The federal budget appears to spray a lot of fiscal “water” but misses many of the most important “fires” that will help Canada get back on a long-term path to prosperity and competitiveness, says the Business Council of Alberta.
“Budget 2021 provides some key investments that will position Canada for the future, including a robust national childcare and early education program, and improvements to the innovation agenda — two key things we were looking for,” said council president Adam Legge.
However, overall, the Business Council of Alberta is disappointed in this budget.
“It has a significant price tag but comes up woefully short on the ambition and approach necessary for Canada to become an economic and climate leader coming out of the COVID pandemic.”
The council said there was very little in the budget regarding fiscal anchors or even “fiscal guardrails” to contain future spending growth.
“All told, the budget projects a deficit of $154.7 billion in 2021-22, falling to $30.7 billion by 2025-26. At that point, the deficit would be equivalent to 1.1 per cent of GDP. Outside of the pandemic and financial crisis, this would still be the largest federal deficit since the mid-1990s,” said the council’s budget analysis.
“More concerning still, by 2024-25, Canada’s debt servicing costs will exceed its projected deficit. In other words, the government will need to borrow money just to pay the interest on its existing debt.”
The council said the budget came up short in investment and the approach necessary to achieve Canada’s climate and environment objectives, including meaningfully investing in emissions reduction potential in Canada’s resource industries, which is a significant impact for Alberta.
“The budget under invests in key areas that could drive emissions down and competitiveness up right now, such as carbon capture. It is nearly silent on Canada’s energy sector. It misses an opportunity for Canada to be an agri-food global leader,” Legge said.
The council said investment in carbon capture, utilization and storage, one of the most promising technologies that directly stops carbon from being emitted into the atmosphere, is at about only one-tenth of the level necessary. Key opportunities for existing industries to reduce emissions are excluded, and there is intentional disregard for blue hydrogen, a zero emissions fuel where the carbon from production is sequestered.
But the council did welcome investments of $30 billion over five years in childcare and $8.3 billion for early learning.
“These measures are a meaningful step forward to support working parents, improve equitable workforce participation, and boost overall economic stability and growth. Over the short term, this will reduce fees by 50 per cent in 2022 and reduce fees to $10/day by 2025. We will be looking forward to further details on this plan,” the council said.
Significant positive investments were also made in regards to the Strategic Innovation Fund, supporting innovation especially in green tech, expanding IRAP funding, reintroducing the Venture Capital Catalyst Initiative, and a Pan Canadian AI Strategy.
The council said Canada needs to address the productivity challenge which stems from the country’s poor track record in commercializing.
“We were looking for bold investments in programs and independent institutions that can help businesses test, pilot, and commercialize innovative ideas,” the council said.