2019 Federal Budget

On March 19, the Government of Canada released its 2019 Budget, Investing in the Middle Class. The following is a summary of key highlights from the perspective of Ontario’s business community.

Skills

In Budget 2019, the government made several proposals to help Canadians improve their skills. The Canada Training Credit is a benefit intended to help workers pay to upgrade their skills by providing a non-taxable credit to help workers pay for training costs and support workers in training through a new Employment Insurance (EI) Training Support Benefit. To offset the increased costs resulting from EI premiums, the government proposes to introduce an EI Small Business Premium Rebate. The Budget also proposes a number of investments to encourage more young people to consider skilled trades and expand the number of work-integrated learning opportunities, with an aim to create 40,000 work placements for students by 2023-24.

OCC Analysis
In our 2019 Federal Pre-Budget Submission, we called on the government to better equip employers with the resources they need to finance and manage student employees and support the expansion of opportunities at small businesses and not-for-profits, which often have fewer resources to dedicate to experiential learning. The OCC welcomes the federal government’s proposed investments to expand Student Work Placement Programs and providing Employment and Social Development Canada to create more work-integrated learning opportunities but would also like to ensure employers have the resources necessary to take on additional capacity.

The OCC has also long advocated for the government to promote career pathways in the skilled trades. We welcome the government’s proposal to invest in a coordinated approach to promoting skilled trades and technologies through a new apprenticeship strategy and the creation of a national campaign to promote skilled trades.

Following our Ontario Economic Summit, the OCC made recommendations to address Ontario’s skills mismatch, which included exploring the creation of a lifelong learning fund. The government’s proposed Canada Training Credit is intended to provide income support while workers keep their skills relevant. This will potentially mean employees taking more time away from work to upgrade their skills. With this in mind, the OCC welcomes the government’s introduction of an EI Small Business Premium Rebate to help offset the upward pressure on EI premiums resulting from the new EI Training Support Benefit.

Pharmacare

In Budget 2019, the government plans to create a Canadian Drug Agency, which would take a coordinated approach to drug assessments, recommendations, and price negotiations. This agency would create a national formulary. Finally, they intend to, in 2022-2023, create a national strategy for drugs for rare diseases.

OCC Analysis
It is critical that the federal government work to streamline drug assessment so that Canadians can more quickly access much-needed medicines. While it is heartening to see the federal government use the term “value-for-money” with respect to these assessments, we are concerned that this new agency will simply be used to drive down drug prices rather than provide Canadians with robust access to new medicines. Similarly, it is positive to see the federal government demonstrate leadership in ensuring the consistency of provincial drug formularies, but warn that this (and the CDA, generally) could lead to a race to the bottom, limiting the number and variety of drugs covered by public plans.

The promise of a focus on rare diseases is important – access to affordable medicines for rare diseases is a legitimate gap within our healthcare system that government and industry can work together to close.

We will continue to wait for the Advisory Council on the Implementation of National Pharmacare final report, in hopes that the concerns of the business community will be reflected in their recommendations.

Energy and Electricity

Budget 2019 proposes investments to support the manufacturing and purchase of zero-emissions vehicles, expand hydroelectricity and electrical connectivity infrastructure through the Canada Infrastructure Bank, and incent energy-efficiency retrofits to residential and commercial buildings. The Budget also commits $60 million to help municipalities engage in asset management planning.

OCC Analysis
Measures that support business investment in zero-emissions vehicles will reduce their energy costs while supporting innovation and competitiveness of Ontario’s auto sector. Increasing the energy efficiency of buildings will also help reduce long-term electricity costs.

Access to affordable energy remains one of the top barriers to business competitiveness across Ontario. Businesses are deeply concerned about the cumulative costs of climate policy that will result from an inefficient interaction between the Output-Based Price System and the Clean Fuel Standard.

We are pleased to see support for municipal asset management planning from the federal government.

Broadband

Budget 2019 sets a national target for broadband expansion: 95 percent of Canadian homes and businesses will have access to internet at speeds of at least 50/10 Mbps by 2026 and 100 percent by 2030. The Budget commits to $5-6 million in funding for rural broadband over the next 10 years, including incentives for private sector investment through the accelerated capital cost allowance, continuation of the Connect to Innovate program, the launch of the Universal Broadband Fund, and partnerships with the Canada Infrastructure Bank.

OCC Analysis
Access to high-speed internet connectivity is a basic infrastructure requirement in today’s economy. Communities rely on broadband to attract businesses and talent, innovate and modernize, educate their populace, and engage with the rest of the world. The government’s commitments to set a national target and leverage private sector investment are necessary to drive regional economic development in Ontario. However, under the current definition of coverage, many homes and businesses continue to lack adequate access to high-quality networks. The OCC encourages the government to work closely with communities and industry to ensure their connectivity needs are being met.

Sector-Specific Support

Science and Innovation: The government proposes to eliminate the income threshold for accessing the enhanced Scientific Research & Experimental Development (SR&ED) credit. This supports SMEs experiencing rapid growth in income or with variable income from year to year.

OCC Analysis
We have long called for SR&ED reform to better support innovative researchers, inventors, and companies in Ontario. This is a welcome first step, but more is needed.

Forestry: Starting in 2020–21, the government will invest up to $251.3 million over three years in Natural Resources Canada to extend existing innovation and diversification programs in the forest sector.

OCC Analysis
Federal funding programs have allowed Ontario’s forestry sector to innovate and grow despite several challenges to its competitiveness. Combined with ongoing provincial efforts to reduce regulatory barriers, extending these programs will support industry growth and regional economic development in rural Ontario.

Tourism: Budget 2019 proposes the following investments to help Canada’s tourism sector innovate and grow:

• $58.5 million over two years, starting in 2019–20, to the Regional Development Agencies for the creation of a Canadian Experiences Fund, which will prioritize tourism for rural and remote communities, Indigenous tourism, winter tourism, inclusive tourism, and farm-to-table tourism.
• $5 million to Destination Canada for a tourism marketing campaign.
• Creation of a seventh Economic Strategy Table dedicated to tourism.

OCC Analysis
Representing $33 billion of Ontario’s GDP, tourism is a significant and valuable component of Ontario’s economy. However, taxes on travel and accommodation, and unnecessarily high wages place undue burden on an industry which already operates on thin margins. Budget 2019 provides a series of welcome investments to promote Ontario’s tourism industry, including the prioritization of communities and industries traditionally underrepresented in Ontario’s tourism sector.

Regulation

Budget 2019 introduces the first three “Regulatory Roadmaps” to address stakeholder issues and irritants in agri-food and aquaculture, health and bio-sciences, and transportation and infrastructure. These roadmaps, to be released in the coming weeks, will focus on:

• Creating a user-friendly regulatory system;
• Using novel or experimental approaches; and
• Facilitating greater cooperation and reducing duplication.

Budget 2019 will also provide $3.1 million per year to the Treasury Board Secretariat (starting in 2020–21) to support its work on interprovincial and international regulatory cooperation priorities.

OCC Analysis
The OCC is pleased to see the federal government’s continued commitment to regulatory modernization and cutting red tape, as well as the government taking a leadership role in regulatory harmonization between the provinces and between other countries. We encourage the government to work closely with industry to find solutions in cutting unproductive red tape.

Taxes

To further combat tax evasion and aggressive tax avoidance, Budget 2019 proposes to invest an additional $150.8 million over the next five years, so that the CRA can hire additional auditors and examiners, and extend programs aimed at fighting non-compliance.

OCC Analysis
The OCC has long commented on the need to address tax evasion and tax avoidance, which limits fair collection of government revenues. Budget 2019 brings welcome investments that will ideally result in increased revenue for government without burdening law-abiding taxpayers.

Read the OCC’s statement.

Read Federal Budget 2019.