Letters February 18, 2020

Letter to the Honourable William Morneau, P.C., M.P., Minister of Finance on Budget 2020

Economic Strategy Industry and innovation Resources and the Environment

Dear Minister,

As you and your colleagues prepare the upcoming federal budget, I would like to offer the following observations on behalf of Canada’s business leaders.

In advanced countries around the world we are witnessing slower growth prospects driven largely by demographic forces and weak productivity growth. In addition to these challenges, the Canadian economy faces heightened trade uncertainty, ongoing tensions with China, economic fallout from the coronavirus, crippling rail blockades and growing costs associated with climate change.

According to the Bank of Canada, growth has slowed from around 3 percent in the 1990s to under 2 percent now. The economy is expected to grow at around 1.6 per cent this year, half the speed of the G20 average growth rate. Trade uncertainty will continue to restrain the level of business investment and exports, with trade measures reducing global gross domestic product by approximately 1.3 per cent by the end of 2021. The government’s plan to transition to a low-carbon economy will impose significant costs on government, business and Canadians that will weigh on growth over the long-term.

To better understand the challenges facing Canada and identify solutions, the Business Council of Canada launched the Task Force on Canada’s Economic Future last year, which engaged Canadians from across the country to advance policies that enhance growth and ensure a better future for all. The Task Force’s report and recommendations outline how governments, businesses and other stakeholders can work together to strengthen Canada’s economic capacity, accelerate growth and spur investment for the benefit of all citizens. At the same time, it asks employers to enhance Canada’s human potential by embracing diversity and inclusion in the workplace, promoting mental health and supporting a more skilled and innovative workforce.

As we engaged in this exercise, we challenged ourselves to focus on the broader interests of all Canadians, not only those of the business leaders we represent. That is why the Council has partnered with the Canadian Council for Aboriginal Business, the Canadian Federation of Independent Business, the Canadian Chamber of Commerce, and Canadian Manufacturers & Exporters to call on your government to ensure a better future for middle-class Canadians by embracing a comprehensive plan for economic growth in this year’s federal budget. Collectively, the member companies of these five organisations employ millions of Canadians in every corner of this country and every part of the private sector. You can find the joint statement attached.

Budget 2020 is an important opportunity to address pressing challenges, including climate change, while outlining a plan for growth by introducing measures to help the Canadian economy reach its full potential. We recommend that budget 2020 address the following:

Develop a responsible climate strategy

It is time to move past divisive debates about GHG targets and focus instead on policies that can drive sustained reductions in Canada’s GHG emissions in partnership with business. The Business Council has long supported a pan-Canadian approach to carbon pricing as a key element of that plan. Price signals encourage changes in behaviour—by citizens, institutions and businesses of all sizes—that are fundamental to success.

The federal government should bring more cohesion to the plan to achieve net-zero emissions by 2050. Greater cooperation amongst government and business is needed to develop a transition plan that meets the emissions target while ensuring the Canadian economy is not unduly harmed. This is necessary to fully cost the fiscal implications of transition – the European Commission recently unveiled a one trillion-euro investment plan to put Europe on track to reach its 2050 emissions-neutrality goal.

Canadian companies also have an obligation to demonstrate how they are incorporating the risks of a changing climate into their long-term business strategy. The recent report of Canada’s Expert Panel on Sustainable Finance contains some helpful ideas in this area, including how to leverage the world-class expertise of Canada’s financial institutions. We recommend the government develop a clear and consistent framework for how companies assess and report climate vulnerabilities.

Modernize the regulatory environment

Of the Task Force recommendations, we believe that regulatory modernization has the greatest potential to improve the lives of citizens, drive innovation and enhance business activity across the board. During our consultations, participants cited inefficient regulation as the single greatest obstacle to Canadian competitiveness and economic growth.

We welcome the government’s commitments to regulatory reform and modernization. In particular, we look forward to the outcomes from the current three targeted sector reviews and the announcement of other reviews in priority areas, such as natural resources; the introduction of an annual regulatory modernization bill; legislation to incorporate competitiveness into the mandates of all federal regulators; and a joint plan with provinces and territories to address one third of the regulatory barriers currently on the agenda of the Regulatory Cooperation and Consolidation Table.

However, we believe the government must be more ambitious in its approach to improving Canada’s costly, burdensome regulatory environment. Canada should aim to become the world’s most efficiently regulated jurisdiction, thereby strengthening the country’s ability to attract jobs, boost business confidence, and encourage badly needed investment.

We recommend that Canada commit to the goal of being the most efficiently regulated country on earth, as measured by the World Bank’s “Doing Business” index and the World Economic Forum’s annual Competitiveness rankings. This could be achieved by establishing an independent, arm’s-length oversight agency with the ability to issue public reports and a legislated mandate that transcends the political cycle. The agency’s mission would be to shine a light on the cumulative impact of regulation on Canada’s national economy, helping governments at all levels prioritize their efforts to reform and modernize the system.

Prioritize nationally significant infrastructure projects

In its first report, the Advisory Council on Economic Growth cited estimates of Canada’s “infrastructure gap” ranging from a low of $150 billion to as much as $1 trillion. The exact size is unknown—in part because there is no nationwide source of reliable data on the current state of the country’s infrastructure. The World Bank ranks Canada 21^st in the world based on the quality of trade and transportation infrastructure, such as ports, railroads and highways.

To address this significant and growing infrastructure deficit, the government should focus more of its infrastructure spending on large-scale, nation building projects that will increase Canada’s long-term competitiveness. Specifically, trade-enabling infrastructure would benefit communities of all sizes, including Indigenous, rural and remote communities. It would also help position Canada as the world’s most reliable and sustainable source of food, energy and other resources. Serious consideration should be given to increasing Indigenous equity partnership in infrastructure projects.

We recommend that the federal government establish an independent statutory body with a mandate to identify and prioritize nationally significant infrastructure projects. This would allow for the creation of a much-needed source of reliable data on the state of the country’s infrastructure.

Build a workforce for the future

In 2012, the ratio of working-age Canadians (ages 15 to 64) to seniors (65 and older) was 4.2 to one. Federal government projections put that ratio at two to one by 2036. This is one of the fastest anticipated rates of increase in the old-age dependency ratio in the industrialized world and will push the ratio of retirees to workers above the OECD average by 2030.

An aging population makes it harder for employers to find the people they need to expand and grow, and it puts a greater burden on working-age taxpayers to fund health care and elderly benefits. Now is the time for government and business to work together to equip Canadians with the skills that can align and adapt to the evolving economy in order to fill the hundreds of thousands of current and future job vacancies across the country.

Immigration can play an important role in offsetting Canada’s aging population and expanding the country’s economic capacity. The federal government should set an annual target for new arrivals equal to one per cent of the country’s population, starting in 2021. Canada should maintain at existing levels the number of annual newcomers meeting social objectives or other criteria, while steadily increasing the number selected on the basis of economic factors. The growth in immigration between now and 2040 should be in the economic categories, including skilled workers, business immigrants, and individuals nominated by provincial and territorial governments to fill specific localized skills gaps.

Create a pharmacare system that works for all Canadians

Canada needs a national universal pharmacare system that addresses current gaps in coverage and rising drug costs. A targeted pharmacare solution that includes government and employers working together would ensure all Canadians have access to prescription medicines at an affordable cost. This would achieve the same goals of a single-payer system more effectively and at a lower cost for everyone.

As your government considers how to design a national universal pharmacare system, we urge you to ensure the following principles are adhered to:

Coverage for all: ensure every Canadian has access to affordable drugs in a timely manner.
Limit disruption: allow Canadians to keep their current plan if they have one.
Keep costs reasonable: avoid unnecessary government spending or tax increases.
Focus government resources where they are needed most: the uninsured, the underinsured, low-income Canadians, and on catastrophic drug costs.

A targeted approach will result in a sustainable national pharmacare plan, allowing for additional government funds to be targeted to Canada’s other significant health-care priorities, from wait times to home care. Enhancing the existing system can get Canadians universal pharmacare in a practical, sustainable way.

Minister, without a strong economy, our country will not be able to sustain the vital public services on which Canadians rely, and we will not be able to meet the serious challenges Canada faces as a result of climate change and an aging population. Government and business need to work together to address these urgent challenges while delivering a plan for growth. I would welcome an opportunity to discuss this with you at your earliest opportunity.

Sincerely,