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In building its budget, the federal government is asking different questions this year. Will Corporate Canada provide a different answer?

IT IS BUDGET SEASON in Ottawa and the town is rife with speculation on the timing of the next federal election and how the government’s commitment to build back better will take shape. Predicting when Canadians will next go to the polls is a favourite pastime in the salons of our nation’s capital. Between now and Budget Day on April 19, we can expect a daily dose of deep analyses of leaders’ statements, the impact of possible budget measures on public opinion, and what it might all mean for the electoral outcome in West Nova, Shefford, or Aurora-Oak Ridges-Richmond Hill.

“If the pandemic has reminded us of the importance of a strong public sector, it has also shown that governments acting alone will not get the job done.”

Setting aside the horse race for a moment, it is worth considering how this year’s budget season differs from years past. The COVID-19 pandemic has exposed profound flaws in the delivery of essential health and social services. Entire industries have been brought to their knees. And governments everywhere have had to acknowledge that conventional policy responses simply are not sufficient to meet the challenges we face. If the pandemic has reminded us of the importance of a strong public sector, it has also shown that governments acting alone will not get the job done. Canada needs nothing less than a whole-of-society approach to rebuilding our economy and rethinking public policies.

At least rhetorically, the federal government seems to have embraced the opportunity for wholesale changes in a number of policy areas. Building back better has given it licence to consider new approaches to energy and climate change issues, income and employment supports, and infrastructure.  But completing those transitions will require strong partnerships with businesses that also embrace the opportunity for transformation.

In fact, the government has already begun to lay out their expectations. Over the last year alone, they created a new 50-30 challenge to increase diverse representation in corporate Canada, set in motion a new public-private Sustainable Finance Action Council to help scale sustainable finance in Canada, and directed the Canada Infrastructure Bank to work with the private sector to expand rural broadband and invest in clean power generation. The key question will be whether the government succeeds in finding those partners.

Throughout the pandemic, countless Canadian businesses have proven they are up to the challenge.  They have adapted to the realities of the pandemic and developed new products, delivered new services and organized themselves in new ways. But too often, those businesses are being let down by policy advocates whose asks of the government fail to reflect the undeniable fact that the world has fundamentally changed in the last twelve months. Many of their budget demands in 2021 sound like the productivity and competitiveness agenda of the early 2000s or the innovation agenda of the early 2010s dressed up in COVID-19 clothing.

Fortunately, a growing number of Canadian business leaders understand the shift that is required of them. They know that looking beyond quarterly reporting toward a purpose-driven approach to running their business is table stakes to partnering with government in this post-pandemic world. They come to the discussion with a willingness to adapt and with skin in the game. They are concerned with their business’s contributions to the well-being of all their stakeholder groups, and they value equity, diversity and inclusion as guiding principles to drive their development. Equally importantly, they know that this government has the political will to usher in broad, systemic changes impacting various sectors. Those who do not commit to change may have change imposed on them.

Former Prime Minister Joe Clark often reminded his advisers that, when engaging in policy debates, one had to choose between making a point and making a difference. Making a point allows an intervener to focus exclusively on the needs of their business or their sector, undiluted by external considerations. The ask is straightforward, but it leaves the intervener on the outside looking in. Success is possible, but the intervener has less agency in shaping the decision.

Making a difference, on the other hand, requires of the intervener that they articulate their contribution to solving the policy problem, not just the benefit they are seeking. It requires openness and flexibility, and alignment with the public good, not just private gain. It is those interveners who become trusted and influential partners. And it is their efforts that are more likely to be reflected in Minister Freeland’s words on April 19 and government action in the months and years to come.

Whether it comes in the spring or fall, the federal election campaign will be a temporary distraction from the serious, long-term thinking that needs to happen if we are to recover successfully from the pandemic. The real story to watch will be how courageous our public sector leaders will be in changing their approach to public policy challenges, and how creative the private sector will be in responding to the call.

Unconventional (w/Shakir Chambers and Matthew Barnes)

This week, host Amanda Galbraith sits down with Navigator Senior Consultants Shakir Chambers and Matthew Barnes to look back a the Conservative policy convention, and look ahead to the upcoming Liberal convention. Then the three go head-to-head in our rapid fire round on Cinnamon Toast Shrimp, vaccines and favourite patios in Ottawa and Toronto.

The Supreme Court’s ruling on carbon pricing is a political windfall for the Liberals, but also a chance for Erin O’Toole to make hay

The Supreme Court has spoken. Climate change — and the reduction of greenhouse gas emissions — is a matter of national concern.

In a 6-3 decision, the court ruled that the Greenhouse Gas Pollution Pricing Act is constitutional and that the federal government indeed has the authority to implement or require provinces to implement a minimum price on carbon.

Writing for the majority, Chief Justice Richard Wagner argued that the issue of reducing GHGs to address climate change meets the definition of a “matter of national concern” and thus can fall within Parliament’s exclusive jurisdiction.

In the majority’s view, climate change “is causing significant environmental, economic and human harm nationally and internationally, with especially high impacts in the Canadian Arctic, coastal regions and on Indigenous peoples.”

The majority also agreed that the provinces do not have sufficient ability to address climate change independently. Provincial governments, they reasoned, do not have authority to implement a consistent standard across the entire country and, further, the withdrawal or refusal of a single province or territory would “jeopardize its success in the rest of Canada.”

In short: we are all in this together.

The prime minister has used similar reasoning before. Speaking about the pricing act in Parliament in 2016, Trudeau remarked that “because pollution crosses borders, all provinces must do their part.”

The ruling itself is a gift to the Liberals ahead of another election, because it finally settles the prolonged debate over the constitutionality of the law. Opponents will continue to attack carbon pricing in the court of public opinion, but for now at least, the legal challenges have ended.

Beyond that, the language in the ruling is a boon for team Trudeau. Having identified climate change as a matter of national concern, the court’s decision seems to imply that a federal government — regardless of politics — is not just empowered but expected to take appropriate action. Canadians respect the impartiality of our highest court, so the language of the ruling will serve the Liberals well as they gear up for an election.

At the same time, the decision presents a unique challenge for the leader of the Opposition.

Last week, Erin O’Toole attempted to usher in a new era for his party by declaring, in his speech at the CPC policy convention, that the debate over the reality of climate change was “over.”

Not so fast.

Delegates later voted against a motion recognizing that climate change is real (albeit one with wider policy implications). After the vote, O’Toole continued with his stake in the ground by declaring, “I am in charge.”

And while he is indeed in charge, he is going to have to deal with the court’s commentary on the “national concern” standard and the responsibilities attached to it.

But here is where there may be a silver lining for O’Toole.

Notwithstanding the inevitable protests of Western MPs who fiercely oppose any form of carbon pricing, the party desperately needs a sincere strategy on climate action.

It has become rote for pundits — and pollsters — to say that the CPC cannot win another election without a serious climate plan, so why do we keep ignoring them?

My hope is that the settled legal case allows O’Toole some breathing room to develop a Conservative approach to carbon pricing — and in so doing, garner the party enough support in Ontario, and elsewhere, to win an election.

A genuine Conservative climate plan could achieve what O’Toole and his predecessor have failed to do to date: prove to Canadians that the CPC is a modern party, open to change, reflective of and responsive to their concerns.

Let the opponents find support in provincial governments who — like the three dissenting justices — can attack what they see as the law’s jurisdictional overreach rather than climate action generally.

Two elections and, now a decision of the Supreme Court, have settled this matter.

It is now time for the federal Conservatives to pick a different fight.

Québec’s Budget 2021-2022

Opening the floodgates… with some caution

Québec Finance Minister Éric Girard tabled his 2021-2022 budget on Thursday afternoon. This budget postpones the return to a balanced budget by two years – it is now scheduled for 2027-2028. Instead of tackling deficit reduction in the short term, the Coalition Avenir Québec government has chosen to invest an additional $15 billion in the five (5) priorities it has identified:

  • strengthening our health care system
  • supporting educational success and youth
  • accelerate growth and the transition to the new economy
  • supporting Quebecers;
  • ensuring fairness.

In Mr. Girard’s view, the priority must be to consolidate the post-pandemic recovery ” before implementing a plan to restore fiscal balance.” Measures to reduce spending and/or increase revenues will therefore await the return of “full employment”. It should be noted that the return to a zero deficit in 2027-2028 depends in part on a substantial increase in federal transfers to the provinces for health care. In addition, the government reiterates its commitment “not to increase the tax burden.”

The budget includes $2.2 billion in new measures to increase productivity and stimulate business investment. Among other things, Mr. Girard announced a reduction in the tax rate for Quebec SMEs (from 4% to 3.2%) on the first $500,000 of taxable income.

In the area of health, in addition to the $11.9 billion planned to fight the pandemic, the government is announcing $2 billion over six years to improve services for seniors (addition of 500 long-term housing spaces) and $1.3 billion to improve health care and services ($527 million to improve front-line care).

In education, substantial amounts ($1.2 billion) are announced to support academic success and encourage perseverance at the college and university levels. This includes countering the negative, demonstrated effects of the pandemic on young people’s learning.

A few measures are planned to facilitate work-family balance, including $97 million to create 3,600 new spaces in family daycare services.

An amount ($214 million) has been announced to extend support to the cultural sector, which has been hard hit by the measures taken to fight COVID-19. The tourism sector will receive $205 million.

The Quebec government had already earmarked more than $130 billion for its ten-year infrastructure plan (2021-2031). Minister Girard is adding $4.5 billion to this already colossal sum. Thus, on average, Quebec will invest $13.5 billion annually in the construction and restoration of roads, buildings and public transportation.

In total, including pandemic measures, Quebec government spending will have increased by an average of 4.3% per year between 2020-2021 and 2022-2023. In the current context, this is not unreasonable.

2021 Ontario Budget: Insights and Analysis

For Ontarians, this week has been a stark reminder of just how truly unalike their provincial and federal governments are. For Premier Ford, that may be very welcome news.

On the one hand, we awoke on Tuesday to news that federal Minister of Finance Chrystia Freeland will table her first full budget since taking on the role—and the government’s first in two years—on April 19.

On the other, Ontario’s minister of finance, Peter Bethlenfalvy was delivering his first budget as well, the third fiscal update provided by the province since COVID-19 began last spring.

It is a remarkable study in contrasts that speaks volumes about each government’s political priorities. For the Ford government, accountability and transparency are the hallmark of their appeal to voters, but they have also focused squarely on their core competencies within their jurisdiction – investing in health care and education.

The federal Liberals, alternatively, have focused more on delivering big ticket items throughout their pandemic response.

Unsurprisingly, the differences did not end there.

In “finishing the job” they began last year, Ford and Bethlenfalvy have tried to strike a difficult balance between fiscal stewardship and pandemic response until vaccines are in every single arm. To do so, they’ve tabled a budget that relies on a measured approach, bolstered by claims to focus specifically on the “lives and livelihoods” its title invokes.

Not only does the budget commit multi-billion-dollar spending to vaccine rollout, hospitals, testing, contact tracing, personal protective equipment, and long-term care, but it also makes a concerted effort to shore up funding for business supports, skills training, and parental supports.

These commitments will be crucial at a time when many Ontarians are experiencing cognitive dissonance between the good news they’re hearing and the less rosy facts on the ground. We have a way to go yet—and investments likes these will be the ones carrying us over the finish line.

The same goes for additional investments in long-term care and their ambitious commitments to provide 30,000 new long-term care beds over 10 years. True to his record, Bethlenfalvy wants to be seen not as delivering one-offs but rather making capital investments that will pay off in the long run.

To be sure, the spending taps are open (to the tune of $190.3 billion this past fiscal year) but they are flowing less freely or widely than those in Ottawa. It’s a difference in approach that Canadians will notice, and the Ford government is betting that Ontarians will appreciate the value of their method.

Don’t expect them to play on the contrast, however. Having watched Trudeau for the past few months, Premier Ford is keenly aware that Canadians have no appetite for divisive politicking until the pandemic has been managed and decisively put to bed by mass vaccination.

Instead, expect Ford to let his government’s approach speak for itself. And once the vast majority of Ontarians have been vaccinated in the fall, expect the Premier and his cabinet to launch a full recovery plan in the form of an election budget to carry them into the next campaign.

The good news is that until then, they have committed to doing and spending more than enough to keep Ontario afloat.

As for the deficit—Bethlenfalvy has conceded that it will be with us for a decade at least and he will certainly not be alone among governments, not only across the country but around the world, in that legacy.

That will be cause for fiscal hawks to gripe, but at the end of the day, the Tories can argue: who better than Ford and his team to chip away at that deficit?

All they will to need to do so, they can conveniently claim, is four more years.