, so they're more likely to take part in a supply chain that's either local or global.

Another key commitment that was made in previous budgets, which the deputy has spoken of to some extent, is the $30 million that was provided to the Consortium for Aerospace Research and Innovation in Canada. Again, that was modelled off a successful model in Quebec called CRIAQ. Emerson essentially said that the future of aerospace and for us to be competitive is based in innovation. That's really about trying to marry the research institutions, the academics, and the industry players in terms of making sure they can develop the R and D necessary for the future platforms in aerospace and space. That was launched already in terms of the consortium.

Another key deliverable was a recommitment to SADI, a five-year recommitment for $1 billion. There have been a number of very successful projects launched through that. I think since its inception 37 projects have been supported under SADI.

Another one announced in the same budget was $110 million for a tech demonstration program, which is, as I mentioned, under the automotive supplier innovation program and is trying to get at moving from basic research to commercialization. It's really about the government sharing in the risk in terms of making sure that companies make those investments that will be necessary for the future.

I should mention that Emerson also made recommendations that applied to other departments taking action. Two of them were in the procurement field in terms of defence procurement. For both of those, actions have been taken in terms of the defence procurement strategy. One of the key recommendations was that when companies bid for procurement contracts in Canada they should be offering an industrial package of investments that they plan to make in Canada and that will now be part of the bid selection process. That has now been implemented.

Another key one was with Transport Canada in terms of certification. Canada is viewed as a world leader in terms of how well we do our certification of aircraft. Emerson recommended that we continue to focus on that area to remain world class. Transport Canada is now consulting with industry on that.

[Joe Daniel, Conservative, Don Valley East, ON]

Thank you.

[The Chair, Conservative, David Sweet]

Colleagues, do you have any further questions?

Mr. McKay.

[John McKay, Liberal, Scarborough—Guildwood, ON]

My last question has to do with Genome Canada, which goes from $22 million or $20 million, and then drops to $7.5 million. Is it the same explanation as previously, that there's a difference between mains and supps?

[John Knubley]

That's correct. Well, specifically—and I think I gave this answer yesterday—Genome is currently funded under three different mechanisms: a statutory grant, a statutory contribution, and a voted contribution. Total funding for Genome Canada in last year's main estimates was $86.2 million. At $78.3 million in these main estimates, the actual net decrease from mains to mains is $7.9 million. I think that was pointed out yesterday. It derives from overlapping funds under these three sources following previous budget announcements, minus $0.2 million under the budgeted statutory grant from budget 2008, positive $7.3 million under the statutory contribution for budget 2010, and minus $15 million in a voted contribution from budget 2012. If you do the math, that takes you to the $7.9 million difference.

I stress, as I think I did yesterday, Mr. Chair, that this is really about a change in the program and a fluctuation based on Genome's cashflow requirements. Perhaps I'd ask Lawrence Hanson, though, to talk a little more broadly about Genome and where it stands and what it's doing.

[Lawrence Hanson]

I'm happy to do that.

For Genome, as the deputy indicates, the reduction in funding is about cashflow and it's off a much larger base. It's not off the $22 million. It's off the $86 million.

They continue to be operating large-scale contribution programs in multiple areas of genomic science. I think we tend to think about genomics as very specifically in the issues of human health, but there are obviously genomics applications in a wide variety of sectors, including such areas as agriculture, mining, and promoting environmental sustainability. One thing Genome seeks to do is to have competitions and fund research in a variety of sectors. They work with regional genomic centres across the country that can be focusing on various kinds of specific needs in specific economic sectors.

Again, it could appear that this is a move from $22 million to $7 million, a much larger decrease than it actually is. This is really more about their current cashflow needs.

[John McKay, Liberal, Scarborough—Guildwood, ON]

When we to and fro and add and subtract and multiply and divide, where are we with Genome? Is it roughly the same funding level? Is that a fair statement?

[Lawrence Hanson]

It's moving from about $86 million to about $79 million, a change of $7 million, but this money exists in the fiscal framework. It's just about their cashflow needs.

I think it's just words, and I should probably say this, because it's important for a lot of our science and innovation funding. Many of these organizations—Genome Canada, the Canada Foundation for Innovation, etc.—are not A-base entities inside our departmental reference levels. These are actually contributions that are made at the front end, and then new inlays of funding are put in place over time. The money, if you will, is invested up front, and then it can fluctuate normally during the course of the years of the contribution agreement.

For things such as Genome and CFI and others, infrastructure and capital expenditures and so forth are often involved. It's impossible to predict those to the dollar each year, so inevitably there's going to be some fluctuation. But the money they have is in the fiscal framework. It's not that there has been any kind of cut or reduction to their funding.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Will you be back here with supplemental estimates for Genome over the course of the year because of the fluctuations?

[Lawrence Hanson]

If the Genome cashflow needs were such that it required something, we would look into it, but at present I don't think that is the case.