For the past two years, Canada’s business community has been on the front line of COVID coping, adapting to the pandemic’s impacts on employees, customers, trade, supply chains and bottom lines. This year, the Canadian Chamber of Commerce makes its asks for the upcoming budget with an eye to the horizon beyond crisis management. Chamber President and CEO Perrin Beatty and Senior Vice President Mark Agnew say it all starts with growth.

Perrin Beatty and Mark Agnew

The 2022 federal budget comes at a critical moment for the Canadian economy. Statistics Canada data released in February indicated that, as of November 2021, GDP had finally surpassed its pre-pandemic level. We have likewise seen an employment recovery to pre-pandemic levels.

Our policymakers need to choose. Either Canada can go back to pre-pandemic economic growth that was neither terrible nor impressive, or we can be ambitious about the future of our economy. Budget 2022 will set the course since what we do today matters for the months and years ahead. Given the time that policy measures take to make an impact, Canada can’t afford to wait until after the pandemic is over before implementing an economic growth plan. 

The early signs from the government have been encouraging. Most recently, when announcing the launch of pre-budget consultations, the Deputy Prime Minister and Minister of Finance said that the “focus must be on jobs and economic growth – priorities that will form the foundation of the budget.” This is a welcome starting place, and now the government needs to deliver the goods. 

Our economy’s performance in recent years makes an economic growth strategy essential. 

Consider the state of public finances. Before the pandemic, the 2019 Fall Economic Statement had the federal debt-to-GDP ratio around 31 percent. The 2021 Fall Economic Statement pegged it around 48 percent.

While federal debt levels are not flashing red — and will indeed be helped in the short term by accelerating inflation — public spending cannot be sustained at current levels, particularly as interest rates rise. We will need much higher private sector growth as government support programs wind down. 

Canadian companies are also facing the quadruple hit of supply chain challenges, inflationary pressures, labour shortages, and an uncertain global trading environment. Any one of these challenges would be difficult for businesses to manage but having the four in varying degrees severely tests even the most resilient companies. It also means that businesses cannot afford unforced errors from policymakers that strain the operating environment even further. Instead, they need a focus on measures to improve business competitiveness.

Over the years, budgets have morphed into massive tomes – last year’s came in at 725 pages – and there is not enough space here to deliver a comprehensive analysis of what should appear in a budget document. However, from the standpoint of the Canadian business community, the budget needs to focus on three general themes: 

• getting the economic fundamentals right, 

• seizing new opportunities, and 

• supporting integration into the global economy. 

At the core of supporting economic growth is getting our basics right to help businesses be globally competitive. Tax policy tops the list. The Canadian tax system has been subject to year after year of bolting on one change atop another. It’s often said that the only two certainties in life are death and taxes. Medical science continues to make great progress on death, but taxes keep moving in the other direction. 

The last time Canada undertook a full, independent review of the tax system, none of the current party leaders had yet been born. We are now long overdue for a review, which should focus on reducing complexity, ensuring we are competitive with other jurisdictions, fairness, the administrative burden, and how we balance personal, corporate, consumption and excise taxes. Canada is lagging behind our peers. For example, when looking at administrative burden, the 2020  World Bank Doing Business index ranked Canada 19th for ease of paying taxes. 

The competitiveness of our tax system is particularly important because of the rapid digitalization that has occurred within the economy. We need to ensure that our approach remains aligned with international standards rather than developing an orphan system here. 

Regulatory reform is another bread and butter economic imperative. In the 2019 World Economic Forum Competitiveness Report, Canada ranked 38th for the burden of government regulation. A key challenge facing businesses is the lack of economic competitiveness as a factor in regulatory decision making. Mandating a review of the impact on economic competitiveness as part of any new regulation would greatly spur economic growth. 

Access to talent remains a perennial worry for businesses, and the pandemic has only exacerbated the challenges. The budget can help close the labour market gaps by reducing burdens for foreign qualification recognition and by reducing the administrative burden for repeat users of the Temporary Foreign Worker program through creating a trusted employer program. 

Budget 2022 also needs to help businesses prepare for new and emerging opportunities. 

One of those emerging opportunities is in the transition to net zero. There are multiple pathways and tools to get our economy to net zero in a sustainable and predictable manner using technologies like small modular reactors and hydrogen. Another example is carbon capture, utilization and storage. The government has committed to an investment tax credit in the budget. The tax credit rate and design conditions must support widespread deployment of projects in a variety of industries, including oil and gas, fertilizer, and utilities. Critical minerals likewise play a vital role in our low-carbon transition by supporting the production of technologies such as solar panels. Continued investments are needed to reduce the risk in critical mineral supply chains. Support for a predictable transition to net zero will enable Canada to achieve its emissions reduction targets without crippling the economy. 

The pandemic has taught us many hard lessons, including the critical importance of a life sciences industry for our domestic resiliency. We have already had many expert reports, as well as the government’s Biomanufacturing and Life Sciences Strategy. Now is the time to shift into action. The budget should commit the required resources and develop a scorecard to measure progress on these well-articulated objectives. A reinvigorated life sciences sector will attract investment to create well-paying, knowledge-intensive jobs. 

The increasing digitalization of activity also exposes new cybersecurity dynamics. We now have both a risk to mitigate and an opportunity for made-in-Canada cybersecurity products and services. However, on a per capita basis, the federal government only invests in cybersecurity about half as much as our G7 peers. Increased investments in cyber protection and commercialization will help businesses prepare for a rapidly changing landscape. 

The third area where the budget needs to support economic growth is in fostering Canada’s further integration into the global economy. This includes both accessing traditional markets as well as enabling businesses to reach new customers. We have work to do in this area. The 2020 World Bank Doing Business index ranked Canada 51st for ease of business trading across borders.

Infrastructure investment is an essential tool for facilitating those cross-border movements. Ottawa must inject new cash into the National Trade Corridors Fund while ensuring that investments are made where they will deliver the greatest returns. 

The budget can also capitalize on the massive, once-in-a-generation investments needed to modernize NORAD. The government should move quickly on road-mapping the technology requirements. Our goal should be to position Canadian industry to meet the capability needs of NORAD and ensure companies can integrate into cross-border defence industrial supply chains with American companies. 

The government is facing a tall order in the upcoming budget. While in years gone by, budgets were focused more on traditional fiscal measures, they have become the keystone documents that set the economic agenda. After all the rhetoric of building back better, the federal government needs to transform the words into action. Continuing to simply plod along may be an option, but it won’t help us win the investment that grows the economy and creates jobs.   

Perrin Beatty, President and CEO of the Canadian Chamber of Commerce, is a former cabinet minister in the Clark and Mulroney governments. 

Mark Agnew is the Senior Vice President, Policy and Government Relations, of the Canadian Chamber of Commerce.