Good morning, ladies and gentlemen.
Colleagues, welcome to the 40th meeting of the Standing Committee on Industry, Science and Technology.
Welcome to the room that honours veterans. In my previous role as chair of the veterans affairs committee, we had the official parliamentary carver do the insignias of the different branches of the Canadian Forces and other aspects here simply to set this room aside to honour veterans. Every time I come in here I want to let people know we have done that work and how important veterans are to us.
To get back to the issue at hand, pursuant to Standing Order 81(4), main estimates 2015-16, you'll see the rest of the description here on your orders of the day.
We have before us John Knubley, a deputy minister at the Department of Industry; Philip Jennings, assistant deputy minister of the industry sector; Lawrence Hanson, assistant deputy minister of science and innovation; Paul Halucha—who's been here so many times before this committee that I feel you're almost one of us—associate assistant deputy minister, strategic policy sector; David Enns, chief financial officer, corporate management sector; and Fiona Gilfillan, director general of the spectrum licensing policy branch.
Colleagues, I'm going to let Mr. Knubley go ahead with his opening remarks. There's been discussion, so I will simply go around the table in a fair process. Whoever has a question can get up to ask one question. If that responds to supplementary that's fine, but we'll just have a free flow in that regard.
Please go ahead, Mr. Knubley.
Just by way of introduction, I thought I would take a little time to go through our mandate, our three strategic outcomes, and a few words on the Industry portfolio and the main issues at hand.
Overall, Industry Canada helps create a strong business environment that promotes competition and instills investor and consumer confidence.
We do this by working with Canadians in all areas of the economy and in all parts of the country to create a fair and efficient marketplace, to encourage innovation, and to provide support to business.
The department basically has three business lines.
First is marketplace frameworks or the regulatory frame, if you like. The industry department is responsible for about 25 acts of Parliament that set these rules, including the Telecommunications Act, the Investment Canada Act, the Copyright Act, the Trade-marks Act, the Competition Act, and the Bankruptcy and Insolvency Act. Key objectives of these marketplace rules include providing businesses certainty through predictability and stability of the rules, achieving fairness of outcomes, incentivizing innovation, providing confidence in the marketplace, and aligning with international approaches and practices while recognizing unique Canadian interests. We try to promote well-functioning marketplace frameworks that generate positive outcomes for Canadians overall to create an innovative, entrepreneurial, and dynamic economy.
The second line of business is science, technology, and innovation. In the area of science and innovation we've seen a shift in governments focus and support. The Jenkins panel of 2011, and its review, took a hard look at overall levels of R and D spending, at the breakdown in federal innovation funding between direct and indirect investments, and at how to get more bang for our buck in terms of the effectiveness and impact of our federal support.
We've moved forward to implement the recommendations of the Jenkins panel. Whether it's transforming the NRC into a more business-oriented research organization, or changing the balance in SR and ED expenditures from indirect to direct support, we have truly been in implementation mode, and we'd be happy to talk about that.
Industry Canada also recently launched two important initiatives that will help shape support in the knowledge-based economy.
The updated science, technology, and innovation strategy announced in December 2014 focuses on three key areas. The first is people, attracting and retaining highly qualified and skilled individuals. The second is knowledge, strengthening support for excellence across discovery-driven and applied activities. The third is innovation, helping to bring new ideas and knowledge from the laboratories to the marketplace.
The second initiative of note is the Canada first research excellence fund. This $1.5-billion investment will enable Canadian post-secondary institutions to excel globally in research areas that create long-term economic advantages for Canada.
The third line of business is support for business overall. This last business line focuses on the importance of boosting the global competitiveness of key Canadian sectors. Typically we focus on the manufacturing sector, and historically Industry Canada's direct support is mostly geared towards the aerospace and automotive sectors.
Following the 2012 aerospace review by David Emerson, Industry Canada has implemented the report and its many measures to support the aerospace sector including, for example, the technology demonstration program; stable funding of close to $1 billion for the strategic aerospace and defence initiative, otherwise known as SADI; and the launch of the Consortium for Aerospace Research and Innovation in Canada, otherwise known as CARIC.
In any case, support for the automotive sector, on the other hand, is largely sourced from the automotive innovation fund, a program that supports significant, new, strategic, large-scale research and development projects to build innovative, greener, and more fuel-efficient vehicles in Canada. Budget 2015 recognized the important role of supply chains in the auto sector in terms of the future sustainability and competitiveness of the sector with the announcement of the automotive supplier innovation program.
Industry Canada aIso provides intelligence, analysis, and advice on key sectors, as I said earlier, primarily in the manufacturing area but including pharmaceuticals; information, communication, and technology; and some resource-based areas like food processing, which in the manufacturing area creates so many jobs.
Tourism is also a major source of employment in Canada and we will continue to examine ways to increase the attractiveness of domestic tourism to Canadians.
Lastly, Industry Canada has an entire team dedicated to small business. Whether it's supporting business through the Canada small business financing program, providing information to entrepreneurs through the Canada Business Network, or supporting the implementation of the venture capital action plan, we as a department are helping small and medium-sized businesses to compete and grow.
Before concluding, while I don't have any of the heads of agencies with me here today that are part of the industry portfolio, this is a diverse group of 12 organizations and indeed other affiliated bodies such as Statistics Canada, the Canadian Space Agency, the Business Development Bank of Canada, the granting councils such as NSERC and SSHRC, and the Canadian Tourism Commission, to name a few of the elements from my portfolio and the department's portfolio.
The entire portfolio, including Industry Canada, has a budget of $6.1 billion and about 16,100 FTEs.
We work in partnership with members of the industry portfolio as a department to leverage resources and to use synergies in a number of areas to further the government's goal of building a knowledge-based economy.
Let me just conclude with a few short words on the main estimates themselves. Industry Canada will receive $1.2 billion in the 2015-16 main estimates, which represents an increase of about $93 million from last year, the majority of which are in the grants and contributions area. The lion's share of this increase is from new funding from budget 2014, and specifically the largest item is $80 million for the connecting Canadians program.
Regarding the main estimates for the industry portfolio, the organizations will receive a total of $3.7 billion in the 2015-16 main estimates, representing an increase of $170 million over last year. The single largest increase in this total is $146 million for Statistics Canada to deliver on the 2016 census of population and agriculture programs. There are aIso significant increases to support SSHRC, NSERC, as well as space programs at the Canadian Space Agency.
Thank you very much, Mr. Chair. We look forward to questions.
Thank you to our witnesses for joining us today.
I'd like to focus my brief time on the automotive sector and manufacturing.
Mr. Knubley, you spoke to both areas in your opening comments. I happen to be a big supporter of the automotive innovation fund, and we've seen some significant success with that fund, specifically in southwestern Ontario. I look at the Ford plant where they have now built a global centre for developing right-hand drive vehicles that are manufactured and shipped overseas. With CETA coming down the pipe fairly soon, we're going to have a great market opportunity for that company, and there are others who have also had successful results with the automotive innovation fund.
I'd like to direct today's discussion more to the supplier innovation program, if you could, and you spoke to that. I wonder if you could talk about the importance of this fund. Clearly when we have manufacturing sectors, there are clusters of suppliers, parts manufacturers, etc., that are around these. They tend to create a type of hub environment around these manufacturing facilities. Would you be good enough to speak to, from your perspective, the objective of the supplier program and the scale of it? What's the timing of this program to bring it on stream?
Sure. It's actually a pretty long list of recommendations that were made in the Emerson report and we have an equally long list of responses from the government. I'll focus on some key ones.
I'll start with what was announced in the most recent budget, which is really a commitment to work with the Aerospace Industries Association of Canada and other industry stakeholders and provincial stakeholders to develop a national aerospace supplier development initiative, which is essentially tailored off a successful model called MACH, which is with Aéro Montréal.
The government has committed seed funding that would begin next fiscal year and the balance of the funding toward that initiative would come from industry. It's meant to develop a world-class supply chain in Canada. The funds are geared toward small and medium-sized enterprises, where we're trying, for one thing, to bring up their performance. A lot of the funding that's provided is really about trying to make sure that people can rate and understand their performance and they can take action on where they feel they're underperforming, as well as a rating system so that the larger companies can rest assured that when they're dealing with a certain supplier they have a certain rating in terms of the quality of their work, so they're more likely to take part in a supply chain that's either local or global.
Another key commitment that was made in previous budgets, which the deputy has spoken of to some extent, is the $30 million that was provided to the Consortium for Aerospace Research and Innovation in Canada. Again, that was modelled off a successful model in Quebec called CRIAQ. Emerson essentially said that the future of aerospace and for us to be competitive is based in innovation. That's really about trying to marry the research institutions, the academics, and the industry players in terms of making sure they can develop the R and D necessary for the future platforms in aerospace and space. That was launched already in terms of the consortium.
Another key deliverable was a recommitment to SADI, a five-year recommitment for $1 billion. There have been a number of very successful projects launched through that. I think since its inception 37 projects have been supported under SADI.
Another one announced in the same budget was $110 million for a tech demonstration program, which is, as I mentioned, under the automotive supplier innovation program and is trying to get at moving from basic research to commercialization. It's really about the government sharing in the risk in terms of making sure that companies make those investments that will be necessary for the future.
I should mention that Emerson also made recommendations that applied to other departments taking action. Two of them were in the procurement field in terms of defence procurement. For both of those, actions have been taken in terms of the defence procurement strategy. One of the key recommendations was that when companies bid for procurement contracts in Canada they should be offering an industrial package of investments that they plan to make in Canada and that will now be part of the bid selection process. That has now been implemented.
Another key one was with Transport Canada in terms of certification. Canada is viewed as a world leader in terms of how well we do our certification of aircraft. Emerson recommended that we continue to focus on that area to remain world class. Transport Canada is now consulting with industry on that.
Maybe I should start by just talking about the capital cost allowance measure that was put in place. In some ways, it's a really broad-based measure that benefits firms across all the manufacturing sectors. These include aerospace, automotive, forest products, information and communications, food processing—it's really a broad base.
Also, what's really critically important in some ways is that there is long-term certainty about how capital costs will be allowed to be written off. That makes a difference for some sectors, such as the chemical industry in Canada, whose horizon to invest in capital is much longer than the two-year extension that has been the case in previous budgets.
The last thing I'd say is that in some ways, if you look at the future of manufacturing, it's really about getting positioned for it. The deputy mentioned a number of programs that are geared toward this. It's about trying to incent innovation in R and D. The other part of it is about trying to incent capital investment by way of people investing in the latest machinery, which is important for the future.
This measure, the ACCA, is something that has been broadly asked for as something that is important to complement the actions on R and D.
I won't spend too much time talking about what John talked about concerning the programs. I can go into the details, but broadly speaking, they are geared generally towards supporting innovation and R and D. Different programs adopt different risk levels in the way they support R and D. With tech demo and the automotive supplier innovation program that I mentioned, the government is taking a larger risk but is also expecting the companies—and there will be thorough due diligence on this—to take risks in what we support.
Then you have programs that are more geared towards the front end, towards basic research. Many those programs come out of the shop that Lawrence Hanson leads at the moment. Then you have some that are more at the commercialization end. The automotive innovation fund, which is really about trying to attract the assemblers here, is an example of the way you support that goal.