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Before we spend on innovation, let’s make sure we’re getting value

Canada's economy could use a boost. The federal government disclosed in December that a decade of budgetary deficits lie ahead, economic growth will drift downward due to aging demographics, and Canada's productivity growth is nothing to brag about. We know this, the government knows this, so what's being done to address it?

The federal and provincial governments have touted innovation as a means of improving growth and productivity. There were significant commitments from the federal government to funding innovation in the 2016 budget as well as reports from the Finance Minister's Advisory Council on Economic Growth that emphasized the importance of building a skilled work force to support economic growth. Canada's premiers have also highlighted the importance of innovation and a skilled work force for long-term sustainable economic growth by establishing the Economic Productivity and Innovation Working Group through the Council of the Federation.

What outcomes can we expect from these efforts? What's being done now to support innovation and skills development and training? For millennials, these questions matter. They are the ones that will bear the brunt of a shrinking work force and low growth as they enter the labour market.

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There are well-established linkages between a growing economy, a skilled work force and its capacity to innovate. The upcoming federal budget on March 22 will surely see new funding for such initiatives. But before new money is allocated to supporting or exploring means of achieving a more skilled, innovative and productive country, we should consider the existing money being spent. There are two reasons for this: new money is getting harder to find and taxpayers expect performance from the tax dollars that they send to government.

In its 2015 electoral platform, the Liberal Party promised to "use accurate data to make good decisions" and to "stop funding initiatives that are no longer effective and invest program dollars in those that are of good value."

This is an important commitment to driving performance from taxpayer dollars. But how do you know if programs are of good value (financial or otherwise) unless you first know what you're spending and then considering how that money is being spent? The problem becomes particularly acute because the government inherited a $270-billion program spending base from its predecessor.

The Institute of Fiscal Studies and Democracy (IFSD) at the University of Ottawa worked with two of its undergraduate students to explore how the government was actually spending on skills development and training and innovation by using the government's own publicly available data. The 2014-15 departmental spending performance reports (released in 2016) of 94 federal departments and agencies were reviewed.

We came to two basic conclusions from examining the data.

First, we're spending a lot of money, to the tune of nearly $23-billion through program spending and tax expenditures. Just over 60 per cent of the money is going to skills development and training (not including funding for employment insurance and related support programs). This is a significant chunk of money when compared to total government spending.

Second, we don't get a clear picture of how the government is performing. In the current set of 147 activities in these areas, the majority have weak performance metrics as assessed by our students, i.e. they don't provide a clear assessment on value-for-money essential for evaluation.

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These conclusions pose a challenge and an opportunity for the government. Upholding its promise of spending money responsibly, based on data for good-value programs, will require a thorough review of the spending base for both efficiency and effectiveness. The opportunity is that the spending base can also be realigned to their new agenda. This is the prerogative of any government and could be fairly viewed as a political opportunity.

As the government continues to advance the much-needed innovation agenda, it may wish to consider this an opportunity to re-examine and re-purpose some of the $23-billion in spending towards its objective of a more innovative and productive economy, and a more skilled work force for a more prosperous Canada.

Helaina Gaspard and Kevin Page are with the Institute of Fiscal Studies and Democracy, University of Ottawa. Kevin Emmanuel and Emel Medinic are economics students at the University of Ottawa.

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