ARCHIVED - Canada's Performance Report 2008-09: The Government of Canada's Contribution

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2 - Economic Affairs

Context

In 2008–09, the global economy entered the deepest and most synchronized recession in the post-war period, triggered by a major financial crisis originating in the United States. Although Canada faced this crisis from a position of economic, financial, and fiscal strength, Canadians in all regions of the country have been deeply affected by these global economic and financial developments. 

Budget 2009: Canada's Economic Action Plan, announced in January 2009, was the Government of Canada's response to the global recession. The Plan proposed a series of measures to provide immediate support for the economy and employment and to invest in our future. Although some preliminary results were felt in 2008–09, the real impact of these measures will occur in the next few years, as programs are delivered.

Building on previous actions taken by the government to stimulate economic growth, the Plan introduced timely measures to reduce the tax burden for Canadians, help the unemployed and create new jobs, build Canada's infrastructure, improve access to financing for households and businesses, and support industries and communities most affected by the global downturn. Canada's strong fiscal performance over the last decade helped make these significant stimulus initiatives possible.

At the same time, the government continued to advance ongoing initiatives aimed at strengthening Canada's economic position and bettering the economic well-being of Canadians. This was done by creating the right climate for business, bolstering key sectors of the Canadian economy, advancing innovation, and strengthening environmental management to support our economy into the future. The government also continued to help Canada's regions and communities and provided employment opportunities and income support for marginalized groups within our society. 

This chapter contains information about the federal government's contribution and expenditures in five outcome areas under Economic Affairs:

• Income security and employment for Canadians
• Strong economic growth
• An innovative and knowledge-based economy
• A clean and healthy environment
• A fair and secure marketplace

Expenditures in Economic Affairs

In 2008–09, a total of 47 federal organizations spent $105.4 billion on programs and services that contributed to Canada's economic affairs. Of this, 66.6 per cent supported two outcome areas—income security and employment for Canadians and strong economic growth. Spending under Economic Affairs included $25.1 billion for transfer payments to the provinces and territories (excluding the Canada Health Transfer) and $16.3 billion for Employment Insurance.

Table 2 — Comparison of 2008-09 planned and actual spending by the Government of Canada for the Economic Affairs outcome areas ($ billions)

Outcome Area	Main Estimates	Planned Spending*	Actual Spending
Income security and employment for Canadians (includes Employment Insurance)	55.4	55.7	56.5
Strong economic growth	11.2	12.3	13.7
An innovative and knowledge-based economy	6.2	6.3	6.8
A clean and healthy environment	2.4	2.7	2.6
A fair and secure market place	0.7	1.1	0.7
Transfer payments (excluding the Canada Health Transfer) to provinces and territories	23.1	23.1	25.1
Total	99.0	101.2	105.4

Figure 2.1 - Text version

The main federal organizations that invested in Economic Affairs were Human Resources and Skills Development Canada, Agriculture and Agri-Food Canada, and Infrastructure Canada.  

Income Security and Employment for Canadians

Background

Canada's economic prosperity, the strength of its labour market, and the safety of its communities are closely linked to the economic security and well-being of Canadian individuals and families. By ensuring a basic standard of living, the Government of Canada allows more Canadians to benefit from economic growth. 

The federal government is responsible for implementing measures that ensure income security for the most vulnerable members of our society-seniors, students, persons with disabilities, women, and families under a certain income threshold. These measures proved to be particularly important during the economic downturn of the past year. 

Equally important in 2008-09 was the government's strategic investment in Canadians entering or repositioning themselves within the labour market. This contributed to creating a strong base for Canada's eventual recovery from recession. 

Expenditures for income security and employment for Canadians

In 2008-09, the following eight federal organizations invested $56.5 billion, which includes $16.3 billion in Employment Insurance, in the income security and employment outcome area:

• Canada Industrial Relations Board
• Canada Revenue Agency
• Cape Breton Development Corporation
• Human Resources and Skills Development Canada
• Office of the Superintendent of Financial Institutions Canada
• Royal Canadian Mounted Police
• Status of Women Canada
• Veterans Affairs Canadaa

Human Resources and Skills Development Canada spent $37.4 billion on implementing social investment programs and policies. This included providing support to people entering the workforce and retraining for those repositioning themselves for new job opportunities. The Department also continued to ensure that eligible Canadians receive pensions, benefits, and allowances to help them meet their basic needs. 

Veterans Affairs Canada provides benefits and services to veterans, their families, and other eligible recipients. In 2008-09, its expenditures in the outcome area of income security and employment for Canadians were approximately $2.2 billion. This included pensions or awards for disability, death, or detention; job placement assistance, rehabilitation, and vocational assistance; and health and financial benefits.

The Canada Revenue Agency spent $402.7 million in 2008-09 to provide Canadians with an effective and rigorous tax system that is easy to use for taxpayers.

Figure 2.2 - Text version

The Government of Canada's contribution to income security and employment for Canadians

Reducing the tax burden on Canadians

In challenging economic times, tax reductions are an essential part of what governments can do to stimulate the economy. The tax reductions introduced in Budget 2009 will help create and maintain jobs and lay a solid foundation for future economic growth.

Canada's Economic Action Plan included measures to reduce the tax burden for Canadian individuals, families, and businesses by more than $20 billion over 2008–09 and the next five fiscal years. Actions taken by the government since 2006, including those proposed in the Plan, will reduce taxes on Canadians over the same period by an estimated $220 billion.

Budget 2009 tax relief measures contributed the following benefits to Canadians:

• Effective January 1, 2009, individual Canadians can earn more income before paying federal income tax or being subject to higher tax rates as a result of increases to the basic personal amount.
• Low-income working Canadians will be better off financially because of enhancements to the Working Income Tax Benefit, which effectively double the tax relief provided.
• Additional support to low- and middle-income families is provided through $1.5 billion in enhancements to the Canada Child Tax Benefit and the National Child Benefit supplement.
• Starting in 2009, approximately 2.2 million seniors can receive tax savings through a $1,000 increase to the Age Credit amount.
• Canadian businesses can benefit from permanent and temporary measures that include reducing the general corporate income tax rate, increasing the small business income limit to $500,000, introducing a temporary 100-per-cent capital cost allowance (CCA) rate for computers acquired after January 27, 2009, extending the temporary 50-per-cent CCA rate to investment in manufacturing and processing machinery and equipment, and allowing a one-year extension of the temporary Mineral Exploration Tax Credit.
• Jobs will be preserved and created through the temporary Home Renovation Tax Credit that will stimulate economic activity, boost the value of Canada's housing stock, and increase energy efficiency. Canadians can claim this credit for work performed or goods acquired after January 27, 2009, and before February 1, 2010.

Budget 2009's tax measures are providing immediate economic stimulus and will continue to boost the economy as individuals, families, and businesses benefit from these measures. For updates on the implementation of Canada's Economic Action Plan, consult the Department of Finance Canada's website.^[7]

Measures to help the unemployed

 A key objective of Canada's Economic Action Plan is to protect jobs and support Canadians directly affected by the global recession. The Plan included significant investments to support workers affected by the economic downturn and to create opportunities for skills development.

Specifically, the $6.3 billion-Canadian Skills and Transition Strategy, funded over two years, will support measures to strengthen benefits for Canadian workers, enhance the availability of training, and maintain low Employment Insurance premium rates. These measures balance the need to provide immediate assistance to workers affected by the recession and the need to ensure that they are able to take advantage of the emerging economic opportunities over the long term.

Benefits for children and families

Human Resources and Skills Development Canada oversees the implementation of the Universal Child Care Benefit. This benefit provides $100 per month for each child under the age of six, to a maximum of $1,200 a year per child. All families with children under the age of six receive the benefit, which they can use for child care costs. This allows parents to choose the child care option that best suits their family's needs. 

In 2008–09, 1.5 million Canadian families received the Universal Child Care Benefit, totalling about $2.5 billion in government spending. This benefit was responsible for lifting approximately 24,000 families, including 55,000 children, out of low-income status.

Since 1998, the Government of Canada has provided direct financial assistance to families with children through the Canada Child Tax Benefit. Its purpose is to help prevent and reduce the depth of child poverty in Canada. This benefit is made up of two components—the base benefit, which is paid to low- and middle-income families with children, and the National Child Benefit Supplement, an additional benefit paid to low-income families with children. 

In 2008–09, more than 3.1 million families benefited from these payments, totalling $11.9 billion in government spending. In 2009–10, a low-income family is able to receive a maximum total amount of $3,416 per child as a result of the base benefit and the supplement. 

Performance context

To set its programs, expenditures, and performance in context, the Government of Canada is tracking key measures of long-term progress in the outcome area of income security and employment for Canadians.

Performance Context - in the outcome area of income security and employment for Canadians.

Trend	Indicator	Overview
No trend	Unemployment	In 2008, the unemployment rate was at 6.1%, up slightly from its 2007 level of 6.0%-the lowest level in over 30 years. In 2006, the unemployment rate was higher than in 2008 at 6.3%. It is expected that the level of unemployment will increase in 2009. The highest levels ever reached in Canada were in 1983 (12%) and in 1993 (11.4%), following two major recessions. Source: Human Resources and Skills Development Canada[8]
Improving performance	Low income incidence	Between 1996 and 2007, the low-income rate among Canadians declined from 15.2% to 9.2%-a substantial decrease of 41%. This also represents an improvement in recent years. In 2005, for example, 10.8% of Canadians experienced low income; in 2003, the rate was 11.6%. Source: Human Resources and Skills Development Canada[9]

Strong Economic Growth

Background

The global economic slowdown that began in 2008–09 reduced demand internationally for many Canadian goods and services. This had a pronounced impact on regions of Canadathat depend on primary industries and the manufacturing sector. To respond to this situation, the Government of Canada, in partnership with local stakeholders, provided strategic investments in targeted sectors with a view to reducing regional disparities and ensuring a stable economic and social climate.

Economic growth forecasts were revised down significantly in early 2009 from the2008 Economic and Fiscal Statement. The government acknowledged that Canada had entered a recession in late 2008 and predicted contractions in nominal and real Gross Domestic Product (GDP) for 2009. Canada's Economic Action Plan focussed on stimulating growth in a number of ways, such as improving access to financing, strengthening the financial system, providing tax relief to encourage spending, supporting businesses, stimulating housing construction, and taking immediate action to build infrastructure.

The development of public infrastructure is critical for underpinning economic growth in Canada. It provides jobs in the short term and sustains economic activity and commerce into the future. It also provides an opportunity for the development of more environmentally friendly alternatives to existing infrastructure, thus contributing to a cleaner and healthier environment.

As outlined in Budget 2007 and re-affirmed in the October 2007 Speech from the Throne, the Government of Canada's Building Canada Plan provides $33 billion in funding over seven years (up to 2014) to support the development of world-class modern infrastructure. It is the largest infrastructure development program undertaken in Canadain more than 50 years. To accelerate its achievement, Canada's Economic Action Plan allocated close to $12 billion of Building Canada infrastructure funding for 2009 and 2010.

Expenditures for strong economic growth

In 2008–09, the following 28 federal organizations invested $13.7 billion in the strong economic growth outcome area:

• Agriculture and Agri-Food Canada
• Atlantic Canada Opportunities Agency
• Atomic Energy of Canada Limited
• Canadian Environmental Assessment Agency
• Canadian Food Inspection Agency
• Canadian Tourism Commission
• Citizenship and Immigration Canada
• Department of Finance Canada
• Economic Development Agency of Canada for the Regions of Quebec
• Enterprise Cape Breton Corporation
• Environment Canada
• Federal Bridge Corporation Limited (The)
• Fisheries and Oceans Canada
• Human Resources and Skills Development Canada
• Indian and Northern Affairs Canada and the Canadian Polar Commission
• Industry Canada
• Infrastructure Canada
• Jacques Cartier and Champlain Bridges Incorporated (The)
• Marine Atlantic Inc.
• National Energy Board
• National Round Table on the Environment and the Economy
• Natural Resources Canada
• Northern Pipeline Agency Canada
• Office of the Superintendent of Financial Institutions Canada
• Standards Council of Canada
• Transport Canada
• VIA Rail Canada Inc.
• Western Economic Diversification Canada

Indian and Northern Affairs Canada continued to make significant investments in strong economic growth. In 2008–09, the Department spent $2.3 billion on infrastructure projects for First Nations communities, Aboriginal business development, and economic development projects in the North.

Infrastructure Canada made significant investments, in the order of $2.3 billion, for the construction of public infrastructure projects in partnership with the provinces, territories, and municipalities. 

In 2008–09, Agriculture and Agri-Food Canada spent more than $1.6 billion to support a competitive, innovative, and environmentally sustainable agriculture, agri-food, and agri-based products sector. The Department assisted the sector in developing and implementing food safety systems to meet the needs of consumers, helped producers manage business risks, applied scientific and technical knowledge to enhance the sector's profitability and competitiveness, supported the industry in gaining new market opportunities and access to export markets, and worked with partners to improve biodiversity and air, water, and soil conservation.

Figure 2.3 - Text version

The government of Canada's contribution to strong economic growth

Building a stronger public infrastructure

Investing in infrastructure like roads, bridges, clean water, transit, green energy, and recreational facilities provides timely economic stimulus by creating jobs across Canada in construction, engineering, and manufacturing and also serves to generate significant economic spin-off activity. Over the long term, such investments also give Canadaa more modern, greener infrastructure and build the foundation for sustainable economic growth and global commerce.

In 2008–09, Indian and Northern Affairs Canada continued to invest in infrastructure for First Nations communities. More than $1.3 billion was allocated over the year to support the construction and maintenance of community infrastructure, including water and wastewater treatment facilities, schools, and housing. This included an additional $78.7 million for energy systems, planning and skills development projects, solid waste management, and repairs and construction of roads and bridges. The Department also built six new schools on reserves, at a total investment of $58 million, and completed repairs and renovations to other schools in the amount of $53.8 million.

Assistance to small and medium-sized enterprises in Canada

Canada's 2.4 million small and medium-sized enterprises are an important part of the Canadian economy. These businesses contribute to Canada's economic success by creating jobs, which account for nearly half of all private sector employment, exporting goods and services worth 35 per cent of the value of exports, and generating new economic activity through start-up companies. 

Industry Canadahelps entrepreneurs start new businesses and gives them the information they need to remain competitive. The BizPaL^[10]service offers one-stop access to permit and licence information for all levels of government, thereby reducing document research time and helping businesses start up more quickly. To date, 11 provinces and territories are participating in BizPaL, with more than 300 municipalities offering the service.

The Canada Small Business Financing Program, also administered by Industry Canada, makes it easier to obtain a loan from a financial institution for establishing, expanding, or modernizing a small business. The program works by encouraging financial institutions to provide their services to small businesses. Approximately 75 per cent of loans would not have occurred, or would have occurred under less favourable conditions, if not for this program.

Regional development agencies, headquartered in Atlantic Canada, Western Canada, Quebec, and Northern Ontario, also assist small and medium-sized enterprises. For example, in 2008–09, the Atlantic Canada Opportunities Agency supported a network of 41 Community Business Development Corporations that provide information, advice, and capital to small businesses throughout rural Atlantic Canada. As a result of this support, over 700 new businesses have started up and more than 850 businesses have stabilized or expanded their operations.

Indian and Northern Affairs Canada made progress in increasing the participation of Aboriginal entrepreneurs in the Canadian economy through the Aboriginal Business Development Fund. Equity in the amount of $23.3 million was distributed to 399 businesses in 2008–09 to support the establishment, expansion, and acquisition of viable businesses.

In 2008–09, National Research Council Canada supported more than 1,462 small and medium-sized businesses by providing $70.6 million in financial contributions to 1,717 projects through its Industrial Research Assistance Program. According to a recent evaluation of this program, the funding that was allocated helped create wealth of up to $6.5 billion.

Reducing the backlog in immigrant skilled worker applications

Citizenship and Immigration Canada contributes to Canada's strong economic growth by admitting permanent and temporary residents into Canada in response to labour market needs through such programs as the Canadian Experience Class, the Temporary Foreign Worker Program, and the Provincial and Territorial Nominee Programs. Budget 2008 announced $109 million over five years to improve the capacity and flexibility of the immigration system to respond to Canada's dynamic and evolving labour market demands. 

To this end, in November 2008, Citizenship and Immigration Canada outlined a set of clear eligibility criteria that apply to all new federal skilled worker applications. Since the implementation of these criteria, the backlog of applications in the federal skilled worker category has been reduced by 25 per cent as of March 31, 2009.

Ensuring the economic competitiveness of the natural resources sectors

Canada's natural resources sectors account directly for 12 per cent of national GDP. They are important economic drivers, providing jobs and income for approximately 850,000 Canadians across the country.

By promoting economic opportunities for these sectors, Natural Resources Canada helped maintain continued investment in natural resources projects in 2008, with capital investment totalling $94 billion or 27 per cent of total private sector investment. Forest, mining, and energy products continued to be important to Canada's trade surplus, accounting for 53 per cent of Canada's exports in 2008. In fact, if natural resources products had been excluded, Canada would have faced a $77 billion trade deficit. Private sector research and development in the natural resources sectors was roughly $2 billion in 2008, accounting for 11 per cent of total private sector research and development investments.

However, business and employment opportunities in the natural resources sectors were constrained by the financial crisis and global recession, resulting in layoffs, production slowdowns, and postponed investments. In 2008, employment in these sectors decreased by 3.4 per cent compared to 2007. Despite this, the natural resources sectors continued to be an important employer of Aboriginal peoples, who make up 7.5 per cent of Canada's mining workforce. 

Small craft harbours

The development of federal small craft harbours across the country, many of which are located in rural and remote areas, is critical for the commercial fishing industry and helps to stimulate economic growth. Nearly 90 per cent of Canadian commercial fish harvesters use small craft harbour facilities to berth their vessels and land their catches. These harbours are often the only visible federal presence in remote communities and provide significant local economic development opportunities.

In 2008–09, Fisheries and Oceans Canada invested $85.7 million in 1,163 small craft harbours located in all ten provinces and the Northwest Territories. Almost all funding went directly into the local economies. Further, about 5,000 Harbour Authority volunteers who manage and operate these harbours make a contribution of their labour valued at approximately $5.3 million per year. Their work generates an estimated $24 million annually in revenue for the harbours.

The Economic Action Plan provides $200 million over two years to support the repair and maintenance of Canada's core commercial fishing harbours and an additional $17 million to accelerate the construction of a small craft harbour in Pangnirtung, Nunavut. These investments will help accelerate required repair work and help ensure that the commercial fishing industry has access over the long term to safe and functional harbours.

 Small craft harbours are necessary for the effective operation of the commercial fisheries, which contribute about $6 billion annually to the Canadian economy and directly support the employment of over 80,000 Canadians. 

Performance context

To set its programs, expenditures, and performance in context, the Government of Canada is tracking key measures of long-term progress in the outcome area of strong economic growth.

Performance Context - in the outcome area of strong economic growth.

Trend	Indicator	Overview
Declining performance	Real gross domestic product	Real GDP growth in 2008 was 0.4%, well below the increases of 2.9% and 2.5% experienced in 2006 and 2007 respectively. Real GDP is expected to decline in 2009. However, the International Monetary Fund expects that Canada will experience the least decline of all G7 countries. Source: Statistics Canada[11]
Declining performance	Cost- competitiveness	In a study released by KPMG in 2008, Canada led the G7 in terms of low business costs, with a cost advantage of 0.6% over the U.S. This advantage has, however, declined from 9% in 2004 and 5.5% in 2006, primarily as a result of the strong appreciation in value of the Canadian dollar relative to the U.S. dollar over the last four years. Source: KPMG 2008 Study: Competitive Alternatives[12]
Improving performance	Sustainability fish stock	Of the 109 commercial fish stocks examined in 2008, 37 fish stocks (33.9%) were healthy, 25 were in a precarious state, 8 were in critical condition, and 39 were of unknown status. The proportion of healthy fish stocks over total stocks examined has increased in recent years. In 2007, the proportion of healthy stocks was 26.4%; in 2006, the proportion was 21.1%. Source: Stock Status Reports (SSR) (1993-2004)[13]
No trend	Green economic practices	ISO 14001 is an international environmental management standard. Canadian firms with ISO 14001 certification increased dramatically from 100 firms in 1999 to 1,636 in 2005. However, in recent years, the trend is less clear. In 2006, the number of firms certified increased to 1,679, but has subsequently declined to 1,066 in 2007. It should be noted, however, that this decline is likely the result of a change in methodology for that year. Source: The ISO Survey of Certifications – 2007[14]

An Innovative and Knowledge-based Economy

Background

The importance placed on the development of an innovative and knowledge-based economy is a strong determinant of a country's economic success over the long term, particularly in times of rapid technological change. Innovations through research and development can also help position Canada as a global leader in emerging green technologies. 

In Canada, the federal government is working to support businesses and research centres in creating opportunities for technological innovation. The field is a challenging one, given the high proportion of small and medium-sized businesses in the Canadian economy and the limited public and private resources available for research and development. Yet it is precisely during times of economic turmoil such as Canada has recently experienced that technological innovation is most needed to stimulate economic recovery. 

Over the long term, the government is investing in post-secondary education to train future generations of researchers and improve our competitiveness in the new, knowledge-based economy. 

Budget 2009 contributed to further developing a highly-skilled workforce by expanding the Canada Graduate Scholarships Program and allocating resources to provide an additional 600 graduate internships through the Industrial Research and Development Internship Program launched in Budget 2007.

Expenditures for an innovative and knowledge-based economy

In 2008–09, the following 16 federal organizations allocated $6.8 billion to the innovation and knowledge-based economy outcome area:

• Agriculture and Agri-Food Canada
• Atomic Energy of Canada Limited
• Canadian Grain Commission
• Canadian Institutes of Health Research
• Canadian Space Agency
• Copyright Board Canada
• Fisheries and Oceans Canada
• Human Resources and Skills Development Canada
• Indian and Northern Affairs Canada and the Canadian Polar Commission
• Industry Canada
• Infrastructure Canada
• National Research Council Canada
• Natural Resources Canada
• Science and Engineering Research Canada
• Social Sciences and Humanities Research Council of Canada
• Western Economic Diversification Canada

Human Resources and Skills Development Canada is the federal department that contributed the most to this outcome area. Its expenditures came to approximately $1.3 billion in 2008–09 for programs that help Canadians access the learning opportunities they need to participate more fully in a knowledge-based economy and society.

Science and Engineering Research Canada invested just over $1 billion in programs that support research at universities and colleges, train the next generation of scientists and engineers, and foster research collaboration with 1,500 industrial partners that bring new knowledge and technology to the marketplace.

The Canadian Institutes of Health Research spent a total of $842.9 million on the promotion of health research through open competition, strategic health research initiatives, and health research applications.

Figure 2.4 - Text version

The Government of Canada's contribution to an innovative and knowledge-based economy

Investing in research to improve our competiveness

The Government of Canada's science and technology strategy, Mobilizing Science and Technology to Canada's Advantage, was released in 2007. It recognizes, among other things, that Canada can and must do more to generate innovative ideas that give us a competitive edge. 

Federal departments and agencies have taken a whole-of government approach to design and implement innovative programs that encourage private sector engagement in science and technology, build Canada's knowledge base, and brand Canada as a destination of choice for talented, highly qualified workers and students. Programs include tax measures to encourage investment and initiatives to attract top researchers and doctoral students in the field.

In 2008–09, the Government of Canada increased its financial support for research and development in key sectors. For example, in May 2008, the Automotive Innovation Fund was launched to provide $250 million over five years to automotive firms for strategic, large-scale research and development projects to build innovative, greener, and more fuel-efficient vehicles. In April 2009, the government officially launched Automotive Partnership Canada, a collaboration between five federal agencies that will provide $145 million over five years for collaborative research and development activities to benefit the entire Canadian automotive industry.

The federal government also invested in nine new technology projects under the Strategic Aerospace and Defence Initiative. The Initiative's repayable contributions of $395.4 million to innovative projects leveraged upwards of $723 million in additional research and development investment commitments in 2008–09, thereby enhancing Canada's competitiveness in the aerospace and defence industry.

Technology Clusters Initiative

National Research Council Canada's Technology Clusters Initiative encourages research partnerships between federal, provincial, and municipal governments, industry, and the higher education sector. This initiative is stimulating research and development investment in the private sector and accelerating the commercialization of new technologies produced by small and medium-sized firms. It is also building regional science and technology capacity in key sectors and industries across Canada.

Since 2000–01, the Government of Canada has invested in several rounds of funding totalling over $554 million for NRC technology clusters. Resources have effectively supported the following improvements:

• construction of over 425,000 new square feet of advanced research infrastructure and work on related technologies (e.g., advanced Magnetic Resonance Imaging (MRI) facilities in Halifax and Winnipeg, a water quality laboratory in Regina, and an environmental chamber for fuel cell testing in Vancouver);
• broader access to leading researchers and their expertise—approximately 325 additional researchers are now employed at the NRC;
• access to business support services (e.g., new business incubation facilities for over 50 companies and related entrepreneurial services through the NRC's Industrial Research Assistance Program); and
• increased research collaboration with private sector firms —217 separate collaborative agreements and 375 fee-for-service agreements have been put in place since inception.

Both the public and private sectors are benefiting from investment in the Technology Clusters Initiative, which has an important impact on training the next generation of talented Canadians—particularly at the graduate level. The Initiative is also accelerating the commercialization of new technologies produced by small and medium-sized firms, with advances in such areas as fuel cell and hydrogen technology, photonics, and the biosciences.

Performance context

To set its programs, expenditures, and performance in context, the Government of Canada is tracking key measures of long-term progress in the outcome area of an innovative and knowledge-based economy.

Performance Context - in the outcome area of an innovative and knowledge-based economy.

Trend	Indicator	Overview
Declining performance	Innovation	Canada's investment in research as a share of the economy has declined slightly in recent years. Despite its increased funding of science and technology activities, Canada's gross domestic expenditure on research and development (GERD) as a percentage of the GDP has decreased progressively from 2.1% in 2001 to 1.9% in 2006 and 2007 and 1.8% in 2008. The largest share of this decline relates to private sector research. While investment in private sector research has increased in absolute terms, it has not increased as quickly as the economy. Source: Statistics Canada[15]
Improving performance	Educational attainment	In 2007, the percentage of Canadians over 15 with college diplomas or trade certifications was 30.5%, which represents a steady increase from 2006 (29.9%) and 2005 (29.8%). The percentage of Canadians over 15 with university degrees also increased from 18.2% in 2005 to 18.9% in 2006 to 19.4% in 2007. Meanwhile, the proportion of persons 15 years of age and over without high school diplomas has steadily decreased over the years from 37.9% in 1990 to 23.2% in 2006. Source: Human Resources and Skills Development Canada[16]
No trend	Adult Literacy	Data from the Adult Literacy and Life Skills Survey indicate that adult literacy (at a minimum proficiency level) among Canadians has not changed significantly between 1994 (54%) and 2003 (52%). Source: Human Resources and Skills Development Canada[17]

A Clean and Healthy Environment

Background

Canada's economic competitiveness depends on the protection of the environment and the promotion of environmental sustainability. This includes preserving biodiversity as well as ensuring clean water, air, and soil. A clean and healthy environment is also a precondition for public health and well-being and fosters the healthy workforce on which our thriving economy depends.

In times of economic crisis, countries sometimes shirk their responsibility to protect the environment. The challenge for Canada, as the government implements its economic recovery plans, is to leverage the opportunities created by economic stimulus to develop new, clean technologies and remain environmentally vigilant and responsible for our natural resources.

Expenditures for a clean and healthy environment

In 2008–09, the following 11 federal organizations spent $2.6 billion in the outcome area of a clean and healthy environment:

• Agriculture and Agri-Food Canada
• Atomic Energy of Canada Limited
• Canadian Food Inspection Agency
• Canadian Space Agency
• Cape Breton Development Corporation
• Environment Canada
• Fisheries and Oceans Canada
• Indian and Northern Affairs Canada and the Canadian Polar Commission
• Natural Resources Canada
• Parks Canada
• Public Prosecution Service of Canada

Environment Canada plays a key role in protecting Canada's environment overall and in preserving it for future generations. The Department's 2008–09 expenditures in this outcome area came to just over $1 billion. 

Natural Resources Canada ranked second in expenditures at $701.2 million. Funds were mainly used for the design and implementation of programs focussed on clean energy research and development, renewable and alternative energy, and improving energy efficiency in numerous sectors. The Department also financed programs that help identify environmental risks and protect critical resources such as groundwater.

Agriculture and Agri-food Canada, another important contributor to a clean and healthy environment, invested $331.6 million in 2008–09 to ensure that the agriculture and agri-food sector uses environmental resources in a sustainable manner for present and future generations.

Figure 2.5 - Text version

The Government of Canada's contribution to a clean and healthy Environment

The Clean Air Agenda

The Clean Air Agenda (CAA) is a fundamental component of the Government of Canada's broad efforts to address the challenges of climate change and air pollution. These challenges are being addressed through regulatory initiatives in the industrial, transportation, consumer, and commercial sectors and by a range of complementary measures, including ecoACTION programs, initiatives for adapting to climate change, approaches for improving indoor air quality, and international actions.

The Clean Air Agenda has just marked the second year of its four-year mandate. This horizontal initiative involves nine federal partners who deliver on 44 programs aimed at addressing the following objectives:

• reducing greenhouse gas (GHG) emissions and air pollutants;
• reducing health risks to Canadians from air pollutants;
• maintaining Canadian competitiveness through the economic benefits of innovative green technologies;
• reducing the risks of climate change to communities through adaptive actions; and
• promoting Canada's international action on climate change.

The chart below presents the structure of the Clean Air Agenda and the federal partners who work collaboratively toward achieving CAA objectives.

HMARF graphic - Text version

Environment Canada provides leadership for the Clean Air Agenda by coordinating the efforts of the CAA federal partners. In 2008–09, the government made progress on a number of CAA objectives, despite the challenge of shifting priorities, the economic downturn, and the need to establish new relationships with partners both at home and abroad. Much work remains to be done, but momentum is building toward achieving agenda outcomes.

The Government of Canada remains committed to a reduction of 20 per cent from 2006 levels in Canada's total GHG emissions by the year 2020 and of 60 to 70 per cent by 2050.

Environment Canada, in partnership with Health Canada, Natural Resources Canada, and Transport Canada, is working toward the development of regulations aimed at reducing GHG emissions and air pollutants. 

It was hoped that implementation of the Regulatory Framework for Industrial Greenhouse Gas Emissions, including the complementary offset system and infrastructure, would be completed by January 1, 2010. Implementation has been delayed as a result of the impact of the global economic downturn and the change in administration in the United States. Canada is consequently fine-tuning its approach to climate change policy.

This work has involved continued consultations with provincial and territorial governments, stakeholders, industry, and others to develop a coherent national climate change and energy security policy.

Additional actions included the publication of three regulations relating to air pollution from consumer products, amendments to the Energy Efficiency Regulations to include new performance standards, the development of new voluntary Energy Star specifications, and the introduction of a series of regulations relating to on- and off-road vehicles, marine vehicles, and engines. Residential indoor air quality guidelines for carbon monoxide and ozone were finalized and made ready for public consultation.

CAA federal partners also made progress on achieving agenda objectives through various efforts.

Natural Resources Canada, in collaboration with Indian and Northern Affairs Canada, worked to improve energy efficiency, increase the use of renewable energy sources, and develop technologies to lower emissions from fossil fuels and reduce greenhouse gas and air pollutant emissions.

Continued investments were made in renewable energy, low-impact renewable power generation, and the adoption of solar thermal technologies (both solar air and solar water systems). There was progress in a broad range of clean energy research and development projects. These included a new project to demonstrate the potential of hydrogen-fuelled vehicles and the start of negotiations for eight large-scale carbon capture and storage projects.

Nearly all provinces and territories (except Prince Edward Island and Newfoundland and Labrador) participated in a federal-provincial-territorial committee to improve energy efficiency in building codes or code-related projects. The industrial sector was also engaged to increase its energy efficiency, and more Canadian companies have committed to decrease energy use by becoming leaders in the Canadian Industry Program for Energy Conservation. The ecoENERGY Retrofit – Homes program was allocated $300 million of additional funding over two years in Canada's Economic Action Plan, thereby increasing the scope and impact of this program.

Transport Canada has the leading role in advancing the agenda for clean transportation. In collaboration with Environment Canada, Natural Resources Canada, and Human Resources and Skills Development Canada (Service Canada), the Department has initiated a number of promising new technologies and practices to reduce GHG emissions in the transport sector.

The recent decline in overall economic conditions may have affected short-term achievements of many clean transportation initiatives. For example, the moderation of fuel prices may have diminished consumer incentive to purchase more fuel-efficient vehicles and the motivation to drive less. The slowdown in economic activity influenced decisions to invest in new equipment and technologies in the freight industries and may have reduced overall purchases of new vehicles and upgrading to more efficient vehicles.

Financial incentives under programs such as ecoAUTO Rebate, National Vehicle Scrappage, the Marine Shore Power, ecoFREIGHT, and ecoMOBILITY were provided to Canadians and organizations throughout the transport sector to increase uptake of emission-reducing technologies and best practices.

An important CAA clean transportation objective is to give businesses and consumers access to good information about fuel-saving technologies and best practices. This builds knowledge, awareness, and capacity to adopt clean air strategies and change behaviour in favour of more sustainable transportation options. Clean transportation programs provided a wide range of information services including guidelines, toolkits, reports, workshops, conferences, training and education events, awards, webinars, and website presentations. For example, approximately 112,000 new drivers learned fuel efficient driving practices from training materials provided under the ecoENERGY for Personal Vehicles program.

The completion and dissemination of research studies are essential to inform government, industry, and consumers on matters ranging from program design to the availability and cost-effectiveness of emission-reducing technologies. The National Harmonization Initiative for the Trucking Industry completed a number of studies related to the feasibility of mandating speed limiters. The ecoTECHNOLOGY for Vehicles program evaluated the fuel efficiency, emissions, and safety performance of 14 advanced vehicle technologies (including full electric, plug-in hybrid, clean diesel, hydrogen fuel cell, hydrogen internal combustion engine, and advanced gasoline vehicles) and initiated several studies on market and regulatory barriers.

 

Health Canada, in partnership with National Research Council Canada, leads the efforts under the CAA to reduce indoor air pollutants and radon exposure through research and development initiatives on indoor air quality and the implementation of a radon reduction strategy.

Stakeholder meetings were held across Canada to discuss the radon strategy and explain several simple, cost-effective ways to reduce exposure. The opportunities for interaction served to raise awareness about the risks from radon exposure.

Health Canada collaborated with National Research Council Canada and provincial and industry partners to incorporate the inclusion of radon-resistant construction technologies in the 2010 edition of the National Building Code of Canada for all new Canadian homes.

From 2009 to 2011, National Research Council Canada, in partnership with l'Institut national de santé publique du Québec, will conduct a field study to examine whether the installation of improved ventilation systems will improve the respiratory health of children afflicted with asthma. Using a new indoor air research laboratory, researchers will be able to replicate field conditions, measure the impact of various improvements to ventilation, and effectively evaluate which interventions would have the greatest benefit for indoor air quality in the homes of asthmatic children.

Construction of an indoor air research laboratory was 90 per cent complete by the end of fiscal year 2008–09 and is expected to be fully operational by the fall of 2009.

Programs aimed at improving adaptation to climate change were launched by Environment Canada, Health Canada, Indian and Northern Affairs Canada, Natural Resources Canada, and the Public Health Agency of Canada. Progress was evident, notably in increased availability of adaptation and air quality information and products.

Projects funded for northern and Aboriginal communities provided climate change risk assessments, addressed climate change information needs and gap analysis, assisted community and regional adaptation planning (including building capacity for this planning), and supported the development of scenarios and strategies for adapting to climate change in the North.

Partnerships were strengthened through collaboration with territorial governments, other federal departments, Aboriginal governments and organizations, and communities. These partnerships establish common priorities in addressing Aboriginal and northern community needs to develop and implement adaptation measures for coping with our changing climate.

By the end of March 2009, the national Air Quality Health Index (AQHI) was available in 11 new locations, bringing the total to 26 locations across Canada. The AQHI is a health protection tool designed to help Canadians make daily decisions about protecting their health during periods of increased levels of air pollution. Information and education campaigns focussed on people at higher risk were conducted, including people suffering from heart conditions and respiratory illnesses. Other adaptation tools in the areas of infrastructure, planning, and risk management were also initiated.

Regional variations in readiness to participate in air quality and adaptation programs were noted this year. Actions have been undertaken to increase the involvement of government, industry, and the general public.

The Government of Canada was constructively engaged in international efforts to address climate change and reduce air pollution. Canada met its financial obligations under the United Nations Framework Convention on Climate Change (UNFCCC) and actively participated in United Nations climate change negotiations to develop an effective international agreement for the post-2012 period. 

Canada also actively participated in technology-related international partnerships that complemented the UN climate change negotiations process to promote and support the development and deployment of clean technologies essential to reducing GHG emissions. These included the Asia Pacific Partnership, the Renewable Energy and Energy Efficiency Partnership, and the Methane to Markets Partnership. 

In addition, Canada continued its work on furthering Particulate Matter Annex negotiations with the United States.

Clean Air Agenda 2008–09 spending on grants and contributions

($ millions)
Theme	Planned	Actual
Clean Energy	147.5	150.2
Clean Transportation	189.8	134.8
Clean Air Regulatory Agenda (CARA)	2.5	1.6
Adaptation	4.6	3.1
International Actions	3.0	1.4
Partnerships	2.5	0.0
Indoor Air Quality	0.0	0.0
Management and Accountability	0.0	0.0
Total	349.9	291.0

The environment is an important issue for Canadians; government accountability is equally important. By mapping success and responding to Canadians' expectations for results, the Clean Air Agenda adheres to principles of sound management and accountability.

The federal partners remain focussed on established objectives and are managing the risks to achieve them. They continue to work together to achieve results.

Environment Canada continues to lead and strengthen CAA partnerships by demonstrating progress and maintaining momentum toward the achievement of results for Canadians.

Clean Air Agenda 2008-09 spending by theme (with comparison to 2007-2008)

Clean Air - Text version

Wilderness and wildlife conservation

In 2008–09, Environment Canada continued work on protecting species at risk, bringing the total number of species subject to immediate protection under the Species at Risk Act^[18] to 447, with a published recovery strategy for 100 of those species on the Species at Risk Public Registry. A National Roundtable on Polar Bears involving territories and provinces, wildlife management boards, Inuit, First Nations and Aboriginal groups, and scientists was held in January 2009. The roundtable focussed on promoting increased awareness of ongoing conservation activity and setting the scene for public consultation on listing the polar bear under the Act. 

Environment Canada met the Budget 2007 commitment to invest $22 million in the hiring of 106 new enforcement officers, bringing the total number of officers working in environmental law enforcement across Canada to 320. The new officers, whose training will be completed in 2009–10, will bolster environmental protection across Canada. Working with the courts, they will have authority to determine penalties in accordance with the seriousness of infractions related to pollution and wildlife.

For its part, Parks Canada placed great importance on restoring the ecological integrity of Canada's national parks. In 2008–09, the Agency consolidated several funding sources to implement a strategy aimed at addressing the most pressing ecological integrity issues. As a result, priority initiatives were identified in 24 of Canada's 42 national parks. These include restoring forest health in Gros Morne National Park and restoring salmon streams in Pacific Rim National Park.

Parks Canada's Ecological Integrity Priority Themes Program, which concluded in 2008, saw the infusion of $22 million over five years in 11 multi-year ecological integrity projects in 12 national parks. This included a $2.5-million major restoration project entitled "From Log to Canoe," which aimed at restoring the aquatic ecosystems of La Mauricie National Park.

The Minister of the Environment announced the establishment of four new Canadian wilderness areas in national parks, which will give them a greater degree of protection. The new wilderness areas cover portions of Waterton Lakes National Park, Fundy National Park, Vuntut National Park, and Nahanni National Park No activities that would impair in any way their distinct character may take place in these areas. Parks Canada consulted broadly with First Nations, stakeholders, and local communities on the declaration of these wilderness areas and on the management plans.

Performance context

To set its programs, expenditures, and performance in context, the Government of Canada is tracking key measures of long-term progress in the outcome area of a clean and healthy environment.

Performance Context - in the outcome area of a clean and healthy environment.

Trend	Indicator	Overview
Declining performance	Air quality	Ground-level ozone, a key component of smog, can cause harm to human health, including lung and respiratory problems. Nationally, our exposure to ground-level ozone has increased by 13% between 1990 and 2007, with a 2% increase from 2006 to 2007. Source: Environment Canada[19]
No trend	Freshwater quality	The ability of Canada's lakes, rivers, and streams to support aquatic life is a way of measuring water quality and the impact of water pollution. Of the 154 representative sites monitored across Canada from 2005 to 2007, fresh water quality was rated as "excellent" at 6% of the sites. It was rated as "good" at 34%, "fair" at 42%, "marginal" at 14%, and "poor" at 4%. Source: Environment Canada[20]
Declining performance	Biodiversity	In 2009, the Committee on the Status of Endangered Wildlife in Canada assessed the status of 226 of the 585 at-risk species. Of those species, 62  (27%) were placed in a higher risk category, 134 species (59%) had an unchanged status, and 30 species (13%) were either no longer at risk or were placed in a lower risk category. Source: Committee on the Status of Endangered Wildlife in Canada[21].
Declining performance	Greenhouse gas emissions	Greenhouse gas emissions trap heat in the atmosphere and warm the planet, resulting in rising sea levels and more severe storms and heat waves. Canada's greenhouse gas emissions went up by 26% between 1990 (592 megatonnes) and 2007 (747 megatonnes). Emissions in 2007 were 4% higher than in 2006 (718 megatonnes) and set a new peak for emission levels—a level that is 0.8 % higher than the previous peak in 2004 (740 megatonnes). Source: Environment Canada[22]

A Fair and Secure Marketplace

Background

Canadian consumers, businesses, and investors all benefit from a legal and regulatory framework that protects their economic interests. For example, market regulation has made it possible for the Canadian banking sector to remain relatively sheltered from the economic crisis. Regulations and laws also ensure the competitiveness required for a vibrant Canadian economy, attract international investment to Canada, secure stable industrial relations, and create safe, fair, and productive workplaces in those sectors under federal jurisdiction.

Expenditures for a fair and secure marketplace

In 2008–09, the following 13 federal organizations spent $713.9 million in the outcome area of a fair and secure marketplace:

• Agriculture and Agri-Food Canada
• Canada Mortgage and Housing Corporation
• Canadian Dairy Commission
• Canadian Food Inspection Agency
• Canadian Grain Commission
• Canadian International Trade Tribunal
• Canadian Radio-television and Telecommunications Commission
• Canadian Transportation Agency
• Human Resources and Skills Development Canada
• Industry Canada
• Registry of the Competition Tribunal
• Standards Council of Canada
• Transport Canada

Industry Canada invested $242.8 million in developing and administering framework policies that support innovation, competition, and productivity and promote confidence among business owners, investors, and consumers.

Transport Canada's expenditures represent $200.4 million in investments to foster a transportation network that is recognized world-wide for being safe, secure, and efficient.

Human Resources and Skills Development Canada is also a significant contributor in this area, with expenditures of $154.5 million directed mainly at promoting stable industrial relations and productive workplaces within the federal jurisdiction.

The Canada Mortgage and Housing Corporation spent $30.4 million on research and information dissemination relating to the Canadian housing market.

Figure 2.6 - Text version

The government of Canada's contribution to a fair and secure marketplace

Protecting competitive markets

New commercial practices and operating conditions demand the modernization of Canada's legal and policy frameworks. To this end, in 2008–09, Industry Canada led the process to amend Canada's competition and investment laws. The amendments respond to the core recommendations of the Competition Policy Review Panel. Modernized legislation will better protect competitive markets, which serve consumer interests by encouraging lower prices, better choices, and new products and services. 

Industry Canada also took concrete steps to protect competitive markets, as in the case of the price of gasoline. The Competition Bureau uncovered a price-fixing conspiracy in the province of Quebec; after investigation, 13 individuals and 11 companies were charged. As of March 2009, six companies and eight individuals have pled guilty, facing overall more than $2.6 million in fines and imprisonment terms totalling 44 months. Measurement Canada, the Industry Canada agency responsible for ensuring the integrity and accuracy of measurement in the Canadian marketplace, has doubled the number of fuel pump inspections, with 35,269 inspections in 2008–09. This demonstrates the government's commitment to ensuring fair prices for Canadians. 

Regulating financial markets

To enhance Canada's preparedness to manage financial system turmoil, the Department of Finance Canada undertook legislative initiatives in 2008–09 to strengthen Canada's financial system and modernize the financial sector regulatory framework, including creating a Transition Office to prepare for a Canadian securities regulator. The measures enhance the ability of the Minister of Finance and the Canada Deposit Insurance Corporation to safeguard financial stability. To aid consumers, the Department also developed transparency-enhancing regulatory measures for credit cards and mortgage insurance.

A global leader in housing finance

In 2008, at a time when many other countries faced severe liquidity and credit issues, Canada's housing finance system was rated as one of the healthiest and most stable in the world by the International Monetary Fund. The Canada Mortgage and Housing Corporation (CMHC) contributed to the stability of Canada's housing finance system through its mortgage loan insurance products, which protect lenders against financial losses in the event of borrower default, and its securitization products, which provide lenders with continuing access to low-cost funding to support mortgage lending.

In order to maintain the availability of long-term credit, the Department of Finance Canada worked with CMHC to implement a special program to purchase insured mortgage pools from lenders. The Insured Mortgage Purchase Program, which is part of Budget 2009's Extraordinary Financing Framework, will buy up to $125 billion in mortgage pools to ensure that financial institutions have access to funds—at no additional risk to the Canadian taxpayer.

Performance context

To set its programs, expenditures, and performance in context, the Government of Canada is tracking key measures of long-term progress in the outcome area of a fair and secure marketplace.

Performance Context - in the outcome area of a fair and secure marketplace.

Trend	Indicator	Overview
Declining performance	Barriers to entrepreneurship	In 2003, Canada had the lowest level of regulatory barriers to entrepreneurship among OECD countries, bettering its rank of second lowest in 1998. But in 2008, Canada ranked fifth, just after Italy and before Denmark. Source: Organisation for Economic Co-operation and Development[23]

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