FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, June 11, 1998

• 0936

[English]

The Vice-Chair (Ms. Paddy Torsney (Burlington, Lib.)): I call this meeting of pre-budget consultations back to order.

We have with us witnesses today who represent the science and engineering community. We have, from the Canadian Academy of Engineering, Pierre Franche, the executive director; from the Canadian Consortium for Research, Dr. Paul Hough; from the Coalition for Biomedical and Health Research, Clément Gauthier, executive director; from the Humanities and Social Sciences Federation of Canada, Chad Gaffield, who is the chair of that group; from the Partnership Group in Science and Engineering, Dr. Howard Alper; and, representing the Canadian Association of University Teachers, we have Professor Shirley Mills, and Robert Léger, government relations.

Welcome to this pre-budget hearing. As you have all been here before, you have between seven and ten minutes to present. I encourage you to respect that time limit, as it will allow for more questions and answers.

We will start with M. Franche.

[Translation]

Mr. Pierre Franche (Executive Director, Canadian Academy of Engineering): I would like to thank the members of the committee for giving us the opportunity to table our brief here. I am going to present a slightly abridged version of it in order to keep to the time allocated.

First of all, I repeat that we believe that the overall debt is too high and must be reduced. The first fiscal priority must continue to be the reduction of the national debt. Traditional expenses must also be reduced in order to free up funds for promising and innovative sectors of the new economy.

[English]

On this occasion I would like to present our recommendations under the three headings of research funding and education, technological entrepreneurship, and lifelong learning. These subjects, being linked, need to be considered as a whole.

On research funding and education, granting councils such as NSERC must encourage, even more than at present, research projects that are jointly funded by the private sector and the universities, thus ensuring relevance and a high probability of successful, technological innovations. The Canada Foundation for Innovation is also essential in this field, and we salute this new initiative of the government.

Compared to just three years ago, there is now a shortage of qualified engineers, particularly in the high technology sectors. This is the result of the brain drain toward the United States and Europe. The average annual migration of engineers during the period 1990 to 1995 was 7.2 engineers leaving Canada for every one entering.

• 0940

I refer you to Maclean's magazine, June 8, 1998, page 22, which I just got the day before yesterday. The shortage, which is most acute in computer science, bioengineering, transportation and environmental engineering, applies to most other engineering disciplines.

In our universities, it is now very difficult to recruit highly qualified engineering professors because of a lack of graduate students entering the Ph.D. programs in computer science and electrical and mechanical engineering. In comparison with the stipend offered by universities to these graduate students, the salaries offered by the private sector, both in Canada and internationally, discourage them from accepting teaching positions. Universities cannot respond to the expansion required to fulfil the shortage of engineers.

Research funding policies must be modified to allow the present modest stipend of $15,000 per year for a graduate student to be increased so as to compete with offers of some $50,000 U.S. from universities and firms in the United States and Europe. This will permit the recruitment of graduate students for Ph.D. degrees and in turn increase the supply of university teachers, resulting ultimately in an increasing supply of highly qualified engineers for the private sector, especially for technological entrepreneurial firms. Such policies will require additional funding for the granting councils.

On technological entrepreneurship, to ensure wealth generation and the creation of employment in the knowledge-based economy we live in today, the growth of small and medium technological enterprises, often called SMEs, requires an ever-increasing number of technological entrepreneurs. Engineering schools, in cooperation with management schools, need to produce more qualified technological entrepreneurs. As the present situation is not conducive to the achievement of cooperation, funding will be required to support new cooperative initiatives.

Last October, when I appeared before this committee, I tabled a background study titled “Technological Entrepreneurship and Engineering in Canada”. At that time I promised that a report with recommendations from the academy would be finalized in 1998. I am pleased to table this report, which was produced with the financial assistance of the federal government and the benevolent input of the fellows of the academy. I believe the clerk received 30 copies yesterday of one called “Wealth through Technological Entrepreneurship”.

This report makes nineteen recommendations under the subjects of leadership, opportunities and markets, getting started, financing, and education, teaching and research. These nineteen recommendations will require the concerted efforts of many stakeholders. To maximize their participation and harness the ideas and energies that will result, the academy proposes that a national steering committee on technological entrepreneurship, which we have called NASCENT, be formed. It would initially be composed of one representative from each of the principal engineering and business organizations in Canada, with power to add. Thirteen possible members of NASCENT are listed in the action plan of the report. I encourage you to read this short report, as it has a direct bearing on the work of your committee.

On lifelong learning, while a university education is a first step in one's career, it is only the beginning of a long journey in personal development. Lifelong learning is important to an individual's contribution to the new economy of Canada. Consequently, Canada's tax policies must be made more flexible to encourage individuals to continue their personal development. The financial cost incurred by an employer for the development of an employee must not be assessed as a taxable benefit to the employee. On the contrary, employers must be encouraged, through tax incentives, to invest in the development of their human resources.

Presently employed Canadians who decide to return to university to obtain post-graduate degrees, should be allowed, through tax policies, to deduct not only the tuition fees, but also the capital borrowed and the interest over a period of years in a somewhat similar fashion to the depreciation on equipment in a firm.

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Concerned with the importance of lifelong learning for engineers in different walks of life, the Canadian Academy of Engineering published guidelines in October 1997 entitled “Lifelong Learning for Professional Engineers”. I am pleased to table 30 copies of this report, which were sent to the clerk yesterday, for the consideration of the committee.

In concluding my remarks, I wish to stress that Canada needs a national environment that not only develops engineers, but also encourages them to further develop themselves and remain in Canada. Through its prime minister, the federal government must show leadership with respect to a national environment that promotes lifelong learning for technically trained Canadians; otherwise we will lose the competitive battle.

Let us remember that Canada has been built, to a large extent, through the efforts of engineers. An acute shortage of qualified engineers in our fast-changing technology could cause us to lose the competitive battle in today's globalized economy. Canada needs an environment that promotes the technological education of our youth.

I thank you for the opportunity to appear before you and trust our recommendations will be seriously considered as being in the best interest of all Canadians.

Thank you, Mr. Chairman.

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): Thank you very much, Franche.

I will now proceed to the representative from the Canadian Consortium for Research, Dr. Paul Hough. Welcome.

Dr. Paul T. Hough (Chair, Canadian Consortium for Research): Thank you very much, Mr. Chairman. I very much appreciate the opportunity to appear here before the committee. I know it is a receptive committee and has been quite supportive in the past.

I will just remind people that the Canadian Consortium for Research consists of about 25 organizations that span the spectrum of research from engineering to natural sciences to social sciences and humanities. They essentially represent about 50,000 researchers in all sectors, and in addition, through the Canadian Federation of Students, 400,000 students. So it's a substantial organization whose focus is largely on research and the health of the post-secondary sector.

I'd like to start by recognizing the fact that the committee has been very strongly supportive of many of the things the research community has proposed over the last few years, and we appreciate that support. I think it has been an important factor in the government's decisions.

The consortium has worked with a number of its constituent members and others in trying to focus what the priorities really are from the community's point of view. This committee has supported a lot of our proposals that have come forward, and I think the government's actions, through the creation of the Canada Foundation for Innovation on the infrastructure, putting the networks of centres of excellence into a permanent mode; the industrial research assistance program that is run out of NRC, and the restoration, most recently, of funding of the granting councils, at least back to the 1994-95 levels, are all very important steps. I would like to emphasize that in our view these are steps. I think there are many more steps to be taken, but it is going in the right direction.

The assumption I'm making here is that the importance of science, technology, and engineering is really not in question. I use the term “science” in its broadest sense to include not only natural sciences but also the social sciences and humanities.

That being said, there are implications to that from a government point of view. They are not limited to the fiscal realities, but there are implications because it is so important to this country. The investments made through the programs I've just mentioned are really designed to enhance that science capacity in this country and make the system better. While they're welcome, each measure actually addresses a different aspect of the requirements in the science spectrum, and they are not really equivalent.

For example, the Canadian Foundation for Innovation provides substantial funding for capital and equipment, but nothing for operating expenses or direct research support. This is fine, as long as we understand this. The universities really have to cope with maintaining the facilities, so the research granting councils will undoubtedly see a greater demand on their research funding as well. The councils themselves provide grants for direct research, and again not overheads or indirect costs, even though some overheads are charged back.

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Another important consideration that I think is looming much more evidently these days is that Canada is influenced by what happens elsewhere, and what happens elsewhere is that there are countries that are putting a lot of resources into research, into science and technology, and a number of Canadians, be they the younger bright ones, be they the established ones, are being attracted out of this country. It's really more a question of losing what I term our “nodes”, the people who are the most creative leaders, around whom groups have developed and are producing some of the best work. If we lose too many of those nodes, then we have a problem. So it's a question of quality as opposed to just numbers.

What are we proposing the government undertake at this point, after having implemented at least a number of important programs?

First, as Mr. Franche has indicated, we support the idea that the base budgets of the research granting councils for basic research in this country be increased along the lines of the report we submitted to the committee last year, “Sustaining Canada as an Innovative Society”.

That document called for a 50% increase over four years in the budgets of both NSERC and MRC, and a 60% increase in the budget of SSHRC over the same period of time. That was a staged proposal, deliberately, that we thought was a doable proposal, and the government essentially combined the proposed changes over years one and two in its announcement in the February 1998 budget.

As I said, that was an important and welcome move and brought the councils back to their budget levels of 1994 and 1995. However, I would suggest that the arguments for continuing this investment along the lines proposed in that document remain valid. Universities in this country provide the bulk of the basic research activity in Canada and they prepare the highly qualified people for all sectors.

In addition, the CFI will undoubtedly add a significant pressure on those grants, and new and important opportunities will become possible and need to be responded to.

Programs like the CFI also bypass, to a large extent, the Social Sciences and Humanities, and that's the fundamental reason, or one of the reasons, we are proposing a slightly greater increase for the Social Sciences and Humanities Research Council.

But besides the base budgets of the councils, there are targeted programs that we propose the government should seriously consider. These are to fill in gaps in opportunities.

For instance, I mentioned losing key people around whom groups have been built. If we lose those nodes, we are left with a shell. What we're suggesting is that perhaps we need a targeted program to retain those top researchers in this country and to attract the known Canadians, especially top researchers who are now in other countries, back into this country.

A second possible targeted program has to do with the CFI. The new opportunities program of that initiative is designed to set up younger people in the universities and research institutions through providing equipment and facilities. That's very good, but perhaps a targeted program of research support for those people is also needed, because there is going to be a fair number of them. They are top quality people. They are being put into place because of that quality and they need the support.

The final targeted program suggestion has to do with international collaborations in which the ability of Canadians to work with colleagues in other countries has really dropped off the table. I think that's a very serious omission.

That international aspect has several dimension actually, because, as an example, the Natural Sciences and Engineering Research Council has recently gone through a complete review of all its programs and priorities. As a part of that review, they pulled in a number of non-Canadian experts to assess what they felt the quality of the Canadian research was. They all described it as absolutely first rate.

Since it's a stated objective that Canadians not only participate in international research but also be at the table such that we can take advantage of developments in other countries, we feel very strongly that the wherewithal to actually participate is important. At the moment, unfortunately Canada has become known as a country of freeloaders, because we do not support our own scientists to be involved in international planning and collaboration.

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Those are the primary proposals. There are two remaining concerns. One is the fact that Canadian universities have seen their funding from various governments drop significantly over the last several years, thus their ability to actually sustain the operating costs and to maintain the facilities have dramatically decreased. We can discuss the jurisdictional responsibilities for a long time. I'm simply raising that as a fact, and it is a factor with far-reaching implications.

Government science is also an area of concern. It has been cut back significantly in all departments, and it really is an important area. The government sector does things and should be doing things that are quite different from the university and the private sector, yet it is losing the wherewithal to do that.

In conclusion, sir, I would like to say that we should be aiming at having a research enterprise that is strong and vibrant, that is seen to be addressing real issues and problems, and that can consistently attract the best of the young people we have. This means fostering an environment and a fiscal approach that builds on strengths, creates the necessary linkages among these groups, and enhances the capacity to benefit from research outcomes. Such an environment would constructively identify the issues and questions that face governments, society, and industry, and in my view would then identify the means required to respond to those challenges. The proposals outlined here this morning are meant to achieve that result.

Thank you very much.

The Chairman: Thank you very much, Dr. Hough.

We'll now hear from the Coalition for Biomedical and Health Research, Mr. Clément Gauthier.

Mr. Clément Gauthier (Executive Director, Coalition for Biomedical and Health Research): Good morning. I would like to thank the committee for inviting the Coalition for Biomedical and Health Research to appear before you. Two documents have been circulated today: our brief, entitled “Building on Canada's Brain Power”, as well as a report based on a survey of Canadian academic health centres, “A Crisis in Health Research”. I will refer to those during my presentation.

[Translation]

The main message the coalition wants to send the government regarding the priorities to be set for the budgetary dividend is to maintain its course towards the objective set by the Minister of Finance in the general policy paper he tabled before the committee last October, that is, to use the new dividend to attack mutually reinforcing national priorities, such as protecting and improving the health system and positioning Canada as a leader in the knowledge-based economy. These priorities provide the best social and economic returns, great training possibilities and better access to jobs for Canadians.

The fundamental role of university research in the conversion of the economy to an economy based on knowledge industries has been demonstrated in the United States and in several OECD countries. In Canada, a recent impact study commissioned by the Association of Universities and Colleges of Canada showed that, in 1993, every dollar invested in university research generated a real increase of $7.50 in the gross national product. That proves beyond all doubt the importance of university research for the Canadian economy.

In that same year, the Medical Research Council of Canada reported that research in health sciences represented 54% of total university research expenditures. Consequently, based on the AUCC study, it is reasonable to conclude that, in 1993, university research in health sciences brought about an increase in the gross national product in the order of 37 billion dollars, that is 5% of the GNP, which is equivalent to about 100,000 jobs.

The February 1998 report of the National Biotechnology Advisory Committee identified medical research as being the source of most leading-edge practices in biotechnology, an activity sector that is growing rapidly all over the world. That same month, an American study on the economic impact of bio-medical research confirmed that it is the source of knowledge-based industries, which are the key to the future economic prosperity of nations.

[English]

The Chairman: Can you slow down a bit?

Mr. Clément Gauthier: Yes. Sorry.

I hope there is translation. Half of my presentation is in French and the other half is in English, so I hope—

The Chairman: That's why you have to slow down. She can't keep up with you.

Mr. Clément Gauthier: Okay. Thank you.

[Translation]

A month before that, the President of the United-States stated in the New York Times that the next 50 years will be the age of biology and of the exploration of the human organism. Consequently, the President, supported by Congress, announced his intention to double the American nation's strategic investments in health research through the National Institutes of Health over the next five years while the NIH's budget had doubled over the preceding decade.

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Japan has already decided to speed up its investments, and France and the United Kingdom will probably follow this trend, as indicated on page 3 of our brief.

The graph on page 3 also shows that funding for basic research in health by the federal Canadian government dropped between 1994 and 1997. The February 1998 federal budget slowed down this alarming trend. The coalition wishes to express its support of the government for this first step toward reducing our competitive disadvantage. However, in the year 2000, public funding of the Medical Research Council will be lower than in 1990, in constant dollars.

[English]

Comparison with the United States, illustrated at the bottom of page 3 of our brief, is instructive. While Canada was investing $8.71 per citizen in biomedical research in the fiscal year 1990-91 through the MRC, the U.S. federal government was investing $39.71 through the National Institutes of Health.

In the fiscal year 2000-2001, Canada will invest $9.58 and the U.S. will invest $86 per citizen. Although it is granted that 25% to 30% of NIH grants cover overhead costs while these costs are covered through transfer payments to the provinces in Canada, this factor is entirely offset by the fact that Canadian federal funding for higher education has decreased 34% since 1993, while funding for universities and colleges has jumped nearly 12% in the U.S. over the same period. As a result, in 1996 alone, provincial funding for indirect costs of health research at Canadian universities, teaching hospitals, and affiliated research institutes declined by 18% to 30%.

It must also be emphasized that even though MRC and NIH are not the only source of health research funding in their respective countries, they share a common and almost exclusive mandate as the major funder of investigator-initiated basic biomedical, clinical, and health research.

Canada's deteriorating international competitiveness is leading to a brain drain of our best and brightest researchers, teachers, health specialists, and students. Illustrating this trend up to 1990, Canada has lost 30% of its star genetic researchers, the worst record among the G-7 countries.

The appended CBHR report titled “A Crisis in Health Research” was released in January 1998. On page 2 it reveals specific statistics provided by Canadian academic health centres on the brain drain of Canadian biomedical, clinical, and health scientists, mainly to the U.S. To help understand the quality of researchers affected by this trend and the seriousness of the loss, profiles of scientists who are leaving Canada due to a lack of MRC research funds have been included. In many cases, it is not simply a matter of losing the individual, as Paul mentioned a few minutes ago, but a critical mass of knowledge, patents, and potential treatments to our competitors.

These components were identified as responsible for the dynamic impact of university research in the AUCC study. In a poll conducted by CBC/Environics in February 1998, Canadians chose health care as the highest priority for new government spending. This poll also sought the opinion of Canadians on how new health care dollars should be allocated. Medical research was accorded the highest priority.

At the fundamental level, the future of Canada's tierist health care system and health industry depend on biomedical, clinical, and health research. The federal funding gap for health research between Canada and the U.S. is such that our country is seriously at risk of losing a whole generation of biomedical, clinical, and health specialists to south of the border.

This situation clearly jeopardizes Canadians' access to quality health care and Canada's economic development in the 21st century.

[Translation]

The Coalition for Biomedical and Health Research is presently developing a proposal aimed at allowing Canada to take advantage of the opportunities generated by the biomedical sciences and strengthen the partnership between the federal government and the university community.

The funding level of 750 millions dollars per year, in support of the direct costs of the basic research related to our proposal, is in line with the recommendation of the National Biotechnology Advisory Committee to double the MRC's budget from its 1993/1994 level over the next three years and to triple it by the year 2003. This strategic investment would represent about 1% of total expenditures by Canadians on health care.

In closing, the CBHR's proposal should be ready to submit to the committee during the Fall of 1998 pre-budgetary consultations.

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The Coalition believes that such an initiative is essential for five reasons: firstly, to train and retain in Canada future health care specialists, clinical workers and scientists; secondly, to form the strategic alliances needed to reinforce and extend the leadership of the Canadian health system at the international level and to generate new economic activity; thirdly, to increase the productivity, the effectiveness and the efficiency of medical education, of health research and of the delivery of health services; fourthly, to develop national public health policies that meet the expectations of Canadians; and finally, to support health care reform throughout Canada by ensuring that health research remains the cornerstone of the application of medicine based on scientific research.

[English]

Thank you for the opportunity to present these comments, Mr. Chairman.

The Chairman: Thank you very much, Mr. Gauthier.

We'll now hear from the Humanities and Social Sciences Federation of Canada, Mr. Chad Gaffield. Welcome.

[Translation]

Mr. Chad Gaffield (Chairman, Humanities and Social Sciences Federation of Canada): The Humanities and Social Sciences Federation of Canada represents 25,000 researchers in all the social and human science disciplines throughout Canada. Myself, I'm a historian at the University of Ottawa.

[English]

Thus, I thank you for the opportunity to address this committee and propose to speak briefly today on two critical challenges facing Canada. These challenges can be framed in the form of two questions. What roles will Canadians play in the knowledge society of the 21st century? Second, will we be haves or have-nots?

As Finance Minister Paul Martin noted last week while addressing a session of the Annual Congress of the Social Sciences and Humanities, which drew more than 7,500 researchers to the University of Ottawa, globalization presents major challenges for Canada. “Make no mistake about it”, Mr. Martin said, “if it is allowed to proceed unchecked, globalization will have fewer and bigger winners, more and more desperate losers. Can Canada preserve and extend a balanced society in the face of ever more rapid movement of investment capital and information and the bewildering rate of technological change?” In response to Mr. Martin's question, the answer is, we must. Moreover, there is a means of ensuring that we do. It can be encapsulated in one word: “content”.

Content is the heart and soul of the humanities and social sciences. As the 7,500 humanists and social scientists gathered from Canadian universities and around the world, from the private sector—in fact, from more than 30 countries—the content is found in the research we conduct on topics ranging from health and immigration to ethics and the public good.

When our philosophers explore the relationship between individuals and the spiritual, when our sociologists study family violence, when our economists examine the determining factors of growth and our psychologists explore the root causes of mental disorders like schizophrenia, they are helping us understand our world. At the same time—and I think this is the crucial point—Canadian researchers are thus fueling the continuing process of making Canada.

Content is what we read in the newspapers, what students learn at school, what we watch on television, what we see at the movies, what we communicate about on the Internet. Content is what is in our museums, our libraries, our archives. It is what defines Canada and it is a crucible through which we structure our lives. Content is the stuff of policy debate, of legislation, of judicial rulings. It is what is manufactured and what is bought. In some, it is the fabric of our social, economic, political, and cultural existence.

The 21st century will belong to those who provide the content for the information highways that cover the globe. In other words, the point of departure for addressing Mr. Martin's question is the recognition that technology is the means and not the end. The most important question is not the number of computers in classrooms or the number of television channels but rather the content to which they give access.

In Mr. Martin's terms, the winners of the 21st century will be those countries that produce content, the commodity of knowledge in the new economy and society. New businesses will thrive or fail based on their content. The losers will be those countries or businesses that exist at the mercy of others.

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Is Canada well positioned to produce such content? In the past two federal budgets the government has taken large steps in the right direction. The Canada Foundation for Innovation and the Canadian opportunities strategy will both contribute to the development of a knowledge-based economy in which Canada will play a leading role. However, additional steps must be taken quickly.

First, it's imperative that the research infrastructure needs of the humanities and social sciences be specifically addressed. As widely acknowledged, the Canada Foundation for Innovation is focused on the natural sciences, engineering, and biomedical fields and was not designed to provide humanists and social scientists with the infrastructure support they need to guarantee that Canadians produce content for the information highways of the global society.

Furthermore, the Medical Research Council's proposed health institutes, if approved, will concentrate even more resources in the biomedical field. There's no question that Canadians would benefit from these two initiatives. By the same token, these efforts emphasize the importance of increasing to proportional levels the funding for research in the humanities and social sciences. I find it interesting that everyone seems to agree on this now. Only then would the true breadth of Canadian research be fully taken advantage of.

As Mr. Martin noted last week, there's a gap in support for humanities and social sciences that urgently requires filling. The more than 25,000 Canadian researchers in these disciplines heartily agree, and as their representative here today, I would urge that closing the gap be a high priority.

Second, we urge tax changes. Indeed, there's no reason why current tax incentives should include social and humanities research. Fiscal incentives to the private sector to support research in the humanities and social sciences would encourage businesses to take a broader view and concentrate on content as well as product development.

[Translation]

On the whole, federal support for the research infrastructure and tax incentives could help create an attractive and stimulating environment that would guarantee that humanists and social science specialists take a leading role in producing content for a knowledge-based society.

Investing in research in the humanities and social sciences and encouraging it is a wise and proper strategy for making Canada a winner in the 21st century.

The Humanities and Social Sciences Federation of Canada will prepare a detailed brief on the importance of our disciplines for the future of Canadian society for presentation in September to the Standing Committee on Finance.

I thank you again for giving us this opportunity to present our viewpoint here today.

[English]

Thank you very much.

The Chairman: Thank you very much, Mr. Gaffield.

We'll now hear from the Partnership Group in Science and Engineering, Dr. Howard Alper.

Dr. Howard Alper (Chair, Partnership Group in Science and Engineering): Thank you very much, Mr. Chairman.

The Partnership Group for Science and Engineering, PAGES—and I'll use the acronym for the rest of the presentation—appreciates the opportunity to present its views on the issues raised by the standing committee.

PAGES is a cooperative association of 22 major Canadian science and engineering societies and associations who work together and with government to ensure that Canada's R and D capacity and the subsequent intellectual and industrial outputs are developed to their fullest potential for maximum economic and social benefit to the country.

Individuals employed in the private sector, universities, and government labs are active participants in the organizations that comprise PAGES. Recent activities of PAGES includes a study on the socio-economic importance of scientific research to Canada. This was sponsored by Industry Canada and was well received both in and out of government.

We have a university-industry synergies working group that has in it representatives at the VP R and D level from different sectors, such as mining, pharmaceuticals, and the IT industries, as well as from university and government, addressing issues to nurture and improve university-industry interactions, and there's going to be some major new initiatives in the coming months.

Finally, we have a communications committee that has launched two initiatives in the past year. PAGES, with Industry Canada, co-sponsors meetings at which leaders from industry and elsewhere give presentations on S and T policy and other issues to the ADM/DG level of science-based departments. Two excellent presentations have been held to date. Another is scheduled tomorrow, which by the way is by Sir John Cadogan, who is director general of all the granting Councils in the U.K. It's at 11 o'clock in the executive boardroom of Industry Canada. I'd be pleased if any of you wish to attend. He's talking on “From Pure Science to Profit”.

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Secondly, with NSERC, we co-sponsor breakfasts with parliamentarians, known as “Bacon and Eggheads”, and these are designed to inform MPs of new developments and research areas of current interest. Two speakers have participated thus far; one was speaking on diamonds last week and three more presentations are planned for the fall.

Just to put my own situation in context, I'm a chemist. I have a research group of 15 graduate students in postdocs who are doing work of value to the pharmaceutical, petrochemical, and commodity chemical industry. I'm also the vice-rector of research at the University of Ottawa.

Now let me address the questions raised by the committee.

First, what message do we wish to send to the government as to the priorities it should set for the fiscal dividend? Research and innovation rank highly among the needs competing for the fiscal dividend. Enhanced support by government for the research enterprise will lead to new inventions, improvement of existing processes, and the fast-track development of emerging areas. The consequences of investing in research include significant contributions to economic and social development, impacting favourably on the quality of life of all Canadians. Innovative research today builds a knowledge-based society for tomorrow.

The research community applauds the government's decision in the last budget to restore funding to the research granting councils to 1994-95 levels. This is an important first step, which, with strategic investments in new initiatives in the 1999-2000 budget, will enable Canada to be at the forefront in research and innovation.

Second, what are the new strategic investments and changes to the tax systems that would allow government to best achieve these priorities? Strategic investments in the granting councils are pivotal for achieving our priorities. We recommend that allocations be made for the establishment of new initiatives by the research granting councils, such as the following.

First is the Prime Minister's new investigator awards program to support new faculty appointees at universities and provide operational support salaries for graduate students, post-doctoral fellows, and research associates; consumables, etc. Paul Hough referred to the same idea without this particular designation. As he said, it complements the Canada Foundation for Innovation, which supports research infrastructure in engineering, health, science, and the environment, but not in the social sciences or humanities.

Second is the Enhanced Opportunities for Tomorrow program for rising stars, for those who have already demonstrated achievement and outstanding future potential three to five years after their initial appointment. This has, we believe, offensive and defensive components, offensive components to provide a significant boost to the researchers, enabling them to be in an advantageous position in competing on a global basis, and defensive components to markedly reduce the loss of talented individuals to other countries, to retain and nurture our leaders of tomorrow.

Third is a Rediscover Canada program to repatriate mid-career Canadian researchers now working in other countries. Individuals who have made significant or major contributions to research and innovation would be eligible for consideration for support by this program.

Fourth is a global partnerships program. Collaborative research on a global basis can add genuine value to Canada. We recommend that cash contributions by foreign companies be allowed to be eligible for matching funds—that is, leveraging—by research councils in university-industry partnerships. Such cash contributions will result in job creation in Canada and will stimulate foreign investment in industrial research and manufacturing in this country.

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Last in terms of research council initiatives is tri-council partnerships, that is, partnerships across the three councils. University researchers working together and with partners in other sectors can provide genuine added value when compared with individual efforts.

A two-pronged approach is recommended here. In both, priority should be given to niche areas important to economic development, such as biopharmaceuticals, food and agriculture, information technology, and materials.

One is the existing network of centres of excellence, the NCEs. These networks have been a great success, and the announcement of ongoing support of NCEs in the 1997 budget was greatly appreciated by the research community. However, the funds available for this partnership program are inadequate to address the significant demands on the system. For example, in the present competition it is anticipated that three to four applications will be funded based on 72 letters of intent. A doubling of the NCE budget will not only help increase the success rate but will enable competitions to occur on a more frequent basis.

The second component is new and is called “creative research initiatives”. It is a new initiative to promote multi-disciplinary collaboration at one or several centres. They are distinguished from NCEs in being units of excellence in a specific location or at several sites. This would promote a world-class team and a cross-sectorial research strategy and build clusters of excellence that certainly can enhance industrial development, as they have done so well in the United States, Japan, and elsewhere.

Industrial research and development: it is essential for industry to nurture research and innovation in order to compete on a global basis. With a few exceptions, too little research is performed in industry in Canada. For example, Minister John Manley, in an interview published in the May-June issue of Research Perspectives at the University of Ottawa, stated, “The level of R and D in the industrial and private sector is a nagging problem in Canada” and said:

...these problems have been picked up by the OECD in describing Canada as having an innovation gap, which not only reflects itself in R and D performance but also in the tendency of companies to adopt the most recent technologies and to use these new technologies in their businesses.

While outsourcing research to universities and other companies is useful for firms to support in-house activities, it is not a substitute for corporate research. In-house research is key to corporate success, through the development of new products and product lines, processes, etc., and for the employment of highly qualified personnel.

A major problem, especially in knowledge-based industries in Canada, is the recruitment and retention of excellent researchers. The information technology and biopharmaceutical industries are severely challenged in this regard. Both sectors cannot fulfil their employment needs at the M.Sc. and Ph.D. levels, and a substantial proportion of those who are hired leave after several years for the United States and elsewhere. The significant lower personal tax system, together with a higher salary, are powerful magnets for our industrial researchers to leave Canada. Any initiatives to address these issues, including modifications to the tax system, would be most helpful to research in industry in Canada.

Third, how can we help Canadians prepare to take advantage of the opportunities offered by this new era? Education is the centrepiece of success for Canadians in the next century. High-quality, forward-looking primary and secondary—that is, K to 12—and undergraduate university curricula will maximize opportunities for Canadians. This is primarily a provincial responsibility. Graduate—that is, M.Sc., Ph.D. and postdoctoral levels—research and training is essential to succeed in most areas of the new economy, and the vibrancy of the research and training programs is largely the responsibility of the federal government.

Support of the programs I described before will be of genuine value in attaining our goals here. Retraining programs, part of lifelong learning, have attracted increased attention in recent years. Such programs are important to adapting to the new era and to enhancing opportunities for career development for those in the workplace.

Finally, your last question, what is the best way government can help to ensure that there is a wide range of job opportunities in the new economy for all Canadians? That really comes down to the issues I've already addressed: education and training, university research, and encouraging research in industry.

• 1025

Thank you very much.

The Chairman: Thank you very much, Dr. Alper.

We'll now hear from representatives from the Canadian Association of University Teachers.

Professor Shirley Mills.

Professor Shirley Mills (Treasurer, Executive Committee, Canadian Association of University Teachers): On behalf of the Canadian Association of University Teachers, I would like to thank the committee for the invitation to appear today. CAUT represents approximately 25,000 academic staff across Canada, and I'm sitting here today as a member of the executive committee of that organization. I'm also a professor at one of the local universities, in an area supporting high technology, actually: I'm a professor of mathematics and statistics at Carleton University.

The Canadian Association of University Teachers is very appreciative of this committee's recognition that knowledge and innovation must be a key priority of the government. We're especially heartened by your support for making strategic investments in university education and research in order to ensure that Canada can compete in a knowledge-based global economy.

Our brief to you today addresses five major issues, and in the few moments I have to speak with you in our initial presentation, I'd like to touch upon those issues. The first one deals with innovation, research, and the granting councils, the second with funding of universities and the CHST, the third with international research, the fourth with government science, and the last one with student aid.

If I could address the first one, the interplay of innovation, research, and the granting councils, your December 1997 report from this committee recognized that innovation in knowledge and technology transfer was something we certainly have to stress, and rightly so. But in order to have innovation in technology transfer, in knowledge transfer, we need to have that basic knowledge.

Our document of September 1997 to this committee, which was entitled “Sustaining Canada as an Innovative Society: A framework for action”, pointed out that the capacity to produce new knowledge is the weak link in the chain in that innovation cycle.

In particular, if we take a look at R and D expenditure in Canada, the gross expenditure in 1997 was 1.61% of GDP. It was 1.53% in 1991, so we have increased, but it's dropped off from 1994, at which time it was 1.64%. We've had a bit of a peaking and then a dropping off again. This percentage of 1.61% is low relative to other G-7 countries and it's low relative to Scandinavian countries.

If we take a look by sector at who is doing the research and development, the business sector has increased its percentage by 11% from 1991 to 1997. It has gone up from 53% to roughly 64%. The higher education sector, however, has dropped from 26% to 21%, a drop of 5%.

Now it would seem like there's an ultimate gain here, except for the fact that the business sector is, for the most part, focusing on applied research and development. While we applaud that, the problem with this is that applied research and development has to be based upon basic research, and the basic research is being done, for the most part, in the higher education sector, and that's falling off. So while we may be okay for the immediate present, we are going to have problems in the future because we're falling off in the development of basic knowledge, basic research, and this is the building block for future applied research and development.

The university community very much welcomed the establishment of the Canada Foundation for Innovation, but the CFI deals with the renewal of research infrastructure; it deals with capital but not with operating costs.

We have young researchers and we have established researchers who need new research infrastructure, a modernization of that research infrastructure. But they also need the operating grants that go with that research infrastructure. It's not enough just to give the infrastructure without backing it up with funding on the operating side. In the absence of operating finances, institutions are going to be reluctant to undertake new infrastructure initiatives. One of the things we're finding right now in the high-tech areas where I'm teaching is that we need the infrastructure but there's no guarantee we're going to get the operating grants to go along with it.

The increase in the funding of the granting councils this past year—to $873 million—was good news for the university community. We really do appreciate this. We're hoping for similar positive news in 1999. We're hoping this finance committee will reiterate one of its major recommendations, the recommendation that the federal government make a commitment to long-term stable funding of the granting councils.

• 1030

We are supportive of the suggestion in the document “Sustaining Canada as an Innovative Society” that we have an increase of 50% in NSERC and MRC and at least 60% in SSHRC over a four-year period.

In particular, I wanted to address the Social Science and Humanities Research Council's work because there seem to be misconceptions. Two major ones that seem to exist are that students studying social science and humanities don't get jobs or that the research done in those areas doesn't need to get funded. Statistics Canada has done surveys to show that graduates in these areas do get jobs and the high-technology sector find that these graduates are very valuable to them as well.

In terms of the fact that the research doesn't need to get funded, I think the Social Science and Humanities Research Council has done a marvellous job of showing the importance of the research done by people in those fields.

In particular, again in the document “Sustaining Canada as an Innovative Society”, which was given to you in September 1997, the Humanities and Social Sciences Federation of Canada called for the establishment of what they termed CRICS, or the community research and information crossroads, as a method of transferring knowledge from the social science and humanities to Canadians. We have mechanisms for transferring knowledge from the physical and health sciences but not from the social sciences, and we call again for the support of that establishment. We note that the Social Science and Humanities Research Council recently allocated $3 million to a pilot project dealing with this initiative, but we would be calling upon the federal government to provide more funding for SSHRC to continue this innovative and forward-looking program.

With respect to the second item on the funding of universities and the CHST, I can speak from personal front-line knowledge of the difficult situation in our universities. From a global perspective the number of full-time students has increased from 382,000 in 1980-81 to 582,000 currently. That's a 52% increase.

Over that same period of time full-time faculty have gone up only 6% to handle a 52% increase in full-time enrolment, and that doesn't deal yet with the part-time enrolment.

We have a demonstrated demand for university education. Students want to come. They're applying to come. We have studies that show that in order to exist and survive in a knowledge-based economy, you have to have more than a high school education.

We have a demand for the university education, but the personnel and the facilities needed to meet that demand have not materialized, in large part due to inadequate funding. Due to shrinking university budgets and better economic conditions in other countries, Canadian universities are not hiring enough Canadian graduates as teachers or researchers.

Just as anecdotal evidence, last night I was at a retirement party for four members of faculty from my own department, and last year there were another four from my own department. That's eight gone, eight out of 35 in two years, and there are no replacements. We are not hiring anybody, not even part-time.

At the same time I'm teaching mathematics, which is fundamental to engineering and computer science, and we're not getting the resources to teach the classes. I'm teaching mathematics to classes of over 400 in first year, and that's considered a normal situation now.

We're not hiring the Canadian graduates and they're going elsewhere. They're going down to the United States where they can make a lot more money and have better opportunities. Not only are the salaries and benefits better, but they're getting the research funding they need down there too.

My other concern in high technology, especially when we're asked to grow, is where are we going to get the professors for tomorrow? We're seeing the students being gobbled up at the master's level, and sometimes even before they get their master's degree. They're not going on to doctoral studies because of the other opportunities. Where are we going to have the professors to teach these individuals?

In my own discipline we have a graduate in mathematics at Carleton University who came out with a perfect average of 12—that's straight A-pluses—in every course he's taken; an outstanding graduate. You would think he might want to go on in mathematics. He's intending to go into electrical engineering. He's not going to be a mathematician. He's not going to be around to teach mathematics later on.

Paul Davenport, the president of the University of Western Ontario, in a talk December 5, 1997, showed that the expense in Ontario to educate the student, an undergraduate in engineering or computer science, is approximately $17,000, but the funding we receive is only $12,000. So we're losing $5,000 for every one of these students we take in. It's not a good way to run a business.

• 1035

I don't think there can be any question of the importance of knowledge, and certainly the need for post-secondary education. CAUT is in favour of making post-secondary education more accessible to the student, and this is why we're applauding this recent federal government initiative in student aid. But on the other hand, giving moneys directly to the students and increasing tuition fees the same amount is not cost-efficient; it's eroding the core funding of university and it does not result in more moneys being spent on education per se.

What we're seeing is a buyer's market, where universities are competing. They're going out and hiring marketing firms and they're advertising themselves. They're spending money to try to attract these students. They're focusing on today, but they're not taking the long-term vision that we have to be educating for the future, for the much longer term. As has been indicated around here, we have to focus on lifelong learning. It's not sufficient to meet today's demand. The universities have to focus on the future demands. We must anticipate them so that we have a well-balanced, knowledgeable learner who's able to adapt to emerging markets and a new society.

With respect to the CHST, we recognize that the CHST is a transfer payment per capita to provinces in the form of an equalization payment, and it should be viewed positively. It would seem reasonable to require provinces to provide at least minimum services in post-secondary education, but we recognize that for the federal government there are problems of visibility and accountability with respect to those transfers. Similarly, from the provincial side, there's a problem with unilateral cuts. The CHST cash transfer was $18.7 billion in 1993-94. That's the EPF and CAP funding. It's now $12.5 billion in 1998-99. So it's a drop of $6 billion. When you take those massive cuts and you project them in a time when we have growing enrolment problems at university, it has placed enormous pressures on our university personnel and facilities. We're crumbling and breaking under those pressures.

We believe there's room for the CHST to be reformed by the provincial and federal governments, but it's easier said than done. CAUT suggests that the stakeholders, including ourselves, should provide advice on this issue for a better system of support for post-secondary education, health, and social services. In the meantime, CAUT is recommending that the CHST be increased substantially.

The third item is with respect to international research. My colleagues around the table have mentioned a little bit about this. I only want to draw your attention to two points here. First of all, CAUT recommends that the government recognize foreign area studies as a strategic research area and devote sufficient additional resources to establish a program in this field. In particular, we feel that foreign area studies are necessary if Canada is to compete globally. We must have a good understanding of the economies, business structures, history, politics, cultures, and languages of the rest of the world, and we feel this can be done most appropriately through foreign area studies.

Secondly, we have a concern that we need to re-establish funding for international research collaboration. We recommend that additional resources be devoted to re-establish these collaborations and strengthen them. We have to bring to the table both finances and expertise, and we've been falling off. Our partners in other countries are noticing that we are not coming to the table with our share of both the funding and the expertise. I in particular have had research grants from all three of the granting councils. I've dealt with international researchers and have found that we just don't have the money to meet any more as we used to. We tried videoconferencing, but it doesn't quite make up for the fact of getting together for research collaborations.

With respect to government science, Dr. Hough has raised some of the issues. I would only say that CAUT supports the position of the Canadian Consortium for Research on government science. There's an important link between government-funded science and our university researchers, and our document provides two examples of that with respect to NATMAP and with respect to geoscience mapping.

Finally, with respect to student aid, very positive steps were taken by the federal government in the last budget. The government's now in the process of implementing those measures. CAUT is a member of the National Advisory Group on Student Financial Assistance and is ready to help and provide advice in this process.

• 1040

With respect to the millennium fund, the concerns of CAUT were expressed in our brief that was presented to this committee on May 4. Bill C-36 gives broad and important authority to the millennium foundation. There's a need for the government and all stakeholders to follow very closely the actions of this foundation.

In the next few months, CAUT will be consulting with our partners in developing more detailed proposals addressing the issues we've outlined here. We would appreciate having an opportunity to meet with your committee later to discuss these further developments. In the meantime, we look forward to your comments and questions.

Thank you.

The Chairman: Thank you very much, Professor Mills.

Now we will proceed to the question and answer session. We'll begin with Mr. Solberg.

Mr. Monte Solberg (Medicine Hat, Ref.): Thank you very much, Mr. Chairman.

I thank our witnesses. This is an extraordinarily important area. I think many of us have talked in the last little while about the problem of research and development, brain drain, and that sort of thing. I think perhaps you can break this whole discussion down into two areas. On the one side, you have the question of how we can develop a strong research community. On the other side, how do we keep them here? I think those are the issues we're facing today.

I guess I've got some specific questions, but I want to start with a fairly general question, which is this. If you had your druthers—I guess I'm asking this of just about everybody—what is the single biggest change that government could make today to turn this whole problem around? On the one side, there's enhancing the research and development community in the country today. On the other side, how do we encourage them to stay? I wonder whether you could maybe be a little bit specific. I'm sure money would solve a lot of ills, but perhaps you could be a little bit more specific than by just saying it takes more money.

Mr. Chad Gaffield: I'll take a really quick cut at it. I would say it would be to see the connection between what I see as the two big issues facing Canada. One is finding where we are going to sit in the knowledge society and the other is the Canadian identity. It seems to me that those two debates have been seen as somewhat unrelated, but I think they're intimately connected.

This is why I emphasize content. It seems to me that one of the things we forget is how, just a few years ago, there was no research basis in Canada. When I was at McGill in the late 1960s, the vast majority of my professors did not receive graduate training in Canada. As for the books we read, few of them were written by Canadians. We were basically a colony. We had a branch-plant industrial economy in which most of the content was really not ours, and we were trying to forge an identity in that context.

Since that time, we've made enormous progress. We now have Canadian graduate programs. We have Canadian books in our schools. We're getting better and better.

But now, in the new knowledge society, the demand on that is just way greater. Now when your children key in on the Internet, where are the web pages being created? Where is all the material available and so on?

So it seems to me that we've got to see the intimate link between Canada as a country, Canadian identity, and Canada and the knowledge society. That's where it seems to me that the content issue is the heart of it. People are going to stay here if they believe in the country having a future. It seems to me they must see Canada in that if that's going to happen.

Dr. Paul Hough: I also feel that it's really important for governments and the community to interact on a much more rational and consistent basis. By this I mean that I think it would be appropriate for the government to actually come out and sponsor workshops, events, whatever you want to call them, at which they articulate the problems they're facing, not just the immediate ones but the ones that are coming down the road. This is so there's more of an involvement, an engagement, of the people on both sides, for instance, with these problems. What do we know about them? What do we need to know? How do we get that information?

From that will come a better appreciation of what the real costs are and who's going to be doing that. So if you get at the engagement, I think you'll get a lot more of a positive environment that will keep people here as well. So yes, money is fine, but it's not the only thing. I would agree.

• 1045

Mr. Monte Solberg: In the past we've had many of you people come here before for a number of years to say that this is a problem and that it's going to be a bigger problem in the future. Now the popular media is picking it up and identifying it as a problem.

What would be very helpful—I think there has been a little bit of research done on this—is if people could quantify the number of people and some of the opportunities we're losing to outside the country. I know people have done that anecdotally, and that's helpful, but it would be very helpful if we had a study of some specific numbers of people we're losing and the impact.

Dr. Howard Alper: If I can make a comment on the first question and then address the second, I'm really proud to be Canadian. I'm proud of the accomplishments of the Canadian community in terms of research and development. But there's a long way to go. Some of the issues that have been raised around the table this morning, especially vis-à-vis how you attract and retain people in this country, are crucial. They must be addressed. Some of the programs I listed for consideration I think would address that.

Consider those young people who are graduating, let's say with a master's degree or Ph.D., and who want to go either to industry or university. In the university sector, many of them want to stay here; however, this is a global competition and if the financial and infrastructure needs are much better provided elsewhere, then let's face it, they're often going to go elsewhere unless there are personal or other reasons keeping them in this country.

Providing significant start-up support to people, a new award from the Prime Minister, or some other mechanism would go a long way. Once you've done that and they start producing and becoming reasonably well known because they've made a significant impact, there's a danger of losing them to elsewhere. Major universities, say in the United States, will try every which way to attract them. That's why a program to address the issue of rising stars is so crucial.

Vis-à-vis industry, let's not forget that the foundation of success to our economy is industry and the research done in industry as well. That success will depend on retaining the people we can recruit, but also on recruiting them in the first place. As I note in my talk, it's crucial that something be done to the tax system that would make it more appealing to stay in this country.

Quebec has tried this. For example, as I understand it, a person coming into Quebec to work for a biopharmaceutical company, which is a major industry there, has a provincial tax holiday for the first two years. What I was told by some of the presidents and vice-presidents just recently is that they come for two years and then they leave. So that effort is a non-starter. One has to look at a much more long-term impact vis-à-vis the tax system.

The Chairman: Thank you. Mr. Gauthier.

Mr. Clément Gauthier: Your question about the magnitude of the problem is very pertinent, actually. This is why the coalition ran the survey last fall through all the 16 academic health science centres in our sector of activity. On page 2 of this report you will find that 5 of the 16 centres provided us with exact figures. So it's a good sample. They were representing large- to medium- to small-sized universities.

Overall, due to the underfunding at the time—this was actually directly related to decreased funding from MRC to these agencies—these 5 institutions lost 62 faculty clinical positions, 232 research technicians, 39 postdoctoral clinical fellows, and 68 graduate students. There you have examples of cases of star scientists who actually left Canada and Alberta for the States.

• 1050

I'd also repeat the point made by Paul Hough earlier in his presentation to the effect that it's not only the numbers that count; it's also the quality of the people. It takes 10 or 15 years to build these people, to make them stars.

But overall for our sector, we are looking to an integrated approach, because the research, for example, in our sector is done in the majority in teaching hospitals. This is an evolving trend now. It's in universities too, but mainly now it's moving toward teaching hospitals, where you have the interface between the teaching of medical students, research, and the transfer of knowledge in terms of health care.

At the same time, you can see these academic health centres as pivotal—i.e. receiving the input from provincial governments, having to comply with various provincial agencies, but being really a pivot for all those interfaces—and, at the same time, as the actual location for optimal care and optimal transfer of research into good care and into economic return.

So we are working on that proposal now to improve things, but down the road we need more support and investment by the federal government, as it happens in the States. The American government doesn't go for partnerships when it supports basic research to NIH. They do make the investment, period. They've doubled it over the past 10 years and now they've decided to double it over the next five years. So they increased the rate of increase.

We really have to get in tune, and it can be done in our sector. We're working on that. We still have very good people in Canada, but we must find ways to keep them. The first place they look is the kind of support they get for funding of basic research. There are other factors, such as income and tax situation, but in our survey it was clear that one of the major key reasons is the fact that for the same person, the equivalent grant is three to four times higher in the States than it is in Canada, so career opportunities are way greater.

We can do better things here, and we're working on that. We will present our integrated approach to the committee early in the fall, but we're working on it now.

The Chairman: Thank you, Mr. Gauthier.

Mr. Franche.

Mr. Pierre Franche: Thank you, Mr. Chairman.

In answer to your first question, as has been mentioned by others, but I think I have to mention it also from the academy's point of view, it's not just one item; it's often the relationship between two items. You can have a level of graduate research. You need that to develop the individuals to take their Ph.D.s, to teach and produce qualified engineers, but you need tax policies to keep them. We cannot continue to educate them and ship them out to the United States or to Europe, which is what's happening now. So we do need a leadership in these tax policies to keep them. It's the two linked together.

In my brief I refer very quickly, in passing, to those who want to become more competent by taking an MBA or a Ph.D. They've practised in engineering and they say they have to go back to university, because the world is changing so fast, and they know. So you incur costs. If you don't have all the support, you will have to incur costs.

I suggest to you that the capital cost of taking, say, an MBA.... And I came very close to that at a point in my career back about 20-odd years ago, of saying I would take whatever my savings were to take an MBA. It just so happens that I became the city manager of Hull, across the street. I used to be in Alma, Lac-Saint-Jean. Therefore I said, okay, there are two universities in town. It changed the whole thing. Otherwise I was going back to Université Laval from Alma, Lac-Saint-Jean.

You have to be able to deduct your capital costs, with guidelines and so forth. The human machine is worth as much as the chemical plant or the coal-crushing equipment, and you have to be able to depreciate what I call your capital cost—your investment in yourself.

As I say that, I suddenly realized just a few minutes ago, thinking about it, that there's something Machiavellian about that. That individual who can deduct it from his income tax, say for the next 10 years, may have less of a tendency to go down to the United States, because he won't be able to do it. He may stay here because he will benefit. He will increase his revenue, generate more taxes for the government, but at the same time also deduct his capital investment. That's an example of tax policies that have to be tied in with your research effort and equipment.

• 1055

We hear of the CFI, and I think it's great. We applaud the creation of the Canada Foundation for Innovation. We applaud, as I said in my written brief, the additional funding to NSERC. But having said that, there still have to be funds, not only for the capital side of research but also for the operating side, to then proceed towards this research with the private sector and the universities together, tied in with the tax policy.

So in answer to your question, you can't say just one item. It has to be two or three items interlinked.

As for studies, we as an academy.... I work part-time and my secretary works part-time, but these things are done through benevolent work by our members. One of them, for example, was done through the financial help of Industry Canada, the National Research Council, and NSERC, but always benevolent work. They only paid for the cost of printing and so forth.

If the study has not been done by others or by, say, Industry Canada, then one would have to look at it, and we'd certainly be prepared to cooperate.

The Chairman: Thank you very much.

Monsieur Perron.

[Translation]

Mr. Gilles-A. Perron (Saint-Eustache—Sainte-Thérèse, BQ): I find myself in a very uncomfortable situation. You want to train people and you're asking for subsidies, for money. I agree, like Monte and everybody else. But we train these people and send them all over the world. Moreover, Mr. Franche, your 7.2 to 1 really impressed me. However, I think that the problem is even worse because today, it's not only our brains that we export; we have more or less become suppliers to the world. As you know, our Quebec nurses are so much in demand in the United States that we are now short of nurses. The same is true for computer technicians. We're not talking about doctors of computer science, but about technicians.

I don't know if you support me or if you have a comment to make, but I believe that the first thing to do is make an in-depth revision of our tax system, not only for the super smart, but also for our technicians. I would like to hear your comments on that. Moreover, have you [* incomprehensible *] the expropriation system for technicians?

Mr. Pierre Franche: There is a problem with engineers, but not only with engineers. There is a problem, like you say, with technicians, nurses, doctors, the very best surgeons. They go to the United States for tax reasons and because they can practice their profession better there. I know all about the problem with cardiac surgeons because I was saved by them. So, I am very aware of the problem and I often discuss it with the Heart Institute in Montreal. It's a very serious problem, but there is also the opportunity to practice. They even do research in the United States, etc., but we train them here.

Canada, for example in the area of cardiology, has one of the best reputations in the world. Our institutes, whether in Toronto, in Ottawa or in Montreal, are fantastic. Unfortunately, our people are leaving. It's a tax problem and it's also because of the opportunity to practice. We train them, we pay them and we export them.

Mr. Gilles Perron: The climate doesn't help us either.

Mr. Pierre Franche: They do like to ski.

Mr. Clément Gauthier: This problem is acute as regards biomedical sciences and specialized doctors in academic health centres, as I said earlier, because there is a double problem here. People who do research with funding that is grossly insufficient compared to what they have in the United States are also the people who taught students, a greater number of students to compensate for the elimination of resources, and who are also faced with the economic restraints imposed by provincial health systems because of cuts, reductions in transfer payments, etc.

• 1100

So, you have factors here that mesh together and create an explosive situation. But, it's not only taxation that's going to solve the problem, as I said earlier, because in the area of services and research being done in these health centres, there has to be an integrated approach. We think that the budgets allocated to research, for example to the Medical Research Council... they are not aware of it, particularly in the senior civil service.

The ratio of 1 to 7, that came from the AUCC study. One dollar invested in university research brought a 7.5 dollar return in terms of the GNP in 1993. That has been proven and it's very clear. When we talk about investment in basic research, in health for example, the same dollar goes first of all to bring about 24% of all research done in Canada because it's done by the universities; secondly, it helps find new therapies and things that will develop the economy and create related businesses; thirdly, it will improve health care and the transfer of knowledge to patients. So, you have a threefold return on the same dollar and that isn't put in the National Accounts. Do you understand?

Revenue Canada and the Finance Department still can't put a value on that, but the AUCC study I just alluded to showed that there is a 1 to 7 effect on the Gross National Product. When will we be able to put that in the public books? When will we be able to show the government—as this study does—the senior bureaucrats in the Finance Department and Revenue Canada that they have to put that data in their accounting books?

In medical research, for example, if the Robarts Institute takes part in a study and shows, for example, that carotid artery by-passes save 90 million dollars a year and we stop doing it because it's more effective, where do we show those savings? We can't convince the Finance Department and Revenue Canada to put them in their books. A multiple regression, whether it's for accounting terms or for my multi-behavioral research, it's the same equation. Why?

We've been going to see them for four years now and we tell them: "If we save 90 million dollars with a procedure, why can't we show that as a return on investment?" It seems that our present generation of accountants and senior bureaucrats is living in the past. They have the mentality of 15 years ago. They are incapable of providing a vision or of helping support a vision for Canada that would bring us up to where the United States are at now, where out competitors are at. I have to tell you: we have a terrible time presenting solutions to people with the mentality of 15 years ago. So, we have to apply that new expertise.

I believe that the role of your committee and of our elected parliamentarians—you did it for the subsidy councils budget in February; you got together and you helped us—is absolutely critical to act as a catalyst for those changes. Otherwise, we are lost. We're losing our scientists for a number of reasons. You have to help us establish an integrated approach. We, in the health sector, are developing it and we're going to come and present it to you in the Fall, when we have the details worked out. We're doing it in cooperation with your people, in your facilities, at Laval, with health research centres that have relations with the provincial ministers. We're going to put that all together, but we'll have to have new national investments.

The United States, Japan, all our competitors are doing it. Why, in Canada, do we play at creating mini infrastructure aid programs when in the United States, for example, the NIHs give a part of their funding to infrastructure? It's logically integrated with the rest.

In Canada, we set up programs at different times and then try to save the ends. We have to adopt this integrated approach. We are ready to do that, but in the senior Civil Service, there also has to be a new generation of innovative people, of innovative economists, who have a vision and who are ready to support a vision of Canada other than by reducing the deficit as a means of advancing their careers. That's where we're at. Thank you.

[English]

The Chairman: Thank you.

Monsieur Franche.

[Translation]

Mr. Pierre Franche: I would like to add to what you have just said so eloquently, if I may say so. When they do cost-benefit studies, they concentrate on costs and forget the benefit part.

If we talk about emigration to the United States, the Canadians who go there, who are generally very competent, who are the crème de la crème, set up research companies that compete with ours here in Canada. That's all.

[English]

The Chairman: Thank you.

Mrs. Redman.

Mrs. Karen Redman (Kitchener Centre, Lib.): Thank you, Mr. Chairman.

I have a couple of questions. The first one I'd like to direct to Dr. Hough and Dr. Alper.

You talked about being in a global market. I appreciate some of the suggestions you've made in your brief, but I wonder if you could comment on a trend we've seen in Ontario of going to cost recovery for tuition fees. That's something the provinces are making decisions on. It's going to drive the cost of tuition through the ceiling. As well, there were some comments made by the Province of British Columbia about charging out-of-province students a greater tuition fee.

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I hear those comments, I get the reaction in my community, I look at the fact that we are in a global marketplace, and I just wonder how we can reconcile those. Several of the witnesses today have made comments about the relationship of the mandate of education being one between the federal and provincial governments. I guess I'm trying to reconcile where that's headed and what role we play.

Dr. Howard Alper: That's a very important point, because I think it's crucial that young Canadians be given the opportunity to pursue an undergraduate university education. The rapid increase in fees will impact, I predict—and this is a personal opinion—on the ability of those from poorer families to go to university, despite all the loan programs that exist.

Concerning out-of-country potential students, those coming from elsewhere, yes, B.C. is planning to increase their fees. But recognize that they're still significantly lower than in Ontario. So they're doing a comparative study.

I think that's very bad as well, because recognize that it's very important that there be a significant proportion of foreign students in our universities. Why? They create a milieu of, I think, greater tolerance, understanding and appreciation by Canadians of people from different cultures, societies and so on, aware of the fact that we have immigrants from those areas as well.

More importantly, they're our ambassadors. When they go back to their countries and talk about the value of Canada, what they learned in this country, not just in the university but also outside the university, that's a very important point, I think, about why having foreign students is important and not pricing ourselves out of the market in competition with the United States and elsewhere.

Dr. Paul Hough: I think it is an extremely important issue. The main concern I think a lot of our people have is that the increasing fees are probably going to result in a real decrease in the numbers of people who are willing to go on to graduate work of whatever description and whatever discipline you want to think of. If you start out at $30,000 or $40,000 before you can get into that, even if you have some support—and they don't all get it, by any stretch of the imagination—you're not going to add another $40,000 or $50,000 onto that.

So I think we're going to be pushing away people who (a) want to, (b) can, and (c) should be pursuing higher education beyond where they are.

The federal government doesn't seem to want to take responsibility for the university sector. Education is in the provincial domain all right, but perhaps the federal government should be highlighting what the real discrepancies are across the country. There really should be mobility and equal opportunity, if you wish, wherever one happens to live. There's no particular reason I should be going to the local university if there's a really good one I want to go to in another province.

I think the federal government has to highlight these discrepancies or impediments to opportunities, because it does impact on the ultimate capacity of our population.

The Chairman: Professor Mills, do you want to add something?

Prof. Shirley Mills: Yes, I'd like to follow up on that.

In my presentation I was indicating that CAUT believes there's room for reform in the CHST. We recognize that it is a provincial jurisdiction when we're talking about education. However, the problem is becoming so severe at the post-secondary level that something has to be done.

Core funding has eroded. There is so much you can do through research funding through the granting councils—and we're calling for increased funding there—but you still have to address the issue of the core funding of the institutions. When you're giving money to the students and also increasing the tuition fees, we've seen in Ontario, for instance, this wild marketing of universities. Everybody's going after the students, and university moneys are going out to the private sector to ad agencies and marketing agencies trying to sell the different universities. One of the results is we're losing focus about what the universities should be. The universities are focusing on the now rather than the future. Certainly we have a concern there.

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But the role of the universities is to both teach and research, and those two combined are giving us education. We have in place granting councils that give funding for research, but I would urge individuals to look at the issues of teaching, especially in the high-tech situation we have now. Many of my professors, including me, have to buy our own equipment.

These are the real situations we are faced with within the universities. Somehow we have to deal with the core funding of the university, the infrastructure, and the salaries to maintain the personnel.

The Chairman: Are there any further comments?

Mr. Pierre Franche: I have a very quick point to add to what Howard has said. I graduated in 1955 from McGill, where we had foreign students. They were some of the brightest ones. It made the class want to emulate them and encouraged us to work even harder. That's the other advantage of foreign students, in my opinion.

The Chairman: The question had to do with interprovincial mobility across the country, and it seems to emphasize the link I see between the work of the finance committee and the question of the future of Canada. If we fragment the country increasingly like that by putting up barriers across the country and at the same time attempt to reinvent Canada for the knowledge society, obviously they're playing against each other. So I think that kind of issue you point to is undermining our future in the new knowledge-based society.

Mrs. Karen Redman: I have a quick question, and this one is directed to Professor Mills specifically.

You talked about the math graduate who had the perfect score and may go on to chemical engineering as opposed to becoming a professor and part of the teaching faculty. Is math too easy and he's looking for another challenge if he can get a perfect score? What, if anything, can the federal government do to facilitate the best and brightest staying and becoming mentors to other bright minds in Canada?

Prof. Shirley Mills: Let me first address whether math is too easy. Math is used by most fields. His sister came out with 11.975 and he came out with a 12. They were both medalists from our institution. Math certainly is not too easy for him or for many others. It's used mainly to weed people out of other programs in fact, so it's a very difficult program. That indicates these are outstanding individuals. These are the types of individuals we would want to go on to do graduate work in our field.

I don't feel badly that he's attracted to electrical engineering. I think that's marvellous for the engineering profession. However, we are concerned about where we will get future graduates in mathematics. The funding in mathematics is not high from the granting councils. The salaries are not high. We're not recognized as part of the high-tech sector, although we're fundamental to the teaching of the high-technology programs. We don't get market differentials on our salaries, so we're lower paid as professors.

When an individual like this comes out and looks at what he can go into—he's a very brilliant student—he's looking at a high-tech field and will probably get gobbled up by industry before he even gets his Ph.D. there. I'm not sure if he will even go on to do a Ph.D. I can see him being grabbed by them by the time he has his master's degree, probably. So we're losing him to mathematics. We may well lose him to even engineering. We may very well lose him to the United States with job opportunities. How do we attract him?

For this student to go on to graduate school he needs funding. That means his professor has to have a grant that can provide funding to him. As I said, we don't have very large grants. We need bigger grants to support these types of students. The basic funding is $15,000 per year for a student like that. We can't be competitive when a student like that is getting offers from the United States of $50,000 U.S. We have a problem right there just with funding that individual.

If he takes our $15,000 offer, comes in and graduates and we actually manage to keep him to do a Ph.D. in mathematics, is he going to work in Canada? I just indicated we lost eight professors in two years in our department—no hires. This is a common situation. So where are the job opportunities for him in mathematics? We're not hiring there. If anything, we will hire in engineering or computer science because that seems to be the focus, but the feeder for engineering and computer science isn't getting the funding.

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So there's no job opportunity. He doesn't see that ahead of him in our particular field, in mathematics, and elsewhere he's going to get much better offers. We are not being competitive. Even if he were to come in, he would come in as an assistant professor at perhaps $35,000 or $38,000. He's not going to do it, folks—not a student like this. That's Canadian dollars, and this is an assistant professor.

May I remind you of what I said earlier. I have to buy my own computer. The secretaries get a computer, but I don't, and this is a common situation. So we're working in crumbling buildings, we do not have the equipment to do our job, we're paying out of our own salaries, and our salaries are not competitive. We have a massive problem here.

It's the core funding of the institutions and it's the funding for the research, especially through the granting councils. Those are the two main things I would emphasize.

The Chairman: Thank you, Professor.

Dr. Howard Alper: Can I follow up on the question? It's a very good question.

If you look back at the last 30 years, you always see people switching from one field to another. They may be in math and go into engineering, or they may be in chemistry or biology and go into medicine or into other areas. That's all to the good. As well, I think it's important to appreciate people in social sciences and humanities who, with degrees, to an increasingly larger extent—it still has a long way to go—go into the IT industrial sector. Their talents are finally, gradually, being recognized, because they're getting an education. That education should be applicable in different sectors.

And yes, the universities, particularly in certain provinces, have had to adjust to significant budget cuts. They've adjusted to them in different ways. I think one area that is very crucial for them to address is the issue of restructuring. Unless and until universities restructure, just like industry and government, we're going to have situations such as described a few minutes ago. One has to make priorities. One has to carve out niches, with the possible exception, I would say, of the University of Toronto. There's no university in this country that is of the level that I would categorize as excellent in all sectors—and that includes the University of Toronto, but they certainly have greater breadth than the others.

So I think it's very important that universities decide on priorities and allocate resources in light of those decisions.

The Chairman: Thank you, Dr. Alper.

On behalf of the committee I would like to express to you our sincerest gratitude for this round table. I always find this particular round table very interesting. You have a serious and thoughtful approach, and your contributions have always been thoughtful, as witnessed of course by the recommendations we made last year.

What this round table does for us, I find, is it raises the issue that every decision and recommendation we make as a committee really speaks to the future of the country. They are issues that also make you think, quite frankly, generationally. The issues of brain drain and others you have raised are of course of concern to this committee.

On behalf of the committee I'd like to thank you.

The meeting is adjourned.