FINA Committee Report

CHAPTER FIVE — THE PRIORITY OF PRODUCTIVITY AND INNOVATION

Implicit is the understanding that the relationship between innovation, the economy and quality of life is symbiotic. Innovation is the catalyst for change; it will improve productive efficiency through the application of new techniques and discoveries, and within the context of environmental stewardship. Through its results, we can all equally share its rewards and benefits of an improved quality of life. (Canadian Council of Professional Engineers, 24 October 2002)

As indicated earlier in the report, productivity growth is the foundation for long-term economic development and prosperity and, consequently, a high quality of life. This growth often occurs as a result of innovation, which requires investments in research and development. Furthermore, productivity growth and the ability to capitalize on innovations are enhanced when a nation has highly skilled employees, which requires a focus on lifelong learning and skills development.

Research and Development

To be a major force in the New Economy, Canada must be — and be seen to be — an important hub of scientific and technological activity on a global scale. The government’s social, economic, and tax policies should send a loud, clear, and consistent message to the world that Canada offers a highly desirable home base from which to operate in the world economy. We need … an environment that encourages … Canadian centres of excellence to attract leading scientists, professionals, and entrepreneurs from around the world. Building such an infrastructure will provide graduates … with the best possible opportunities to pursue their careers and thus encourage them to stay in Canada. (Canadian Association of Insurance and Financial Advisors, 9 September 2002)

For a number of years, the federal government has focussed on innovation, most recently with the February 2002 release of the government’s two-component Innovation Strategy: Knowledge Matters: Skills and Learning for Canadians and Achieving Excellence: Investing in People, Knowledge and Opportunity. The Strategy focuses on the creation of an innovation-friendly business environment.

The Innovation Strategy undertakes a commitment for Canada to, by 2010:

On 18 and 19 November 2002, the federal government convened the National Summit on Innovation and Learning in Toronto, with the objective of engaging the private sector, non-governmental organizations, academia and government in shaping the priorities for Canada’s Innovation Strategy. The Summit also provided an opportunity for all sectors to commit to a Canadian innovation and learning action plan.

As the nation realizes the importance of research and development as contributors to innovation, attention must be paid to support for research and development activities, commercialization, patent and copyright protection, and smart regulation.

Support for Research and Development

[L]et me turn to the importance of funding for the federal granting councils. This is the bedrock of university-based research. It is difficult, if not impossible for governments to predict winners and losers in the knowledge economy. No one foresaw, for example, that the Internet would arise from a need of physicists engaged in the most basic research to exchange massive amounts of data internationally. No one would have thought that an obscure study of the fur trade in Canada by Harold Innes would spark a line of thought that transformed the way we think about communications technology in Marshall MacLuhan’s Global Village. These examples show that basic research led not only to the World Wide Web, but also to the way we assess social impact. (University of Toronto, 4 November 2002)

A number of entities play a vital role in helping Canada to meet its research and development targets, including the Natural Sciences and Engineering Research Council of Canada (NSERC), the Social Sciences and Humanities Research Council of Canada (SSHRC), the Canadian Institutes of Health Research (CIHR), the Canadian Institute for Advanced Research (CIAR) and the Canada Foundation for Innovation (CFI). By providing support to Canada’s R & D community, they help to improve Canada’s productivity and contribute to innovation. In the 2001 budget, the federal government increased the annual budgets of the NSERC and the SSHRC by 7% each, for an annual increase of $36.5 million and $9.5 million respectively. Figure 18 provides information on the funding of the NSERC, the SSHRC and the CIHR.

The University of Toronto told the Committee that more than 75% of the inventions reported to it every year arise out of projects funded not by industrial partners, but instead by the federal granting councils. We were told, however, that the granting councils are becoming victims of their own success. According to the Canadian Consortium for Research, increased federal support for research infrastructure through the CFI has placed additional demands on the base budgets of the councils, as has the increasing number of new and young scholars being hired in Canadian universities.

The evidence received by the Committee indicates that the granting councils are not being funded to the same level. In particular, we heard from several groups, including the Canadian Federation for the Humanities and Social Sciences, the Université du Québec à Montréal and the Université de Montréal, that in contrast to the other granting councils the SSHRC is relatively underfunded. The SSHRC informed us that it can only fund 3.5% of the entire (relevant) graduate student population, while application rates for new scholars have increased 47% over the past three years in the core programs. It also remarked that recent funding increases do not address the fact that 55% of Canada’s academic community receives only 12.5% of total federal R & D funding.

While witnesses were generally supportive of the granting institutions, several suggested to the Committee that the presence of the CFI is leading to duplication in the federal granting structure, and that research and development efforts would be better served by redirecting CFI funds toward the other granting institutions. As well, we heard criticisms that the CFI favours larger institutions that have access to private funding and commercialization offices at the expense of smaller institutions, including colleges. A similar criticism of the CFI was made by the Conference of Alberta Faculty Associations about the Canada Research Chairs program. In its appearance before the Committee, it claimed that the program favours “institutions that already have CFI and private sector funding and are specifically designed to strengthen institutions that are already strong in terms of grants from the federal granting councils.” The CFI, however, told us that “[i]nstitutions in all parts of the country, institutions large and small, have quite similar success rates. The excellence that [the] CFI is seeking is found in all of these institutions. Remarkably, the distribution outcome is similar to that achieved in their competition for granting council funds.”

In the September 2002 Speech from the Throne, the federal government made a commitment to increase funding to the federal granting councils. The Committee supports increased levels of funding, but believes that the valuable contributions made by the social sciences and the humanities deserve recognition, and that smaller institutions must not face discrimination because of their size and/or lack of private-sector funding or commercialization offices. Moreover, accountability is needed regarding the disbursement of funds by these entities, since the responsibility for spending tax dollars carries with it a responsibility to be accountable to the Canadian public regarding these expenditures. For these reasons, the Committee recommends that:

RECOMMENDATION 13

The federal government increase funds for the federal granting councils and, in so doing, ensure that the Social Sciences and Humanities Research Council of Canada receives an appropriate share of the allocation. Moreover, the federal granting councils and the Canada Foundation for Innovation should consider the concerns of smaller universities and colleges when disbursing funds, and should ensure that they do not face discrimination.

Within Canada, support for research and development can also occur through funding of the indirect costs of research. The Committee heard from a number of groups and individuals on this issue, and their overriding recommendation was for a permanent program to cover such costs. We were told that indirect costs — infrastructure, equipment, libraries, administrative and other costs that are incurred so that research can be undertaken — can be quite significant. Problems financing these costs are often encountered, since funds are not typically provided in research grants for these costs. In the absence of funding, the result has sometimes been deterioration in infrastructure, equipment and libraries, since support must come from other parts of educational institutions’ budgets. We received evidence that for every dollar of funding received from the granting councils, an additional 40 cents may be taken from educational budgets for infrastructure needs.⁵⁴

In the 2001 budget, the federal government provided a one-time investment of $200 million through the granting councils to Canada’s universities and research hospitals to assist in financing the indirect costs of federally supported research. This initiative enjoyed wide support among the Committee’s witnesses, but the argument was made that a permanent program is needed. For example, the Canadian Association of Research Libraries, the Graduate Students Association of Canada, the University of Saskatchewan, the University of Regina and the University of British Columbia called on the federal government to continue to support the indirect costs of research. While we also support the measure contained in the 2001 budget, we believe that more must be done. In particular, the indirect costs of research continue, and it is unlikely that the $200 million committed last year was sufficient to meet the need. For this reason, the Committee recommends that:

RECOMMENDATION 14

The federal government, in the next budget, provide a permanent program for financing the indirect costs of federally funded research.

Several of the Committee’s witnesses commented on the degree to which the federal government should finance the indirect costs, and made reference to the commitment in the September 2002 Speech from the Throne to work with universities on this issue. Some groups suggested that a 40% grant would be appropriate to cover the indirect costs of research.

The Committee feels that the 40% figure suggested by most witnesses as the appropriate level for funding indirect costs would provide levels of support competitive with that found in other G-7 nations. Therefore, the Committee recommends that:

RECOMMENDATION 15

A permanent program financing 40% of the indirect costs of federally funded research be implemented in the next budget.

Research and development support by the federal government is also provided through the Scientific Research and Experimental Development (SR&ED) investment tax credit. With this credit, qualifying Canadian-controlled private corporations (CCPCs) with less than $200,000 of taxable income during the previous year are eligible for a refundable investment tax credit of up to 35% for qualifying expenses, to a limit of $2 million; this limit is reduced by $10 for every $1 of tax income between $200,000 and $400,000 in the preceding year. Other Canadian corporations, proprietorships, partnerships and trusts are eligible for a 20% non-refundable tax credit on qualifying expenses; they may be carried back three years or carried forward ten years to reduce tax liability.

Several groups, including the Ottawa Centre for Research and Innovation, commented that the SR&ED tax credit needs to be improved for it to have its intended effect of encouraging research and development for all Canadian companies. Some witnesses complained that the credit was too complicated and recommended simplification. The Canadian Manufacturers and Exporters recommended that Canadian subsidiaries of foreign multinationals be eligible for the credit.

At present, the SR&ED credit can only be claimed by public companies when they are profitable. According to the Canadian Advanced Technology Alliance (CATA):

[t]his has the effect of eliminating these valuable tax credits at the time when companies need them most. When your revenues are down and your profits are under pressure, it’s very difficult to resist cutting your R & D expenses. If the credits were available, there would be less of that taking place and Canadian industry would be in a better position to capture new markets and encourage job and revenue growth when the turnaround comes.

The CATA would prefer the 35% refundable tax credit to the current 20% non-refundable tax credit, despite its carry-forward and carry-back options.

Throughout this report, the Committee stresses the importance of prosperity and growth, productivity and innovation, research and development. Like many Canadians, we are convinced that our future prosperity depends on the research and development activities that will enable enhanced productivity and innovation. Thus, changes must occur, and the Committee recommends that:

RECOMMENDATION 16

The federal government simplify the process by which firms access the Scientific Research and Experimental Development investment tax credit. Moreover, a change should be made that would allow the credit to be better utilized by a company during periods that are not profitable so as to act as a continuing incentive to invest in research and development.

Commercialization

Increased spending on R & D will be necessary, but by itself, will not achieve the goals. … [T]here must be much earlier industrial involvement, greater opportunity for private sector leadership in defining research goals, and more flexibility of funding availability in order to realize successful commercialization of innovative technologies. (Canadian Lightweight Materials Research Initiative, 3 September 2002)

Commercialization is the final step in the research and development process. Many great advances have resulted from basic, non-commercial research. Nevertheless, while research represents an essential first step, the development aspect of R & D must not be forgotten. In order for research to have the maximum possible effect on productivity, a climate that is favourable to the development, dissemination and commercialization of research is needed.

The Committee heard from groups such as Environmental Technology Innovation Canada and the Association of Canadian Community Colleges that while Canada has favourable incentives for basic research, insufficient attention has been paid by the federal government to bringing innovations to the marketplace. Canada’s innovators must be provided with assistance to bring their ideas, products and processes to the marketplace, since to do so would result in more jobs, increased economic activity and future R & D undertakings. Without a favourable atmosphere for commercialization, Canada risks losing its innovators and their work.

The Partnership Group for Science and Engineering recommended that the federal government help universities build capacity for the commercialization of university research, including the training and employment of individuals with skill sets in intellectual property, contracts management, patents and licensing, venture capital negotiation and management. Such support, it suggested, could involve supplementary funding to the indirect costs program, or the creation of a commercialization office or secretariat, as well as working to minimize barriers to industry-university partnerships.

Canadian community colleges are also well positioned to promote innovation and commercialization in the regions they serve. The Association of Canadian Community Colleges recommended the creation of college and community innovation and technology commercialization centres. These centres would leverage the applied research capabilities and the assets of colleges and institutes to make resources more accessible to small and medium-sized enterprises (SMEs) and thereby stimulate business innovation and new business creation and/or expansion.

Testimony was also received about the National Research Council’s Industrial Research Assistance Program, which works at the local level in all regions to help SMEs develop innovation projects collaboratively. The National Research Council and the Aerospace Industries Association of Canada suggested that increased funding and access to this Program is needed. Moreover, an example of the success of collaborative work and funding was provided by Triumf, Canada’s national laboratory for subatomic physics and a world leader in its field. It told the Committee of the excellent links it has with Canadian industry for the transfer of knowledge.

The Committee believes that Canada must improve its ability to take innovative ideas and products from the research stage to the marketplace. We recognize that innovators and universities of various sizes may differ in the types of assistance they need, and support the September 2002 Speech from the Throne’s commitment to work on strategies for commercialization. While any costs associated with commercialization could be considered to be an indirect cost of research, we think that the concept of a commercialization office or secretariat within the federal government has merit, particularly as an agency to facilitate partnerships. It is for this reason that the Committee recommends that:

RECOMMENDATION 17

The federal government create a commercialization office within Industry Canada. The mandate of this office would be efforts leading to the commercialization of research undertaken in Canada.

Patent and Copyright Protection

We need the Federal Government to maintain mechanisms for patent protection, and to ensure their effective enforcement. Contrary to popular belief, 20 years of patent protection does not mean 20 years of shelf life for new medication. In fact, we are very lucky when it means half of that, because patent protection begins long before a medicine is approved and made available to patients. (Canada’s Research-Based Pharmaceutical Companies, 28 October 2002)

Strong patent protection is another tool that helps to ensure that innovators have an economic incentive to undertake research and development, as was indicated to the Committee by Canada’s Research-Based Pharmaceuticals Companies. During the hearings, however, the Committee heard the concerns of the Canadian Generic Pharmaceutical Association, which suggested that its industry was being unfairly penalized by the application of patent law. According to the Association:

[t]he patented medicine notice of compliance regulations of Canada’s Patent Act allow brand-name companies to stop Health Canada approval of generic drugs simply by alleging patent infringement. The automatic 24-month stay under the regulations means that Health Canada cannot approve a generic drug until any claim of alleged patent infringement is decided in court. The regulations withhold Health Canada approval, not when a patent is actually being infringed, but when the brand-name company says it might be.

It believes that nuisance lawsuits are impeding the arrival of generic drugs on the market, based only on an alleged, not a proven, claim.

The Committee firmly believes that patent and copyright protection play an important role in inducing companies and individuals to undertake research and development. In our view, the federal government must ensure that all parties respect these laws. From this perspective, the Committee recommends that:

RECOMMENDATION 18

The federal government ensure that the rights embodied in patent and copyright protections are vigorously defended.

Smart Regulation

[W]hen the regulatory process is not responsive to innovative products, critical competitive factors for other industries are impacted. They can be a significant barrier to Canada’s international competitiveness. It is hard for a Canadian producer using old technology to compete with a U.S. or European producer using cutting-edge technology that has not yet been approved here. … The most maddening thing is that it doesn’t have to be this way. In the right environment, cost-recovery policy and regulators can actually encourage innovation, something that has been proven in other countries. (Canadian Animal Health Institute, 22 October 2002)

Regulations can affect the prosperity of particular industries or sectors, and thus the prosperity of our nation. In this area, however, there may be competing interests. Consider, for example, that health, environmental and competition regulations help to protect our quality of life by setting standards in areas that are thought to be important to Canadians. Regulations do, however, impose a cost on businesses in the form of user charges and time spent addressing regulatory requirements, which can affect competitiveness and impede productivity improvements. For example, the Canadian Animal Health Institute told the Committee that “Canada’s system of regulating the approval and use of veterinary pharmaceuticals has a serious impact on the competitiveness of our member companies and the customers we serve.” Such witnesses as the Canadian Home Builders’ Association and CropLife Canada also commented on regulatory issues. The challenge, therefore, is smart regulation; balancing the need for regulations to meet the needs of Canada’s citizens with their effect on efficiency and productivity for firms.

The Committee notes this challenge, and believes that striking the proper balance will not be easy. It must, however, be done. In our view, a mechanism is needed that would require regulatory changes and government programs to be assessed in order to determine whether they will assist or hinder productivity and innovation within Canada. Conceptually, this notion resembles the current Rural Lens that is used by the Rural Secretariat within Agriculture and Agri-Food Canada, which determines if new programs, services and policies are appropriate for rural Canadians. From this perspective, the Committee recommends that:

RECOMMENDATION 19

The federal government develop a mechanism by which existing and future policies and programs would be assessed to determine their impact on productivity and the incentive to undertake research and development in Canada. Particular attention should be paid to the impact of regulations in these areas.

Lifelong Learning and Skills Development

In the fast-paced, global economy of the 21st century, prosperity relies on innovation, which depends on investments by both government and the private sector, in the creativity and talents of our people. (Canadian National Institute for the Blind, 26 September 2002)

In order to benefit from productivity and innovation, Canada must make a commitment not only to research and development, but also to the lifelong learning and skills development of Canadians, whether that learning and development occurs in educational institutions or on the job. In addition to support for traditional providers of education and training, witnesses recommended innovative approaches to learning and skills development, including the proposal by the Financial Executives Institute Canada for a centre for continuing workplace training and education.

In assessing what policies and practices are needed to provide Canadian students, workers and their employers with an incentive to invest in learning and skills enhancement, such issues as access to learning opportunities, skilled labour shortages, foreign accreditation, assistance to refugee students and support for educational institutions must be considered.

Access to Learning Opportunities

For all learners, the education levels required to obtain and keep rewarding employment or to seek higher education are rising. The importance of ensuring opportunities for lifelong learners has emerged … as an equity challenge. (Saskatchewan School Trustees Association, 9 September 2002)

Literacy is absolutely necessary for any individual to engage in lifelong learning and skills development: a literacy deficit limits opportunities. While the federal government has affirmed its intention to address Canadian literacy problems in the last two Speeches from the Throne, the Movement for Canadian Literacy (MCL), citing data from Statistics Canada, told the Committee that the need is pressing:

[T]he literacy skills of nearly half of Canada’s adult population rank below the acceptable range: 22 per cent have serious difficulty with reading, writing and math, and another 26 per cent do not have the literacy skills necessary to prosper in the knowledge-based economy. … Canada’s future economic vitality is threatened by looming labour shortages. … Now more than ever, we cannot afford the loss of potential, innovation, and productivity that stems from allowing millions of less-literate Canadians to sit on the sidelines. … [W]ithout a national strategy for adult literacy, less than 10 per cent of those who could benefit from literacy training are currently being helped.

The MCL’s main recommendation was that the federal government expand the funding and mandate of the National Literacy Secretariat so that it can develop a national literacy strategy. According to the MCL, the National Literacy Secretariat currently operates with an annual budget of $28-30 million, an amount that has not changed since 1997.

Immigrants to Canada face a special literacy challenge because they must also develop basic English and/or French vocabulary before they can begin literacy training and before they can even contemplate lifelong learning. The Campaign for Stable Funding of Adult ESL Classes told the Committee that becoming fluent in English or French is an essential ingredient to immigrants’ prosperity, and stated that “[w]hen large numbers of people cannot speak fluently, nor read and write at least one of Canada’s official languages, we all lose. It affects our economy, it affects our ability to provide quality health care and deal with other social issues.” The Canadian Community Economic Development Network also highlighted the need for programs for recent immigrants.

The Committee was also told that both Citizenship and Immigration Canada and the Prime Minister’s Task Force on Urban Issues have commented on the importance of English and French language training, with a lack of language training hindering the ability of immigrants to enter the labour force and fill labour shortages. We were told by a number of groups and individuals that there is a lack of resources for second-language programs, although there have been commitments by the federal government to provide targeted measures to assist the children of recent immigrants so that they can realize the opportunities that brought their parents to Canada.

The Committee believes that literacy training hould be a priority of the federal government, which would recognize that literacy is absolutely critical to full participation in society. As such, the Committee recommends that:

RECOMMENDATION 20

The federal government expand funding for the National Literacy Secretariat and increase its role in supporting English/French as a second language.

Some citizens face financial barriers in obtaining the kind of education and training that the job market demands and/or that they desire. The Committee heard many presentations by groups and individuals — such as the Manitoba Organization of Faculty Associations and the National Professional Coalition on Tuition — that highlighted problems with high tuition costs, an inability to access sufficient funds to finance education and training, and excessive debt upon graduation. We learned that these barriers may be particularly severe for those wishing to study in certain areas, such as dentistry.

Most Canadians would adopt as a societal goal the notion that access to post-secondary education in Canada should be based on skill, not ability to pay: everyone who wants and is able to complete a post-secondary education should be afforded the opportunity to do so. That being said, tuition fees continue to rise and fee increases have outpaced inflation for a number of years. Statistics Canada data reveal that undergraduate students currently pay an average of $3,738 in tuition, a 4.5% increase over 2001-02 and nearly double the average tuition of $1,872 paid in 1992-93. As well, since 1997-98, tuition fees for graduate programs have increased 11.5% annually, compared with over 6% for undergraduate programs.⁵⁵ Groups such as the Canadian Association of Student Financial Aid Administrators and the Conseil national des cycles supérieurs noted that high debt levels can be a barrier to participation in post-secondary education. The Canadian Association of University Teachers also expressed concerns about rising tuition fees and student debt.

Moreover, while there are slightly fewer students borrowing from student loan programs, the amount borrowed and debt levels two years after graduation are significantly higher. The Canada Student Loan Program estimates that 75% of borrowers who exhaust the 54 months of interest relief provided by the federal government are ineligible for debt reduction in repayment, largely because debt reduction and interest relief use two different eligibility tables.

In recent years, federal budgets have often contained education-related measures, including the Canada Education Savings Grant, Canada Millennium Scholarships, Canada Study Grants, improved tax measures and an enhanced Canada Student Loans Program. The Canada Millennium Scholarships provide more than 90,000 students annually with scholarships averaging $3,000 per year to reduce the debt that they would otherwise have incurred, while Canada Study Grants of up to $3,000 each provide assistance to about 25,000 students with dependants.

Through its Debt Reduction in Repayment (DRR) program, the federal government changed the Canada Student Loans Program to help manage student debt by: increasing the number of people eligible for interest relief; providing debt reduction of up to 50% of Canada Student Loans outstanding up to a maximum of $10,000 for those in extended financial difficulty; and giving a tax credit for interest paid on federal and provincial student loans.

More recently, the 2001 budget contained additional initiatives:

As well, the 2001 budget allocated $24 million over two years to sector councils — industry-wide partnerships that bring together employers, unions, employees and educators to assess future employment patterns, skill requirements and training practices in various sectors of the economy. Moreover, recent budgets have increased funding for research and development, as noted earlier.

In spite of these efforts, the Committee heard that student debt levels remain a problem for many graduates. This may be the result, in part, of the programs themselves, since some programs such as dentistry and medicine are more costly than others. The Canadian Federation of Students told the Committee that the federal government’s 1998 DRR program has fallen far short of its goal of helping more than 12,000 students a year with debt and interest relief. The Federation told us that “ ... less than 500 students per year are benefiting from the program to-date. … Officials from both the Department of Finance and Human Resources Development Canada acknowledged this problem years ago, but to date no action has been taken.”

These concerns were echoed by the Canadian Alliance of Student Associations (CASA), which also recommended an increase in Canada Student Loans Program limits and annual increases based on a students’ price index that would factor in such costs as tuition, books, food and rental accommodation. The CASA shared cost information with the Committee, telling us that “[f]or a typical 34-week academic year, students can only receive a maximum of approximately $9,350 when the federal portion of their loan is combined with their provincial loan. Consider that the national average for undergraduate tuition is $3,737 a year; an average student will be left with less than $5,700 to pay for rent, food, books, ancillary fees, transportation and personal costs over eight months.”

The Committee believes that adequate student loan funding should be a federal government priority. Tuition fees, inadequate access to financing and the prospect of burdensome levels of student debt are limiting educational opportunities for Canadian citizens. Action is needed if Canada, and Canadian employers, are going to be able to access the highly skilled workers that will be needed to ensure our future prosperity and our quality of life. From this perspective, the Committee recommends that:

RECOMMENDATION 21

The federal government re-evaluate the criteria for its student debt relief initiatives to determine if they are too stringent. Consideration should also be given to expanding student loan limits to assist students in financing rising tuition fees.

Skilled Labour Shortages and Foreign Accreditation

As technology continues to advance at an accelerated rate, Canada’s present and future workforce will require part-time training and skills upgrading to ensure that they remain current. With technologies and job descriptions changing rapidly, and many experienced workers close to retirement, the skills gap facing Canadian business and industry is bound to widen unless concerted, focused action is taken. (Northern Alberta Institute of Technology, 9 September 2002)

Several industry groups, including the Greater Toronto Home Builders’ Association, told the Committee that Canada is facing a skilled labour shortage in several areas. According to the Canadian Machining and Tooling Association, “[c]urrent estimates are that 50,000 tradespeople will need to be replaced within five years in the automotive sector alone and, of this total, an estimated 5,000 skilled precision metal tradespeople will be required independent of the various economic cycles to be encountered.” Given expected skilled labour shortages, funding for community and vocational colleges is desired.

The Committee heard two solutions to this shortage. First, several witnesses argued that the accreditation process for skilled immigrants is often unduly onerous and restrictive. Furthermore, while attracting skilled immigrants and addressing certification issues will help, it will not be enough. Witnesses told us that the federal government must become involved in helping to address the skilled labour shortage; several suggested using the EI system to encourage training, and allowing the creation of Training Trust Funds modelled on the Registered Individual Learning Accounts Program. Others, such as the Canadian Tooling and Machining Association, suggested a program of apprenticeship tax credits.

While the Committee notes that actions have recently been taken to reduce waiting period provisions for apprentices in the Employment Insurance program, to allow an income tax deduction for apprentice vehicle mechanics’ tools and to assist mentoring and business support to young entrepreneurs, greater efforts are needed and on a priority basis. Earlier in the report, data were provided on the aging of our population, and some have argued that skilled immigrants may be needed if we are to avoid skilled labour shortages. While several of the other proposals voiced by witnesses have merit, we believe that priority should be given to the problems associated with the recognition of foreign accreditation. It is for this reason that the Committee recommends that:

RECOMMENDATION 22

The federal government work with the provinces, territories and relevant professional associations to make it easier for foreign workers with the necessary level of expertise to practice their trade in Canada.

Refugee Students

Given that recognized refugees are here to stay, it makes no sense to delay their education. The sooner they begin their studies, the sooner they will become self-supporting, full participants and contributors to the Canadian economy and society. Conversely, the longer their education is delayed, the greater the risk that their opportunity to be a full-time student will be forfeited. (The Getting Landed Project, 29 October 2002)

The Committee also received testimony from the Getting Landed Project, a group advocating the extension of the Canada Student Loan Program to refugees. We were told that “under current student loans legislation only Canadian citizens and permanent residents qualify for student loans. Recognized refugees, known as ‘Protected Persons’ under the new Immigration and Refugee Protection Act, are currently excluded. This exclusion is bad for refugees and bad for Canada as well.”

It generally takes at least one year for a refugee to acquire permanent resident status, although some wait as long as five years. During this period, most refugees cannot afford an education. The Getting Landed Project estimates that extending the Canada Student Loan Program to these persons would cost about $4.5 million.

The Committee believes that refugees to Canada must be embraced by us, and that they must be able to begin their integration into Canadian society as soon as possible. The ability to undertake education is part of this process, and should be assisted by the federal government. We believe that assisting their integration into Canada benefits both them and us. From this perspective, the Committee recommends that:

RECOMMENDATION 23

The federal government immediately implement any changes necessary to ensure that recognized refugees are treated in the same manner as Canadian citizens and permanent residents for purposes of qualification for student loans.

Support for Educational Institutions

Institutions have economized in the short term by deferring necessary maintenance, to the point that deferred maintenance is a major problem on our campuses. The provincial government in Alberta reckons the provincial backlog [for universities, colleges and technical institutes] at about $350 [million] while a recent study by the Canadian Association of University Business Officers estimates the national total at $3.6 billion. (Confederation of Alberta Faculty Associations, 31 August 2002)

Inadequate support for educational institutions is also a barrier to the type of lifelong learning and skills development needed by Canadians. Research and development funding, which was discussed earlier, is not the only financial issue facing educational institutions. Other stresses on them also exist. The Association of Universities and Colleges of Canada told the Committee that “[o]verall, the most significant issue facing universities is institutional capacity, in terms of both human and physical resources.”

The Committee heard that cash-strapped post-secondary institutions are facing an increasing infrastructure deficit, since they lack the funds to repair buildings, and maintain libraries and laboratories, among other elements. The Association of Nova Scotia University Teachers told us that, in the absence of adequate core funding, it is becoming increasingly difficult to update laboratory and computing facilities, and that on some campuses the buildings are on the verge of collapse. The discussion above noted the infrastructure deficit in the discussion of the indirect costs of research.

The federal government’s main contribution to post-secondary education occurs through the Canada Health and Social Transfer (CHST). As is the case with spending on health care, there is a concern about the lack of accountability and transparency regarding how the CHST funds are spent: at present, there are no explicit requirements that a certain portion of the CHST be spent on education or health care. According to some groups, including the New Brunswick Faculty Associations, this absence has resulted in some provinces diverting CHST funds away from their intended uses, potentially resulting in underfunding of one sector or another. This deficiency prompted some of the Committee’s witnesses to recommend a post-secondary education act, which would mirror the Canada Health Act and address accountability and access issues.

The Committee believes that many educational institutions are experiencing financial stresses and an unacceptable erosion of their infrastructure. Ultimately, this erosion will have the effect of reducing the quality of lifelong learning and skills development that occurs. While addressing this issue through the indirect costs of research may be one option, we are not convinced that it is the best option. We feel that federal funding of lifelong learning and skills development must occur, but are hesitant to recommend a particular allocation in the absence of clearly stated principles that would ensure accountability and transparency. The issue of jurisdiction in the area of education must also be considered. From this perspective, the Committee recommends that:

RECOMMENDATION 24

The federal government meet with the provinces and territories with a view to developing accountability and transparency mechanisms related to the expenditure of funds on post-secondary education by both levels of government.