Where’s the plan? Budget needs better plan for the future

TORONTO—Finance Minister Chrystia Freeland’s first budget has come under strong criticism for, in the eyes of its critics, its failure to put the country on a strong growth path for sustained future prosperity. “I don’t think we really have a plan going forward and the budget is supposed to be a planning document,” David Dodge, former Bank of Canada governor and deputy minister of finance, complained in a recent webinar. He is not alone in this view. While there are things in the budget to like and some measures that will improve the longer-term economy, I believe the critics are on the right track. But the big failure is that the budget is not up front on the fundamental challenges we face nor does it explain how its aspirations—such as a green economy, a digital society, a leader in green energy, advanced manufacturing, a world source of critical minerals and automotive batteries—will actually be accomplished. Moreover, will the needed technologies be provided through imports, adding to our trade deficit, or will they come from Canadian innovations and technologies? If heavy polluters are to transition to green technologies such as carbon capture and storage, what will this cost, who will pay for these investments, and how long will they take to implement? If we are to move to large-scale adoption of electric vehicles, this will require a major investment in charging stations. Will we use Canadian technologies? There is much talk of Canada playing a major role in electric vehicle batteries—but how? Do we really have an advantage in the needed rare minerals? For some, such as lithium, there appears to be a global abundance. Do we have the right kind of nickel ores for use in electric vehicle batteries? What intellectual property do we actually have in electric vehicle batteries? While there is much boasting of Canada as a leader in advanced manufacturing, what is the evidence? And since there is no manufacturing strategy in Canada, and little reference to manufacturing in the budget, how do we plan to have a competitive manufacturing industry for a greener and more digital world? 'I don’t think we really have a plan going forward and the budget is supposed to be a planning document,' David Dodge, former Bank of Canada governor and deputy minister of finance, complained in a recent webinar. The Hill Times file photograph by Jake Wright There is excitement in the tech community, as a number of Canadian tech companies have initial public offerings or raise significant new rounds of private equity financing. But there are no serious plans to ensure that foreign tech giants can’t swoop in and buy up the best companies and their intellectual property. And in the meantime, foreign tech companies are expanding in Canada with R&D branch plants that hire our world-class talent and tap into our university professors and research—but these investments are to create intellectual property for their foreign parents, not actually produce anything in Canada. As Dodge argued in the Public Policy Forum webinar, instead of a plan for going forward, Canadians got a list of expenditures, which is not the same as a plan. Finance ministers these days want to present good-news budgets, not address the realities of the world Canadians face. Dodge’s criticisms are based on experience. He led the drafting of budgets in 1994-95 that helped move Canada from a high-deficit and debt nation to a country with a budget surplus that soon allowed Canada to pay down debt, provide tax cuts, and expand spending in some key areas. The recent budget should have clearly set out the country’s most urgent challenges—how to generate the innovation and investment needed to create a greener and more digital economy—and spelled out how the government expected Canada to meet these challenges. There is a critical need to raise the growth potential of our economy to sustain our standard of living and meet the needs of an aging society. To do this, we must be much more innovative so that we can improve our productivity performance. One sign of our weakness is our chronic current account deficit, which reflects the fact that we are currently sustaining our way of life by increasing our debt to foreign investors. Under-investment in tangibles such as machinery and equipment by business along with underinvestment in intangibles, such research and development, intellectual property and marketing for global markets have left Canada poorly positioned for the future. According to the OECD, Canada is a laggard when it comes to investing in the new economy. For example, just 12.2 per cent of business capital investment has been going to finance intellectual property, compared to 26.5 per cent in the U.S., 30.8 per cent in Switzerland, 23 per cent in Japan, 21.6 per cent in Britain, or 17.9 per cent in Germany. Likewise, Canada has lagged in investment in digitization. Business has been investing 10.1 per cent of capital spending in information and communications technology, compared to 15.9 per cent in the U.S. and 13.6 per cent in Britain. A new study from the Confederation of British Industry, 'Prosperity Sending,' on Britain’s underperformance on the commercialization of ideas, identified which countries that it saw as global leaders on innovation as well as strong performers on IP creation and the commercialization of R&D. The seven benchmark countries it ended up choosing were Switzerland, Sweden, the Netherlands, Finland, the United States, Singapore and Korea. Canada was not in the race. Yet, we continue to delude ourselves with a level of boosterism that conceals both our weaknesses and the challenges we face. A typical example was the report late last year of the government’s Industrial Strategy Council. “We are an incredible country with exceptional strengths. Canada’s economic prosperity is built on strong and active sectors, global connections, deep roots in research and cutting-edge technological capabilities and rich natural resource requirements,” it said. “If we rally together with relentless conviction to do greater things, we could supply the world with Canadian innovation and build prosperity and wealth for all Canadians.” If only it were that easy. David Crane can be reached at crane@interlog.com. The Hill Times

Where’s the plan? Budget needs better plan for the future

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Where’s the plan? Budget needs better plan for the future

Under-investment in tangibles such as machinery and equipment by business along with under-investment in intangibles, such research and development, intellectual property and marketing for global markets have left Canada poorly positioned for the future.

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