OTTAWA — The Trudeau government’s influential team of economic advisers is pursuing solutions to an issue that has preoccupied policy-makers for years: how to open the spigot on business investment.
Dominic Barton, chair of Finance Minister Bill Morneau’s growth council, told The Canadian Press that the group’s next report, due this fall, will outline ways to encourage more business investment with the aim of reversing several years of decline.
“We’re still in the diagnostics (phase) to try and understand more what’s happening,” said Barton.
“Are there levers that we can pull to try and encourage more investment?”
Since its creation last year, the group has produced eight reports containing recommendations that have played a key role in the development of government policy.
The council, Barton added, is also working to build upon past recommendations on how to ensure Canadians are ready for the rapidly transforming needs of the country’s labour market.
Earlier this year, the group suggested Ottawa establish an arm’s-length national agency to help workers upgrade their skills. It warned that nearly half of Canada’s jobs are at high risk of being affected by future technological change, such as automation.
Barton, the global managing partner of consulting giant McKinsey & Co., said this time the advisers will focus on a plan to help higher-skilled workers who, like lower-skilled workers, face the possibility of losing their jobs.
“We’re worried about the skilled workers that will lose their jobs,” said Barton, who hopes eventual solutions will be driven by the private sector.
“So, how do we make sure there’s a system in place to help?”
However, he was reluctant to share some of the council’s possible recommendations for job skills or for business investment, since it’s still early in the process.
On business investment, Barton said the group will also weigh the potential impacts on Canada from the Trump administration’s plans for trade and corporate taxation.
The group has already had a 90-minute session on the subject with Larry Summers, a one-time U.S. treasury secretary and former president of Harvard University.
He said the council hopes to build on existing research, including work conducted by the Conference Board of Canada, the C.D. Howe Institute and tax-policy expert Jack Mintz.
In an interview Tuesday, Mintz said Canada should consider changes in two areas if it hopes to promote more business investment: regulation and taxes.
Canadian firms, he said, face significant regulatory delays in obtaining permits and exporting goods across the U.S. border.
On taxation, Mintz said Canada has enjoyed a big corporate-tax advantage over the U.S. in recent years and, because of this, many businesses have shifted their corporate profits north of the border.
That edge would be threatened if the U.S. government follows through on any of the substantial tax-cut plans being discussed in Washington, he added.
“Who knows what will happen with tax reform in the U.S., but if it goes ahead, it could wipe out our business tax advantage,” Mintz said.
A discussion paper released in March by C.D. Howe said business investment in Canada was relatively strong between 2009 and 2014, which was marked by an oil-price shock.
But since then, the think tank found there’s been a large decline in corporate spending across the country — from $15,100 per worker on new business investment in 2014 to a projected $11,700 per worker this year.
“Capital investments by Canadian businesses have fallen sharply and 2017 looks especially bleak,” said the paper, which recommended policy measures to promote business investment: liberalized trade, less-intrusive regulations, cheaper electricity and lower taxes.
Last month, the Bank of Canada’s business outlook survey detected early signs of a “modest” pickup in corporate investment over the near term, even amid considerable uncertainty surrounding the U.S. economic agenda.