April/May 2017 - 2017-18 Budget: new spending to help spur innovation

The federal government’s 2017-18 budget isn’t revolutionary – but the tech industry will continue to grow.

While modest with limited new spending and no major taxation changes, the word innovation appears 212 times in the official document. This is good news for us.

With funding in key areas for skills development, venture capital, clusters and procurement, this is a positive budget for the tech sector overall.

In Manitoba, the budget hits on some key focus areas such as access to talent/skills, markets and capital.

A few top-line investments of note:

Skills/talent development
•    $225M investment over five years for a new skills agency, with $75M ongoing;
•    $221M to allow Mitacs to increase co-op placements from 3,750 to 10,000;
•    $50M over two years to support organizations delivering digital skills to girls and boys in grades K-12;
•    Additional funds specific to supporting indigenous education and access to broadband.

Venture capital
•    The Venture Capital Catalyst Initiative was announced, providing $400M for BDC (Business Development Bank of Canada). This is essentially VCAP (Venture Capital Action Plan) 2.0, but the government has yet to decide how exactly it’ll work – if this will fund ‘funds of fund’ (like VCAP), for example, or whether there would be a more direct mechanism to invest.
•    The Business Growth Fund (a $500M contribution from major banks) was re-announced.
•    There was a strong focus on clean tech this year with the announcement of a Clean Technology Fund, which will include $1.4B through BDC and EDC (Export Development Canada).

Procurement
•    Innovative Solutions Canada is a new procurement program modelled on the SBIR (Small Business Innovation Research) program in the United States. Initially, it will be a small program ($50M over five years). It will aim to provide an easier way for small, innovative companies to sell to the Canadian Government.

Further details on the announcements are available below. The full budget document is available here.


Focusing programs

Streamlining processes and making programs more accessible for companies is a strong focus in this year’s budget.

Most notably, the Strategic Innovation Fund ($1.26B) rolls up a number of existing funding programs aimed at the automotive and aerospace sectors adds an extra $200M in new money, and now makes them available more broadly for companies – including those in digital industries, clean tech and agri-food.

There aren't a lot of details in the budget, but this potentially addresses problems high-growth companies have had in accessing available government funding envelopes previously focused only on specific industries.

The budget includes a call to review all business innovation programs and streamline them into 'one-window' access for companies. This includes all relevant departments (particularly Innovation, Science and Economic Development Canada, Natural Resources Canada and Agriculture as well as the National Research Council and the Scientific Research & Experimental Development [SR&ED] program).
This is a potentially positive statement, but lacks detail. ICTAM and its sister organizations across the country will closely monitor the review of SR&ED.

Impact Canada
The budget announced two new 'challenges' programs under the title 'Impact Canada'.
•    $300M for the Smart Cities Challenge will provide up to $50M to a winning city that puts forward a plan to implement a smart cities strategy. There are not a lot of details, but the program will be run out of infrastructure Canada and have a strong focus on Internet of  Things (IoT) and data initiatives.
•    $75M for a Clean Technology challenge to help remote communities move away from diesel power.

Pan-Canadian AI Strategy
The budget contained $125M to promote collaboration between Canada’s main centres of AI excellence – Montreal, Toronto-Waterloo and Edmonton. Details were limited but this will include funding for the new Vector Institute in Toronto, among other initiatives. The Canadian Institute for Advanced Research (CIFAR) will administer the funding for the new strategy. The document also noted that AI is also available for cluster funding. Likely the cluster funding bucket will be where EMILI – the Enterprise Machine Intelligence and Learning Initiative – might find support.

Other funding
•    $10M over two years was provided to continue funding the Institute for Quantum Computing at the University of Waterloo.
•    $14M for Futurpreneur Canada.


Highlights from Manitoba’s 2017-18 budget

•    Renewing Interactive Digital Media Tax Credit
•    “A new Labour Market Strategy aligned with industry and community needs will ensure the province has a highly skilled and adaptable workforce able to meet the economic and labour market opportunities of the future.” This is a relatively easy commitment to make, as funds for these programs are provided to the Province through Federal Transfer Payments.
•    Budget 2017 includes a 2.1 per cent increase to core government spending in 2017-18.
•    Partnerships for Economic Growth, a new, single-window approach to supporting innovation and economic development through an investment of $4 million allocated based on demonstrated results. (this is a decrease from $6.5M in the previous budget).
•    Removing regulatory burdens for businesses, non-profits, local government and residents, as well as those that prevent full engagement in public private partnerships, that would allow better value for money in provincial infrastructure investments. Understanding what this actually means is key to understanding the provincial budget in terms of our industry.

Tax measures
•    tax relief,
•    no tax increases and
•    no new taxes.