Special Report

Ottawa’s superclusters unlikely to hit goals for job creation, GDP growth: Budget watchdog

Parliamentary budget officer Yves Giroux in Ottawa in March 2020. The Canadian Press/Adrian Wyld
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The federal government’s superclusters program is underspending and will miss its ambitious targets for job creation and GDP growth, according to a report released Tuesday morning by the Office of the Parliamentary Budget Officer (PBO). 

The Liberal government announced the program in the 2017 federal budget, pledging $950 million over five years for organizations it said would help forge strong links between firms and research institutions, develop more skilled talent and share the risks involved in developing disruptive technologies. In February 2018, Innovation Minister Navdeep Bains announced the five successful consortia, focused on digital technology, proteins, advanced manufacturing, AI and oceans. 

But protracted contract negotiations between Ottawa and the new organizations meant the first projects were only unveiled in March 2019. ISED has already pushed back its superclusters targets by a year, citing the time it took to evaluate applications. The PBO’s report offers the first independent look at how the program is proceeding. Here’s what you need to know.

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The money: Innovation, Science and Economic Development Canada (ISED) had paid out just $30 million as of Mar. 6, 2020, compared to a projected outlay of $104 million. The superclusters and private-sector partners have pledged another $97 million to the projects announced to that point. 

The jobs: The PBO report estimated the program will directly generate 27,000 jobs if both Ottawa and private-sector partners fulfill their spending commitments. Ottawa had promised over 50,000. The PBO extrapolated from data for 24 announced projects, which ISED expects will create 2,594 jobs, a rate of 14 positions for every $1 million in joint government and partner spend. “The department’s current projections suggest [the superclusters] are on track to exceed their target of 50,000 jobs over a 10-year horizon,” said John Power, spokesperson for Innovation Minister Navdeep Bains. He claimed they’ve already created over 6,100 net new jobs to date.

Missing the target: The PBO found it “highly unlikely that the government will meet its objective of increasing GDP by $50 billion over 10 years,” citing comparable initiatives in other countries. Hitting the target would require every dollar of the $2 billion Ottawa and private-sector members are putting up to generate $25 for the economy, but the watchdog noted that somewhere between a three- or eight-fold return is more common. Even a multiplier effect of 8.82 seen in some U.S. examples, which the report called “optimistic,” would only generate a GDP lift of about $18 billion.  

The data gap: Per the report, ISED said it’ll track things like productivity increases and the creation of new products and processes, but the PBO didn’t find “quantifiable objectives for any of these metrics.” The department did disclose some new program objectives in March, setting the superclusters a collective goal of creating 150 new companies and roping in 100 large “anchor” firms by the end of the 2022–2023 fiscal year. 

The pandemic effect: The PBO’s study cuts off before the pandemic, at which time the five superclusters had announced a collective 45 projects. At Ottawa’s direction, each subsequently dedicated a portion of its budget to COVID-19 measures. The Vancouver-based Digital Technology Supercluster, for example, set up a $60-million program that has backed 35 projects, including platforms for virtual mental health, addiction treatment and telework for youth and health-care workers. They’ve also been involved in other parts of the pandemic response. Hamilton, Ont.-based Next Generation Manufacturing Canada linked StarFish Medical, a Victoria-based device-design and contract-manufacturing firm, with a Winnipeg firm that had commercialized a ventilator created by a former University of Manitoba professor; the federal government subsequently ordered 7,500 units.  

The government responds: “We are seeing the five superclusters live up to their promise in terms of leveraging industry contributions, and supporting collaborative projects with small and medium-sized enterprises which are having a national impact,” Bains said in a statement. He said Canada needs to back areas where they have knowledge clusters, existing economic activity and research expertise, and the program is designed to break down silos between sectors. Power said the superclusters have approved 219 projects valued at more than $800 million so far, and its non-pandemic undertakings attracted “$1.5 of industry investment for each $1 of government investment.”

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The opposition perspective: “There should be widespread anger from the science and research and innovation community about what’s taken place,” said NDP innovation critic Brian Masse. “This is lost years during an age of innovation.” He has previously criticized the government for failing to hit program-spending targets following major announcements. Masse called the superclusters “a very poor return of job numbers for our investments,” and suggested they were set up at the expense of other, potentially more effective strategies. Ottawa has continued to provide R&D and business support through other programs such as the regional development agencies and the Strategic Innovation Fund.