2017-18 federal budget: some relevant investment intentions but few specific and short-term commitments

MONTRÉAL – “With the tabling of its budget today, the Canadian government shows some good intentions in making relevant investments, especially in the area of innovation, training and infrastructures,” remarked Conseil du patronat du Québec (CPQ) president Yves-Thomas Dorval. “But it needs to be more specific about its commitments and quickly move ahead with the initiatives. With global economic uncertainty and growing needs linked to technology and energy transition, the aging of the population and transportation infrastructures, the Canadian government needs to show enlightened and responsible leadership.”

Competiveness of businesses: manpower training and innovation

The Employers Council is pleased to see the Innovation and Skills Plan, which is looking at investing $753 million for job training and $527 million that will be allocated to research and development; this will have a direct impact on the competitiveness and productivity of the innovative manufacturer, particularly in the clean-tech, digital and agri-food industries.

“Being able to rely on an abundant and skilled labour force and on the improvement in innovative processes are essential pre-requisites to foster business growth in a context of rapidly changing technologies and an aging demographic,” noted Mr. Dorval. But the Employers Council reiterates that measures designed to help in the training process must encourage development of the skills of workers in the job force, as well as those who are on employment insurance.

The Employers Council wonders whether the holding of various discussion groups on innovation, as announced in the budget, might slow the execution and investments on the ground, because these are urgent. It should not turn into endless debates, where everyone is trying to look after their own interests. In this regard, the affected Québec communities will have to be proactive to ensure there are significant investments in this province.

Moreover, since the Canadian government’s reduction in the amount of the SR&ED investment tax credit, statistics are starting to show a decline in investments in this area, in Canada. The plan proposed by the government is based on excellent guidelines for dynamic innovation, but the Council fears the measures won’t be tangible enough in the short term to provide enough of an impetus.

Investments in infrastructures

While welcoming the federal government’s intention to invest $21.9 billion in green infrastructures, the Council notes there was no announcement on the location of the Infrastructure Bank of Canada. The Council reiterates the importance that the bank be established in the province of Québec, where expertise in this area has already started to emerge.

In this regard, it would have been hoped there was a more definitive commitment by the federal government to support the construction of the Réseau électrique métropolitain, the automated transportation system being partnered by the Caisse de dépôt et placement du Québec. The Council would also have liked to see measures that particularly targeted our strategic infrastructures, such as the logistical centres and the ports in the province, the gateways to Atlantic shipping trade for all of Canada. And the Council is disappointed to note no announcement was made to support rapid transit bus service in Québec or the extension of the blue line in the Montréal subway system.

“The federal investments in these major construction projects should not have to lag behind while waiting for the Infrastructure Bank to be effectively and operationally set up, because that isn’t going to happen for several months. In many instances, including the REM project, the decisions will have to be made in the next three months. The government can move ahead right now to support these instrumental projects for Québec and its economy,” said Mr. Dorval.

It should be noted that, a few days ago, the Employers Council released the results of a study on the importance of logistical centres for the prosperity of Québec and Canada. Some of the recommendations were heard. Based on the economic statement last fall, the government will invest $10.1 billion over 11 years in projects related to trade and transportation. In conjunction with the trade and transportation corridors initiative, the Council notes with interest the creation of a national fund of $2 billion over the next 11 years for transportation corridors, to which $5 billion will be added through the creating of the Infrastructure Bank, whose vocation will be to deliver fast and efficient trade corridors and deploy an information system on trade and transportation.

Fiscality and trade relations with the United States

The Employers Council is pleased that no changes were announced in regard to taxes on capital gains. But the Council warns about the risk of raising taxes on alcohol and tobacco, as planned in the budget, because the market has reached its saturation point.

The Council is disappointed there are no measures in the budget such as loan-guarantee programs for industries affected by the softwood lumber dispute. Nor does the budget seem to have any support measures for industries that might eventually be affected by a hardening of trade policies with the United States.

A return to a balanced budget plan that is needed and urgent

In the Council’s view, Ottawa should maintain healthy public finances so the Canadian economy can rebound in the event of a future economic recession and to address a potentially aggressive fiscal, regulatory or American customs policy.

“The string of repeated deficits of tens of billions of dollars underscores the risk of plunging Canada into a spiral of structural deficits. It’s worrisome to note that returning to a balanced budget doesn’t seem to be a priority. But the government has the responsibility of announcing, without delay, a plan that is mindful of the importance of raising the competitiveness of our current economy without negatively affecting the economy of future generations,” stated Mr. Dorval.

SOURCE Conseil du patronat du Québec