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Federal Budget 2016: A Shift in Government Funding Priorities

by Rob Maciel

As previously explored by a fellow Mentor Works team member, Alex Barlow, the Liberal Government presented their first budget, and with it has come significant reflection on the election campaign and the direction this government will take the country. Throughout the campaign and early days of his government, Prime Minister Trudeau made it clear that his government wanted to focus spending on innovative projects and creating a sustainable green economy. These two areas are the most prominent changes to the Canadian business environment.

In addition to our previous Budget 2016 blog, which reviews how the budget will affect government funding agencies, this blog will identify how federal funding will accomplish priorities set forth by Canada’s Liberal government.

Related Blog: Budget 2016 and its Impact on the Future of Government Funding – The Canadian federal government has developed new priorities to stimulate the economy. Discover what the budget suggests about Canadian government funding programs on the horizon.

Canadian ‘Innovation Spending’ Outlined in Federal Budget 2016

Research and Development Capacity

Prior to releasing the budget, Trudeau’s government said that they would top up funding for the National Research Council’s Industrial Research Assistance Program (IRAP), and they held true to this promise by earmarking a $50 million boost to the program. IRAP offers businesses grant funding to support innovative R&D, product development, and process development projects. The program offers flexibility and allows businesses to determine what R&D priorities make sense for them.

“In Budget 2016 the Government is defining a new vision for Canada’s economy: to build Canada as a centre of global innovation. Canada will be propelled by its creative and entrepreneurial citizens; its leading science and technology; its excellent innovation infrastructure; and its globally competitive companies offering high-quality products and services, thriving within a business environment that supports commercialization and growth.”
– Federal Budget 2016

Expanding government funding support through IRAP will help ensure small and mid-sized businesses across Canada may perform innovative R&D projects.

Related Blog: Trending in Small Business Grants: Productivity, Innovation, Exports – An increasing number of Canadian small business grants require that businesses complete projects that increase productivity, enhance innovation, an grow exports.

Scientific Research Spending

The government has increased spending in scientific research. In order to support an innovative economy, we need to attract, train, and retain world-class researchers. The budget promises an additional $95 million per year, starting in fiscal year 2017, to the granting councils as follows:

While much of this money will support post-secondary research initiatives, small businesses will be positively impacted by this. Several industrial partnership programs will help SMEs access leading researchers to support Research and development initiatives.

Lastly, the federal government is providing $28 million ($14M/year for two years) to support Mitacs, a national not-for-profit organization, to help build more partnerships between industry and academia.

Agri-Food Innovation

Budget 2016 announced new spending for innovation programs that support the agricultural and agri-food sector’s global competitiveness. The Liberal government reiterated support for the Growing Forward 2 program, which runs until fiscal year 2018, and represents a total of $3 billion in spending on grant funding and risk management programs. Although they did not confirm that the program will be extended or renewed, they did extend a commitment “…to [support] an agricultural and agri-food sector that is strong and innovative.”

To this effect, they have announced a new agricultural science funding envelope of $30 million over six years starting in fiscal year 2017. While the specifics of this funding has yet to be announced, the $30 million will be invested in advanced research for agricultural genomics.

Canadian ‘Green Spending’ Outlined in Federal Budget 2016

Throughout the campaign, Trudeau continuously referenced his commitment to improving the government’s approach to (1) fighting climate change, and (2) developing a green economy. In the budget we finally see how the government is going to implement this plan. Over the next four years the government will invest $1 billion in clean technology initiatives for the forestry, fisheries, mining, energy, and agricultural sectors.

Related Blog: Canada Declining in Market Share for Global Cleantech Industry – The global market for clean technologies is valued at over $1 trillion. Canadian companies need to become more innovative to satisfy the market.

Investing in clean technologies is a clear priority for the government. They have confirmed additional funding to the SD Tech Fund and a range of new funds to Natural Resources Canada. Highlights include:

  • $50 million over four years to the Sustainable Development Technology Canada (SDTC) Tech Fund (SD Tech Fund);
  • $82.5 million over two years to Natural Resources Canada to support development and demonstration of clean energy technologies;
  • $50 million over two years to Natural Resources Canada to invest in technologies that will reduce greenhouse gas emissions in the oil and gas sector; and
  • $2.9 billion over five years to address climate change and air pollution.

What Does Federal Budget 2016 Mean for Canadian Small Businesses?

While there are several references to small business grants funding programs, a majority of the spending referenced here will indirectly impact businesses. Investment in Canada’s research capacity will primarily be spent between Natural Resources Canada, post-secondary institutions, and research institutions. Businesses will benefit from this due to improved access to world-class researchers and infrastructure to support R&D initiatives. However, Budget 2016 reveals much more for the future climate of business funding in Canada.

Budget 2016 shows that the federal government is shifting towards investment in scientific research, climate change, and green projects. Given how closely small business funding programs mirror government priorities, we can expect that the next round of major funding programs will have a similar focus.

Sustainable business spending will require investments in clean tech, energy efficient equipment and processes, and improving R&D capacity for innovative products and processes that address climate change. I expect that that this trend will continue to emerge as we progress through the new fiscal year.

Canadian small and mid-sized businesses should take the Liberal government’s economic investment as a positive sign; additional investment is likely under this government.

Canadian Government News and Funding Programs:

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