Fraser Forum

Ottawa spends $23 billion each year on innovation and skills training—with little sense of success

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Rumours suggest the upcoming federal budget may introduce new spending intended to encourage innovation and skills training in Canada. However, a new report led by Canada’s former Parliamentary Budget Officer (PBO) finds Ottawa is already spending considerable sums on innovation and skills training, with little indication that the money has achieved its stated goals.

The report finds that the federal government spends $23 billion each year on programs and special tax breaks related to innovation and skills training. (For perspective, that is nearly the same size as the projected $25 billion federal deficit this year).

Approximately 37 per cent of the total spending is on innovation initiatives and the other 63 per cent goes to skills training. Notably, the money is being funnelled through a web of 147 separate programs and tax measures (tax credits, deductions, exemptions, etc.), with many targeting particular regions of the country (i.e. Atlantic Canada) or sectors of the economy (i.e. the auto or mining industry).

Clearly, Ottawa is currently spending a lot on innovation and skills training so a reasonable question is whether this money is being spent effectively. And yet, the report finds the federal government does not adequately measure the effectiveness of the vast majority of its initiatives for innovation and job training.

While the spending programs include metrics meant to measure success, only 20 out of 126 of them are required to go through performance reviews and provide metrics of sufficient quality to make a value-for-money assessment. Meanwhile, the 21 tax measures have no publically available metrics for success.

In fact, the government is not properly measuring the effectiveness of 90 per cent of its spending on innovation and skills training, according to data accompanying the report. So it’s not clear that new spending will be helpful when there’s no indication whether what Ottawa is doing now is effective.

For a government projecting a $25 billion deficit this year and another $100 billion in new debt over the next five years, there’s simply no fiscal room for dubious spending. Any existing or new spending must be scrutinized and shown to be effective as the country cannot afford questionable debt-financed spending, which will burden current and future taxpayers.


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