Mr. Speaker, Canada has to create a climate that encourages investment and innovation, a stable, predictable economic climate that inspires confidence in entrepreneurs and will enable us to stimulate innovation. We have to create good, high value-added jobs and develop our vast natural resources responsibly to create a more prosperous, greener and more just society. To do that, we have to provide competent management of the economy and government.
Whether the issue is the criteria that guide the review of takeovers of our natural resources or the budget implementation act, the government is sowing uncertainty and doubt where predictability should prevail. The private sector is now used to receiving an annual budget in March that does not even bother to announce the actual initiatives the government intends to bring in. For the rest of the year, we get three omnibus bills that are unrelated to the budget document, into which the government tosses all its dirty laundry and the bills it does not have the courage to defend in the House of Commons, let alone before parliamentary committees. This is not a climate that inspires confidence.
In this monstrosity of a bill, which is even bigger than the budget was, the opposition is particularly concerned about the nearly $500 million cut to support for research and development in the private sector. Cuts to scientific research and experimental development tax credits are of particular concern to the private sector. These arbitrary cuts exacerbate the problems our manufacturing sector is already suffering, fragile as it is as a result of our high dollar. They threaten the climate of certainty that encourages investment and good job creation in Canada, in Quebec and in my riding, LaSalle—Émard, where manufacturing is an important economic activity.
The budget reduces the 20% general R and D tax credit to 15% for the big corporations that do most of the R and D in Canada.
In a letter to the Minister of Finance, the Canadian Manufacturers & Exporters wrote:
The reduction of the ITC rate will impact the ability of Canadian divisions of multinational corporations to attract global R and D mandates in Canada and will require Canadian headquartered companies to examine outsourcing R and D as a more cost-effective way of driving innovation and productivity....Unfortunately, the signal that the proposed SR&ED changes send are two-fold: (1) Canada does not value or welcome large R and D mandates; and, (2) companies with large R and D projects should look elsewhere in the future. Large R and D projects, affiliated with existing manufacturing operations, are the prime driver of innovation and commercialization in Canada. While it is true that many enterprises will continue to invest in R and D, the proposed changes to the SR&ED program mean that those investments are much less likely to be placed in Canada.
The government has also cut the payroll expenses that companies can claim instead of making detailed claims by 10%. But what is of greater concern is that the government has decided to reduce the tax credit for eligible capital expenditures.
On this last point, the Canadian Manufacturers & Exporters told the Minister of Finance:
Eliminating capital expenditures from eligible expenses will significantly and negatively impact the largest users of SR&ED – Canada's manufacturing sector – which is much more capital intensive than other sectors...it will have a much broader impact on the ability to retain and attract investment in Canada. Some manufacturers may continue to invest in R and D and carry additional costs, other companies will simply move the R and D to other jurisdictions where overall R and D costs are lower, providing a greater return on these investments. This will further undermine Canada’s innovation and commercialization performance.
This is extremely alarming, coming from the association representing a sector that employees nearly two million Canadians and generates $166 billion or 14% of our GDP. The manufacturing sector also does 45% of R&D in Canada and employs nearly 6,000 people in my riding, La Salle—Émard.
The artificially high value of our dollar is hurting our exports and our manufacturing sector. Quebec lost 70,000 jobs in the first three months of 2012, 8,000 of which were in the manufacturing sector.
Over the last decade, the share that the Canadian manufacturing sector contributes to our country's GDP has fallen by 2%. That decline has been felt especially in the lumber and pulp and paper processing industry, but also in the fishing industry. Between 2002 and 2011, the value of Canadian exports produced by the manufacturing sector fell by $20 billion. We are paying the price for a dollar that is too high.
The ill-conceived cuts to R&D tax credits will also be a drain on the profitability and competitiveness of the aerospace industry, an industry that is of vital importance to metropolitan Montreal and to Quebec. R&D cycles in that industry are counted not in months and years, but in decades.
The costs are astronomical, the financial risk is high, competition is fierce, and the margin of error is zero. This sector must be able to rely on financial certainty and long-term federal assistance. Federal tax credits for research and development are the only federal instrument that can provide this long-term certainty.
I spent the last few weeks of the summer visiting aerospace facilities in the Montreal area. In Quebec alone, the aerospace industry employs over 70,000 workers and provides economic spinoffs worth nearly $20 billion. This is no reason to rest on our laurels. The aerospace sector is rapidly developing in emerging economies. In Canada, in Quebec, our industry has reached a crossroads and needs leadership.
We must be able to provide financial certainty through government programs that support research and development in order to create greener, quieter devices. We need to introduce tools that help businesses put their ideas to the test before they reach the marketing stage, so that we can finally bridge the “valley of death”.
We must ensure that businesses operating in Canada enjoy the same opportunities as their foreign competitors in terms of federal procurement programs and calls for tenders.
While I may have jumped ahead of the release of the Emerson report on the future of the aerospace industry and begun a direct dialogue with businesses in that sector, I did so because the NDP is an engaged partner, one that listens. Once again, what we are hearing is that the industry is looking for partners, certainty and a long-term vision for our economy.
The Conservatives have reinvested only part of the savings from the scientific research and experimental development program in direct support programs. Entrepreneurs are being shortchanged $400 million. This is bad for innovation and bad for the economy.
Canadian manufacturers are saying that the government underestimated the cost to businesses by $250 million. The scientific research and experimental development program, or SR&ED, is an important tool in the planning of major sectors of our economy. Once again, the Conservatives are not fostering a predictable climate for R&D investments. This is bad for our economy.
The NDP supports sustainable economic development that is built on the creation of skilled, value-added jobs and the responsible development of our natural resources. Together, we can create a more prosperous, greener and more just society for all Canadians.