Written for Vancity Buzz by the Business Council of British Columbia
Tuesday’s budget dips the country deeper into deficit to bring long promised support to lift up the middle class, First Nations, veterans, and students. Although short on a clear path towards economic growth, the budget does offer some goodies that will compliment other efforts by the Liberal government to advance innovation, infrastructure development, and investment.
So – what’s in it for B.C.? Here’s a closer look at what yesterday’s budget means for you and the B.C. economy.
How far into the red are we going?
While no one likes to accumulate debt, with today’s record-low interest rates and when spent strategically to support economic growth, deficit spending can help boost an otherwise lagging national economy. It is also important to keep some perspective. The $30 billion in red ink that the Finance Minister is planning for each of the next two years should be seen against the backdrop of Canada’s $2 trillion economy.
The federal government’s debt-to-GDP ratio is the lowest of the G7 countries. With that being said, the Business Council would like to see a strong focus over the medium term to bring the budget back into balance.
And where is it going?
This leads to the inevitable question – so where are your tax dollars going? The majority of new spending announced in Tuesday’s budget will go to support middle class families and the Canada Child Benefit programme. Also, some modest changes have been made to the EI programme to support regions hit hard by recent job losses, such as Northeastern British Columbia, Northern Alberta and Northern Saskatchewan.
The Business Council has taken a closer look at some of the other expenditures that will support a growing and innovative economy:
- $2 billion over three years to modernize and improve infrastructure and other research and training facilities at Canadian post-secondary institutions.
- $32 million over two years for the B.C.-based Centre for Drug Research and Development, which will facilitate the commercialization of more locally-developed innovative health products and technologies.
- $87 million over two years to support research in forestry, mining, earth sciences, mapping, and energy technologies.
- $1 billion over four years to accelerate clean technology development, with a focus on research, development and demonstration, to accelerate the commercialization of promising technologies. B.C. has a strong clean tech industry and stands to benefit from Ottawa’s growing interest in this area.
Will there be more transit?
Yes – but not right away. The government announced a 10-year infrastructure plan of $120 billion, but the budget earmarked only $12 billion for the initial phase of the plan. Local projects like rapid transit lines in Surrey and along Broadway could see a down payment to support planning, but big projects like these will require greater federal funding if they are to proceed. Ottawa’s commitment to increase the federal share of project funding to 50% is a positive step that will help to advance local projects.
The initial phase will also include green and municipal infrastructure projects. However, these are not necessarily the types of investments that will support the movement of people and goods to spur greater economic growth.
Something else to consider: there is as much as $60 billion in planned or proposed energy-related private sector investment in Canada. Realizing even a portion of this substantial investment would help achieve the government’s economic and job growth objectives with less pressure on the public purse.
Investing in First Nations communities and education
A key component of the budget saw greater investment in education and infrastructure in First Nations communities. These are important to ensure people have access to safe drinking water and proper infrastructure, and will also have an economic impact.
British Columbia is expected to have nearly one million job openings in the next decade, and with First Nations people still underrepresented in today’s workforce, improving access to education is key to supporting their participation in the economy.
You probably missed it – but there will be a review of the tax system
If all goes as intended, your taxes could get simpler. Over the last 10 years, the tax system has become increasingly complex – for businesses and families – with too many boutique tax credits. The Trudeau government has committed to reviewing the tax system with the intention of eliminating poorly targeted and inefficient tax measures.
It’s the kind of thing that usually excites only policy wonks and economists, but can make a real difference for Canadians and business owners trying to navigate the tax system.
So there is an economic growth plan?
While yesterday’s budget focused primarily on spending opportunities to support middle class Canadians, the government does have an eye to long term economic growth with their all-star Advisory Council on Economic Growth. So yes, there will be a plan to pay back the debt after all.
Visit the Business Council of British Columbia this week for a full analysis of the Federal Budget and what it means to B.C.’s economy.