Ineffective R&D funding system faces overhaul

Companies doing research and development work can expect some changes this year from the federal government.

Ottawa spends about $5 billion a year to encourage research and development through tax credits and grants.

But Prime Minister Stephen Harper told the World Economic Forum in Davos, Switzerland, last week that Canada wasn't getting good value for that money.

Gary Goodyear, the minister of state for science and technology, says Canada spends more than most countries to help businesses create new products —and it's not paying off.

"The regrettable truth is most businesses don't do either any R&D, enough R&D, or the R&D they do isn't really valid or reliable or producible," Goodyear says. "It doesn't end up becoming a commercially marketable job creating process or product."

The government commissioned a task force chaired by Tom Jenkins, executive chairman and chief strategy officer of Waterloo, Ont.-based Open Text, to look into this problem last year.

The panel came back with a number of recommendations, including the creation of a new arm's-length funding agency that would streamline the tax-credits application process for businesses and putting a single cabinet minister in charge of innovation to give the government a clear voice on the issue.

The idea is to cut red tape to make it easier for companies to get access to cash and to increase collaboration for worthy projects.

Streamlining programs

For instance, Goodyear says, there are currently 60 programs to fund research and development spread across 17 government departments, something that will likely change.

Elizabeth Lance would like to see the process simplified. She's the CEO with the Ingenuity Group, a company that helps other businesses apply for the R&D tax credits.

"You have a great idea. You'd like to run with your idea, but you have to spend all of your time trying to find the capital for your idea and programs for it, and applying to 60 different programs with 60 different sets of regulations just doesn't make sense."

Lance says there also needs to be a change in how the programs are run.

She says there's a lot of paperwork to get the money, and then more paperwork while the research is happening, which can take time away from developing a new product.

Goodyear wouldn't say when the changes are coming, just that the prime minister wants to act as soon as possible.