Tories' long-term plan shifts focus from spending to innovation

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The Harper government's Throne Speech and budget this week will try to shift the spotlight away from the billions of dollars in short-term stimulus and onto measures designed to generate higher-paying, longer-term jobs.

Even as they dole out the final year of cash aimed at spurring infrastructure and construction activity, the Conservatives are trying to demonstrate they're also tackling Canada's longer-term economic challenges amid warnings on several fronts of big problems ahead.

Terms like innovation, the digital economy, productivity and research will play a prominent role in the Throne Speech tomorrow, as well as in the budget, which will be unveiled Thursday.

The Tories are returning to their fiscally conservative roots for inspiration, drawing on Advantage Canada, a late-2006 blueprint for economic policies designed to make the country more attractive for investors and more competitive internationally. It promised measures to relax restrictive ownership rules, recruit foreign talent and boost productivity, but had to be largely set aside in 2008 when the recession hit.

"In both documents [the Throne Speech and the budget]you will see Advantage Canada come up," said one government official. "As you come out of recession, that is where future growth is going to come from."

Reports going back several years have found Canada's private sector fails to invest enough in new technology to stay competitive - a problem that becomes more acute as the Canadian dollar rises.

The Conference Board recently ranked Canada 14th out of 17 countries in terms of innovation.

Minister Tony Clement has delivered a string of speeches lately on the topic, but many of his Tory and Liberal predecessors have failed to make the issue resonate with the public.

Essentially, productivity means turning research into products and getting as much revenue out of workers, equipment and goods as possible.

In such areas as housing, jobs, deficits and stimulus, how does Canada measure up? Our graphic explains

The government is also fending off critics who say there will be further long-term pressures on Ottawa's finances due to a mix of high spending, low taxes and an aging population.

It is all shaping up as a key political battle.

The Liberals have organized a policy conference this month in Montreal that is entirely devoted to positioning Canada for its 150th anniversary in 2017.

The Conservative government's long-term proposals include increased foreign competition, attracting high-skilled workers and creating a more business-friendly atmosphere through more permissive regulations.

A 2008 independent report for the government called Compete to Win, by former BCE Inc. president Lynton Wilson, urged aggressive action in these areas.

During the last election campaign, Prime Minister Stephen Harper said he supported some of Mr. Wilson's recommendations, including calls to relax foreign ownership rules in the airline and uranium industries.

Conservatives say the recession knocked some of these initiatives off course, but this week will mark their comeback.

Tories are eager to avoid a repeat of last year's budget, which saw science minister Gary Goodyear under attack for cutting $147-million to agencies that fund university research.

They express frustration that those reports overshadowed the 2009 budget's $2-billion for university infrastructure and $750-million for the Canadian Foundation for Innovation, which helps fund expensive research equipment.

In a budget that is expected to be slim on new announcements, the government has given itself some financial leeway to make a small splash in the innovation field.

The budget will have two main elements: a confirmation that a second year of stimulus spending - worth approximately $19-billion - will continue and a broad outline of how the government will erase its deficit over time.

Of the nearly $4-billion in stimulus measures for "creating the economy of tomorrow," most will be spent over the coming year.

Kory Teneycke, Mr. Harper's former director of communications, said the reason Liberal and Tory productivity agendas have come and gone is partly because some of the required measures are simply too controversial for federal and provincial politicians to touch.

"Labour laws and unions are a central factor in losses in the manufacturing sector," Mr. Teneycke said.

"One only need to look at the tale of General Motors and Chrysler to see a perfect example of that problem, and it's not something that you see a lot of politicians of any stripe taking on directly."