The Government of Canada has released the fourth and final budget for this term of office. While not a complete reaction, the GNCC has shared these preliminary thoughts on some key areas of the 2019 budget.
Debt and Deficit
While the 2018-2019 deficit projection has been reduced slightly, deficits are projected at $14.9-billion for 2018-2019 and $19.8-billion for 2019-2020, with a debt of $685.6-billion projected to rise to $761.7-billion by 2023-24. However, debt-to-GDP ratios will fall from 30.8% to 28.6% in the same time period.
This level of indebtedness puts Canada well ahead of the United States, Mexico, the European Union, the UK, France, and other peer countries, many or most of which are running debts of at least double Canada’s ratio. While this ratio may be currently favourable, increasing debt leaves us vulnerable to interest rate hikes and economic downturns. The current and future governments would be well-served to aim at keeping Canada’s debt at this internationally-low level, and not to see it instead as an opportunity to borrow heavily.
Unfortunately, we may be nearly at the end of an unusually long inter-recessionary period, and a new recession may be around the corner. In that event, the government will have to increase both the debt and the deficit so as to continue to deliver services without stalling economic recovery with tax increases, and our favorable ratio may not be preserved.
We also note that public debt charges are projected to increase from $23.6-billion in 2018-2019 to $33.2-billion by 2023-2024.
For some time, the GNCC has been working with the Toronto Region Board of Trade and the Canadian Global Cities Council (CGCC) to liberalize inter-provincial trade, starting with alcoholic beverages. Budget 2019 takes a substantial step in the right direction with a stated intent to remove the federal requirement that alcohol moving from one province to another be sold or consigned to a provincial liquor authority. This is a strong signal to the provinces that Canada wants to implement free trade within its own borders. We hope that the provinces will follow the Government of Canada’s lead and enable free trade across provincial boundaries. Free trade in alcoholic beverages would be a huge opportunity for Niagara’s world-famous wine industry, not to mention our budding craft brewery and distillery businesses.
Funding mechanisms to ensure that high-speed internet will be available across Canada by 2030 are welcome, and something that the Chamber network across the country has pushed for. High-speed internet makes the country more competitive for business, especially in the modern, online, data-rich economy, and rolling this service out to more rural, remote, and northern communities, as the Government of Canada has aimed to do, will make those regions more economically competitive and attractive to business.
The Government of Canada has also announced a one-time $2.2-billion doubling of Gas Tax cash for municipal infrastructure spending. The GNCC has frequently highlighted the problems that municipal governments face, caught between aging infrastructure and a dwindling tax base from deindustrialization, and has advocated for injections of cash from higher levels of government so that municipalities can maintain and build the infrastructure that business demands without passing the entire cost on to the property taxpayer. This investment will be well-received.
Skills and Training
Most employers in Ontario have reported difficulty in finding skilled talent when hiring. The 2019 budget includes $632.2-million to expand Work-Integrated-Learning (WIL) programs and $150-million for new partnerships between government and industry to create up to 20,000 new WIL opportunities, as well as multiple funding mechanisms to enhance apprenticeship programs in skilled trades. This investment in Canada’s workforce is welcome news to employers who increasingly struggle to find skilled workers.
The Canada Training Benefit also allows workers to take four weeks for training after four years. While worker training is valuable, and while the government is supporting small businesses through an EI Small Business Premium Rebate, we question whether enough has been done to support small businesses, particularly micro-businesses with fewer than five employees, whose employees may take as much as a month off for training. We suggest that employers, particularly smaller firms, have more input into this process.
Recent discussions around taxation, including of employee benefits and staff discounts or ending income-sprinkling and other benefits to incorporation for small businesses, highlighted a need for a comprehensive overview of Canada’s tax system, which has not been done in decades. The GNCC feels that rather than adding new regulations and taxes or tinkering with a tax code that has already become an onerous burden for Canada’s businesses, the government should take a clean-slate approach to taxation and aim at revamping the whole system so as to simplify the code, reduce regulatory burdens, and close loopholes that ordinary Canadian taxpayers and businesses will, ultimately, always end up paying for.
The Province of Ontario has undertaken an initiative to consult with businesses across economic sectors with a view to reducing red tape and the regulatory burden on business. The GNCC recognizes that regulation of business is necessary for a variety of reasons, including consumer and worker safety, environmental protection, or the prevention of unfair discrimination. However, we feel that the goals of regulation could be achieved while still simplifying and reducing the regulatory burden on business, and that the Government of Canada would be well-served to embark on a similar initiative to identify and then reduce or eliminate unnecessary, duplicate, or contradictory regulation on businesses. Such a commitment was absent from the budget.
Niagara, like many regions across Canada, has fallen into an affordable housing crisis. The GNCC is advocating for new approaches and solutions to this crisis, working with groups such as Bethlehem Housing and the Niagara Poverty Reduction Network in its lobbying efforts. Budget 2019 contains measures aimed at increasing home-ownership, such as $1.25-billion over three years on a shared-equity mortgage program for first-time home buyers and an increased RRSP withdrawal limit from $25,000 to $35,000 for first-time home purchases. The GNCC is not convinced that increasing privately-held debt is a good solution to the affordable housing problem. We feel that the issue is, at the core, one of under-supply, and that Canadians seeking to purchase homes or even to rent at sustainable rates would be better-served by a greater availability of affordable housing rather than new or enhanced sources of credit. While this government has invested significantly in affordable housing, a multi-pronged approach to the lack of housing stock is needed, including reducing red tape for developers and incentivizing the construction of more affordable units. Increasing the availability of credit to match spiraling real estate prices is a stop-gap solution at best.
The Greater Niagara Chamber of Commerce is the largest business organization in Niagara and the third-largest Chamber of Commerce in Ontario, with 1,600 members representing 50,000 employees. More information on the GNCC is available at gncc.ca.
Mishka Balsom, President & CEO of GNCC
Mishka@gncc.ca or 905-684-2361