Budget 2024

Tax and spend fiscal plan will inhibit growth

In light of the COVID-19 emergency, we’ve temporarily suspended our regularly scheduled series of conversations with Canadian CEOs. But we’re not going away. Instead, we’re going to pivot to the health emergency itself. We’re going to explore the impact on companies and workers across the country. And we’re going to find out how business leaders are responding to crisis.

Dan Kelly, President, CEO & Chair of the Canadian Federation of Independent Business (CFIB) discusses the devastating impact of COVID-19 on his members, the government’s response, and where he believes we need to go from here.

Transcript

Goldy Hyder:
Welcome to a special edition of Speaking of Business. I’m Goldy Hyder of the Business Council of Canada. During this unprecedented time, as we all deal with the COVID-19 outbreak, we are speaking with business leaders to hear about how they are responding to the crisis. Over the past few weeks, I’ve said many times we’re all in this together, and that’s what we’re discussing with my guest today.

Goldy Hyder:
As the CEO of the Canadian Federation of Independent Business, Dan Kelly represents over 110,000 small businesses across the country. The COVID-19 virus doesn’t discriminate between large and small businesses, and leaders across the country are grappling with many of the same issues. Dan Kelly, welcome to the podcast.

Dan Kelly:
Happy to be with you.

Goldy Hyder:
Well, let’s jump right in because, look, I know you’re a busy man. So I can’t tell you how much I appreciate your doing this. Canadians have seen and heard from you, day after day, fighting the good fight for your members, but the economy writ large. And I know you’ve been surveying your members throughout this crisis and you released these results just on March 31st. What did you hear? What are the top lines as to what you heard from your members?

Dan Kelly:
Yeah. Well, it’s getting pretty ugly, Goldy, and you know this from the conversations you’ve been having with your CEOs. But the owners of small, medium sized companies across the country are pretty stressed right now. We’ve done now three surveys of our members to measure the impact on them, and it’s pretty grave. Right now, there’s only about 20% of small businesses across Canada still open. That means about 80% of them are either completely shut down or are partially shut down. That’s creating great stress because, of course, if you’re shut down by government, you still have all your bills coming in, both your wage bills, your rent, and many other expenses.

Dan Kelly:
What worries me probably more than anything is, of those businesses that have been forced to close, 32% of them told us that they are unsure if they will ever be able to reopen. That’s how grave this is. Small companies worry that they’re just not going to make it through this. We all know that there are many Canadians that would struggle without their wages for two straight weeks, but there are many Canadian businesses that feel that a month of zero income will mean that the business itself is in jeopardy. That has concerns, of course, for all of us as Canadians. Certainly for larger companies, many of these small companies are very connected to them, so that’s a worry for them. But for Canadian workers, 60% of private sector employment is in small companies, and that should be a worry to Canadian workers about whether or not they’re going to have a job to come back to.

Dan Kelly:
And of course, for the tax base of the country, small firms kick in an awful lot. So these are big, big worries, let alone the worry that the business owner has on his or her mind about their dreams, their hopes and dreams and their source of family income disappearing by the end of this.

Dan Kelly:
That’s why we’ve been pushing for some government help. And Goldy, as I know I’ve said to you before, this is very off-brand for us at CFIB. We are typically recommending the government to get out of business support programs, that they’re unhelpful, unnecessary and governments end up picking winners and losers. But this kind of emergency is the time where I think governments do need to step to the table to support businesses through this because this is a very different economic turmoil than we’ve ever been through in Canada. This one started on Main Street. It didn’t start on Bay Street. Everybody’s affected, but it’s the small guys that I think were at the bleeding edge of this and actually started to see the effects of COVID much earlier than many others.

Dan Kelly:
And it’s one of the reasons why we’ve done this unprecedented call for a wage subsidy. So happy that we’ve been able to work with Business Council and other business associations on this. But we’re getting some good news from government and hoping to get even further good news on some of these other major support programs that are needed.

Goldy Hyder:
Yeah. Well, we’re speaking today, April the 1st, before we hear the details from Minister Morneau on the execution of the wage subsidy. And of course, as you and I both know, the devil’s always in the detail in these things. But if there’s one thing we’ve learned, it’s that we’re, as that hashtag goes, right, we’re all in this together.

Goldy Hyder:
You mentioned the supply chain. I can tell you from my members, it’s a big priority for them as to how to make sure that, even if they come out of this at the other end and ready to go back to business, what happens when the disruption has occurred in the supply chain? What can we be doing to minimize and mitigate that, not just from a government perspective, but from our own perspective in your mind?

Dan Kelly:
Well, it’s one of the reasons why I think we’ve all been pushing for some form of wage subsidy. I think what is most important and one of the reasons why most of European countries have gone in this direction is that we need to freeze the economy. Look, there were warts in the economy before we went into the COVID disaster and, of course, right before that were the rail blockades that affected us all. There have been just a load of shocks in 2020 already, including the major resource projects.

Dan Kelly:
But I think if we could freeze the economy before we hit COVID, we have a good chance of coming out of this quickly. And that means that we keep workers attached to their workplace so that they’re not basically shown the door and are on unemployment. One of the things that worries me the most is if we have as employers the only option to lay off large numbers of employees and have them go through the EI system or the New Canadian Emergency Response benefit, it will be months and months, Goldy, before those employees are back to work.

Dan Kelly:
Think of how many people at the end of this are going to say, “Oh gosh, I’m on EI right now. I’ve got my bills paid. I’ve had a stressful few months. I’m just going to take the rest of the summer off and enjoy it with my kids and maybe look for a job or go back to my employment in September.” If that happens, the economy is not going to rebound as quickly as we need it. If we can support those employees, keep them connected to their employer during this period of time, the very next day after the emergency phase of this is over, most of them will return back to their previous positions. That’s the kind of support that we need right now and it’s why we need to get this wage subsidy program right.

Goldy Hyder:
Right. Well, look, it’s April the 1st as I mentioned, and of course that for many people means the rent is come due, especially for the small businesses around the country. What kind of relief do you hope to see when it comes to the issue of rent?

Dan Kelly:
Yeah, it’s a tricky one, of course, because even on the rent side of the equation, we have small business owners on both sides of that. Your local dry cleaner may own the strip mall in which his business is located and rent out three or four other bays. And if those other tenants don’t pay the rent for their commercial property, well then his business is in big trouble.

Dan Kelly:
This is why I think the answer is to provide direct government aid for some of the fixed costs as well. If the feds are picking up a large chunk of the wage bill, we are looking to the provinces to help support small firms with their rent. Our suggestion is that we use, leverage this new Canadian Emergency business account that the federal government set up. The feds have been working with the banks to do that. They’re supposed to allow up to $40,000 in lending to business. Most businesses say they don’t want loans.

Goldy Hyder:
Right. And 10,000 of that, I think, is forgivable, if I recall correctly.

Dan Kelly:
You got it. And that’s the piece that we’re looking to leverage. We’re asking the feds to make that 10 grand actually an upfront grant to the business so they can pay some of their bills and asking provinces … Remember, the provinces are the ones that told the small businesses, “You must close.” If the provinces can kick in 5,000 per month during the duration of this, that would mean an account of $25,000. And that money could be used by the local nail salon, the coffee shop owner, or bike repair place to help them get through this. And then hopefully, brighter days will be there in a month or two.

Dan Kelly:
That’s the kind of support that I think would help, if we can get the provinces to focus on rent support. Forgiving property taxes would be a piece of this, not just deferring those bills, but actually helping meet some of those bills, and then the federal government coming to the aid of business with some wage money. I think we have a fighting chance of having some, not all certainly, but some of our small business community make it across the finish line.

Goldy Hyder:
Can I ask on a personal level, how has this been impacting you? What are you learning about yourself? How are you managing the work from home situation?

Dan Kelly:
Well, I feel actually really lucky compared to the stories I’m hearing from my members.

Goldy Hyder:
Yeah.

Dan Kelly:
So while this has no question been stressful, it’s been difficult to sleep because I read 20 stories from business owners that are seeing their dreams go up in smoke, but I still have a paycheck, a nice home to work out of, and technology to assist me. I’m so much better off than most of the small businesses that I represent. So the stress on me is a fraction of what it is on other people.

Dan Kelly:
The other thing, just on a personal note, is I have given up the fight to take the iPad away from my 11 year-old son. And in fact, I’m thanking God every day for Fortnight, because while I used to loathe his hours on that game, right now he’s playing with his friends, talking to his buddies while he’s playing the game. And I’m thinking that actually is really helpful at a time when he would have no other social connection beyond his two parents. He’s an only child. So the fight will resume when this is all over.

Goldy Hyder:
Yeah. No. I asked that because, of course, we’re so focused on our businesses and stuff and I think we always forget about those unsung heroes at home who are keeping it all going while you and I and others are battling for these things that we are.

Goldy Hyder:
Now, speaking of battling, maybe as a final question, you and I, we’ve been really working hard to bring about positive public policy change and resist the temptation to fall into some of the populous traps that many other countries have. What have you learned about Canada and what have you learned about the way in which we go about talking policy? It’s early, but I’d love to hear your thoughts on that.

Dan Kelly:
Well, look, I do think we are so much better off than in many other places. Just one thing that always makes me incredibly proud as a Canadian, and it’s not that we are immune from some of the pressures from elsewhere, but that the social acceptance of immigration by really all stakeholders is something that I think is so positive. Our members, I know yours, deeply depend on a stream of new talent coming to Canada. And small businesses like never before have been hiring people from elsewhere because it’s really supplementing their workforces with some terrific talent. They’re also telling me that this has raised the bar for some of their Canadian workers by seeing the work ethic of some of the new Canadians that have come to Canada. It’s one of the things that I’m most proud of about our country.

Dan Kelly:
But it also reveals to me, though, that we are ill prepared in many respects. The public policy makers have, I don’t think, really prepared Canada well to deal with these kinds of turbulent economic events. The reaction has been slow. We’re getting there. We’re getting to some positive decisions, but it’s coming … We’re not as nimble as we could be in responding to these events, both the rail blockades in 2020, some of the resource project disruptions that we’ve seen, and of course most recently the economic response to COVID.

Dan Kelly:
Governments did need to focus on the healthcare response first. I totally get that. But we’ve now been experiencing, almost a full month in many respects, a huge degree of economic turbulence as a part of COVID. And that response has been slow. I think we are going to get there, but unfortunately we have seen millions of people joining the unemployment line as a result. I don’t think that that needed to happen. Had we moved faster as a country, I think we could have prevented many more people from being on EI and actually being still connected to their employers.

Goldy Hyder:
Well, look, I’m sure this is a subject that we’ll be able to continue. It’s the curse and the blessing of being Canadian, I suppose. But I hope, like you, we come out of this with lessons learned on the need to act more decisively and with speed and with collaboration. And I think that, as you rightly say, we get there and we get there eventually. But boy, it could have been a lot less painful process in doing so.

Goldy Hyder:
So Dan, look, I know you’ve got a busy day ahead of you. Thank you so much for joining us. I really appreciate your time.

Dan Kelly:
Goldy, thank you. And I just want to say you’ve been an incredible champion for not just your members, but for the economy more broadly and for all Canadians. Really grateful to be working in partnership with you.

Goldy Hyder:
Well, that’s kind of you, my friend. I look forward to continuing that and I wish you well. And I want to thank Dan Kelly, CEO of the Canadian Federation of Independent Business. If you would like to hear more of our special Speaking of Business conversations about the COVID-19 crisis, you can find them all wherever you get your podcasts or simply go to our website, SpeakingofBiz.ca. That’s biz with a Zed. I’m Goldy Hyder. Thanks for joining us.