Business groups call for budget measures to close productivity gap
Business groups are sounding the alarm over Canada’s growing productivity gap – and they’re calling for measures and money in the upcoming budget to help reverse course.
The House of Commons Finance Committee released its pre-budget report this week – a 344-page document that delivers 359 recommendations to Finance Minister Chrystia Freeland. Committee members – with the exception of Conservative members who issued their own dissenting report – said they are “hopeful” she will implement their recommendations in the federal spending plan.
The report noted Canada’s falling productivity relative to other G7 countries, particularly the U.S., driving down our living standards. In 2022, income in Canada averaged $57,000 U.S. compared to $76,400 U.S. for Americans.
Some key recommendations in the report are aimed at boosting innovation to make Canada more competitive globally, including tax incentives for investments and measures to support the business data ecosystem. There are also calls for industrial strategies for aerospace, artificial intelligence and semiconductors and ways to improve supply chains, competition policy and talent retention.
The report also makes sweeping recommendations to help sectors transition to a net-zero economy, improve health care and education and address labour challenges.
In its submission to the committee, the Canadian Chamber of Commerce urged the government to focus on growth that’s driven by the private sector through regulatory reform and dismantling internal trade barriers.
“In the aftermath of the pandemic, our international competitors continue to outpace us, but our opportunities are clear,” the Chamber submission said.
In his presentation, Robert Asselin, Senior Vice President, Policy at the Business Council of Canada, warned that geopolitical shocks have compounded the domestic challenges Canada was already experiencing.
“Canadians are feeling the weight of high interest rates, low productivity and persistent inflation,” he said.
According to Asselin, debt service costs will continue to be much more prohibitive than previously forecast, and that governments can no longer run permanent large deficits “without fear.”
The Canadian Federation of Independent Business, an advocacy group, are calling for measures to help lower costs at a time of inflation, higher interest rates, labour shortages and supply chain challenges.
“Small businesses are looking for much-needed relief in the upcoming federal budget. That includes fixing the unfairness of the federal carbon tax system, reducing red tape, and keeping the cost of doing business down,” Jasmin Guenette, VP of national affairs at the Canadian Federation of Independent Business, told Means & Ways in a statement.
MPs on the Finance Committee launched the consultation process last June. They received a record-high number of submissions - 858 briefs in total, compared to 706 last year and 495 in 2022 – from stakeholders ranging from business and Indigenous groups to health care and housing advocates.
That high volume of requests may reflect the fact that Budget 2024 is the last one before a pre-election budget in 2025. Many groups may also be trying to grab a slice of the funding pie ahead of anticipated federal spending restraint.
In its dissenting report, Conservatives called for the elimination of the carbon tax, a ban on new and planned tax hikes and an end to what it calls “inflationary spending.”
Some of the recommendations from the committee include:
Convene a federal‐provincial‐territorial innovation summit.
Provide incentives that encourage Canadian venture capitalists to invest in Canadian companies by offering compelling financial supports that de‐risk investments.
Increase and coordinate commercialization funding to enable regional organizations with a national platform to supercharge start‐ups across the country.
Publish a code of conduct that specifies the rules for data sharing in Canada’s financial sector to ensure accredited participants in Canada’s open banking system meet a common and transparent set of requirements and standards.
Create industry councils to bring together all levels of government, business and labour and convene every two years.
Develop a dedicated AI commercialization and intellectual property strategy with a focus on scaling Canada’s domestic artificial intelligence technology firms.
Collaborate with the U.S. to build a North American electric vehicle industry and supply chain beyond the Inflation Reduction Act.
Introduce an equipment modernization and cybersecurity tax credit.
Adopt an older worker strategy.
Increase the global competitiveness of Canadian businesses by expanding access to customers, developing a procurement strategy for domestic small and medium-sized enterprises and reviewing procurement policies
