Background

Now that the dust has cleared a little on Budget 2016, it’s time to take a good look at what the good news is for the business community – and at what’s not so good. The government does not have the resources to satisfy every interest group and every aspect of Canadian society, and every budget is a bit of a balancing act.

Overall, the budget is decent for Canadian businesses. There are some smart investments that will support key aspects of the Canadian economy, although they don’t always go as far as we would like or as far as we advocated for. There is definitely a solid foundation for Canadian prosperity, and there is also room for future improvement.

The Good

• The budget invests $50 million over two years, starting in 2016-2017, in Destination Canada to seize new tourism opportunities in important international markets. Tourism is hugely important to us. In 2012, Niagara had 12 million visitors who spent $1.8 billion here, supporting 1 in 10 local jobs. Travel and tourism contributes $85 billion every year to the national economy. However, previous governments have cut marketing budgets for tourism and neglected this sector. We advocated strongly for the Government of Canada to restore marketing funds for Canadian tourism, and it was great to see this in the budget.
• Public transit is a top priority for the business community in Niagara, and we’ve been advocating for better and more accessible public transit for some time. The budget announced an investment of $3.4 billion over three years in transit and infrastructure, which is very welcome. It has not been announced where that money will go – we hope that funds will be made available for enhancing Niagara’s transit system, and perhaps for projects like expanding VIA Rail and GO train service.
• The GNCC has also recently advocated for VIA and the Government of Canada to investigate restoring VIA Rail service to Niagara, which was cut back in 2012 owing to blanket budget reductions imposed on all Crown corporations. Budget 2016 allocates $7.7 million to VIA in support of technical studies and other pre-procurement activities, which we hope will be the first step to service restoration.
• Affordable housing is addressed in this budget, with $2.3 billion over two years starting in 2016-17. This is good news for organizations like Niagara Regional Housing, and also for the construction industry. The proposed Affordable Rental Housing Financing Initiative could support the construction of more than 10,000 new rental units over five years, which will benefit those on low- and fixed incomes as well as developers, contractors, and property managers.
• Investing significant funds in green infrastructure and addressing climate change is a good idea, with global temperatures and emissions continuing to endanger all our futures. This budget invests $5 billion over the next five years in infrastructure to transition to a green economy, and an additional $75 million for local governments to address climate change. Firms working and researching in green technology fields will benefit. Industries and sectors affected by climate change, like Niagara’s wine industry, will have more resources to adapt. A serious attempt at tackling this problem means serious investment.
• Although no concrete announcements on the Canada Pension Plan (CPP) were made in the budget, it repeated the government’s commitment to working with the provinces and territories for an enhanced CPP. Although the laws on reforming CPP make this task difficult, by the end of the year, a viable alternative to the flawed Ontario Retirement Pension Plan (ORPP) could be found.
• Budget 2016 made major public-sector R&D investments, with $2 billion over three years going to post-secondary institution strategic investment and $141 million in new annual funding for the research granting councils. This will be very beneficial to Brock University and Niagara College, two major research institutions and large local employers.

The Not-So-Good

• Everyone’s talking about the deficit. The 2016 budget projects a 2016-17 deficit of $29.4 billion, larger than we all expected. TD Bank believes the federal government will run $150 billion in budget deficits over the next five years. Deficit spending is not necessarily a problem as long as the debt-to-GDP ratio doesn’t change too much (as it did in Greece, for instance, where it rocketed from 105% to 179% in just a few years). Canada’s debt-to-GDP is around 86%, comparable to the G20. Balancing the budget over a year doesn’t make much sense – it would be smarter to balance it over the course of a business cycle. Running a deficit is an acceptable policy option, however, any government choosing that option should have a plan and a timeline for getting back in the black.
• Reducing small business taxes from 11% to 10.5% on the first $500,000 of active business income was definitely a step in the right direction. Unfortunately, it stopped there. We were promised a gradual reduction to 9% by 2019, but Budget 2016 postponed any cuts past 10.5% indefinitely. Small businesses are very important to the economy, representing around a quarter of Ontario’s economic activity. In Niagara, small- and micro-businesses are 98% of all firms. Supporting and nurturing them is vital. The tax cut is a good step, but it doesn’t go as far as it should have.
• In the private sector, the government has only made $800 million available over four years, beginning in 2017-2018, to support innovation networks and clusters, plus $50 million for companies served by the National Research Council’s Industrial Research Assistance Program, and $4 million over two years to renew the Canadian Technology Accelerator Initiative. This is much less than public-sector R&D investment, but it is private-sector R&D where Canada lags behind. The level of investment in the budget is insufficient to close the gap. Taiwan, for instance, now out-spends Canada on R&D by $6.7 billion USD per year. South Korea out-spends us by $65.9 billion, and the United States by $447.7 billion, and all three spend around twice as much as Canada per capita. In terms of per capita expenditure on R&D, Canada invests less than Ireland, Iceland, Australia, Belgium, Finland, Israel, Sweden, Singapore, and many more countries we’d consider our peers. We will continue to advocate for much greater investment in R&D, especially in the private sector.
• The budget does not contain any new programs or investment in agriculture, merely opting to continue the existing investment that the previous government put in place. Agriculture is an important sector, especially in Niagara, and it is facing many serious challenges such as climate change and resource depletion. A $30 million investment over six years in advanced research in agricultural genomics is a good start, but we should have had a stronger response to support this vital sector – perhaps the most vital sector in the entire economy.
• $25 million in 2016-2017 was promised to support faster and more predictable processing times for family-class immigration, and $56 million over three years to support higher admissions levels of permanent residents and to help newcomers integrate. Immigrants bring significant talent to Canada and are valued by the business community, so encouraging immigration is welcome. However, the government should also have invested in faster and more predictable processing times for tourist visas, as well as reducing the costs, both of which are currently significant burdens and both of which we recommended addressing in the budget. These issues affect not only Canadian tourism but trade missions and the international conference business, both of which are made more costly and difficult as a result.

About the Greater Niagara Chamber of Commerce
The Greater Niagara Chamber of Commerce (GNCC) is dedicated to the success of businesses and organizations in order to ensure the long-term prosperity of the Niagara region. Our vision is to give a credible and definitive voice to Niagara enterprises and economic interests. The GNCC has over 1,500 members and represents 45,000 employees. It is the largest business organization in Niagara and the third largest Chamber of Commerce in Ontario.

Prepared by the Greater Niagara Chamber of Commerce
@The_GNCC l www.facebook.com/NiagaraChamber
www.gncc.ca l info@gncc.ca l 905-684-2361