Federal budget passes the stimulus baton from government to business

SR&ED program trimmed; NRC research directed toward the practical.

Comments Off on Federal budget passes the stimulus baton from government to business March 30, 2012
by Canadian Press

Ottawa — Finance Minister Jim Flaherty is giving Canada’s corporate titans the means to drive the economy — while signalling government is moving to the back seat.

Thursday’s massive budget — at nearly 500 pages it is one-third bigger than last year’s — is chock-a-block with direct spending and incentives to help firms expand, invest and export, as well as measures designed to shed some of the shackles on their growth.

“They are trying to create a favourable environment in which businesses can grow,” said TD Bank chief economist Craig Alexander.

“The government is telling business, ‘We carried the ball during the recession, now it’s your turn.”’

The budget suggests government is getting out of the business of stimulating the economy. In fact, Ottawa is creating a slight fiscal drag with average spending growth of 2.1 per cent over the next five years, a rate that’s just a shade under inflation.

With consumers tapped out, the message of the budget is that future growth will have to come from exporting to other countries and business investments in plants, machinery and equipment.

The budget will help on many fronts, said Jayson Myers, president and chief executive of Canadian Manufacturers and Exporters.

“There’s a lot of good things … speedier regulatory approvals, limits on employment insurance rates, improvements on the foreign worker program, venture capital, what they are doing to support small business innovation, that’s all important stuff,” Myers said.

The budget loses marks with Myers for changes to the Scientific Research and Experimental Development program, which cut the tax credit rate and withdraw capital from eligible expenditures. That will hit Canada’s research and development heavyweights, who might export R&D elsewhere, he said. But overall, business will cheer, Myers concluded.

The budget spreads modest amounts of money to business-friendly endeavours. Half-a-billion dollars of venture financing for start-ups and $1.1 billion over five years for direct research and development to help both big and small businesses become more competitive.

Funds will be funnelled into programs to help connect unemployed workers with businesses that want to hire them. Smaller firms will be given money and other incentives to hire.

The important changes for the business community aren’t measured in terms of money, but in terms of tipping playing fields in their favour.

To get firms to become more productive and innovative, the government will overhaul how it hands out billions annually in grants and tax credits for research and development. This includes a “refocus” of the National Research Council away from blue-sky scientific study to research aimed at the bottom line of getting products to the market.

Flaherty has long complained that Canada does not get a big enough bang for the buck on its R&D spending. His budget makes it clear he believes this re-focusing on commercialization might change the current record.

“In spite of our efforts so far, Canada is not keeping up with other advanced economies on this crucial front,” Flaherty told the Commons.

“The result (of the new approach) will be to position Canada to succeed in the knowledge economy of the 21st century.”

As well, the government’s measures to help green light major resource projects could have far-reaching implications given the growing global demand for Canadian oil and minerals.

Businesses will still have to manoeuvre through regulations and approvals, including environmental-impact assessments, but there will be fewer of them and they will be conducted over a shorter period of time.

Ottawa intends to telescope the number of reviews, set strict timelines and introduce a “one project-one review” process so that environmental assessments are done either at the provincial or federal level, not both.

“We won’t have ridiculous situations where we have assessments going on for years that are sometimes abandoned because the processes take so long,” Flaherty said.

Anticipating opposition, the minister insisted the new rules could still offer reasonable protection for the environment.

But it is clear where the priority lies. Flaherty said booming economies in Asia need Canadian resources and Canada can’t afford to miss the window of opportunity to make sales.

As well, the government is proceeding with an aggressive free trade agenda in Europe and Asia. That is an initiative that gets solid support among Canada’s biggest firms.

Flaherty acknowledged much of what he has done, and will continue to do, is with an eye to the long term, not just this year or next. But Canada has to take advantage of the shift in the global economy from slow-growing advanced nations to the emerging powerhouses.

“We want to be in the next league,” he said. “We want to be with the emerging economies, we want to be with the economies of Asia and South America that are growing . . . but to get there are certain steps we have to take. They are not done in one year, that’s why we planning to the longer term.”

© 2012 The Canadian Press