Use budget to boost competitiveness and prepare economy for a downturn, Business Council tells Morneau

The Business Council of Canada is urging the federal finance minister to include measures in the upcoming budget to make Canada more competitive — and brace it for the next economic downturn.

In a letter to Bill Morneau this week, BCC President and CEO Goldy Hyder outlined the council's concerns about skills training, regulation, the energy sector, trade and Canada's fiscal sustainability.

"Canada's business leaders are concerned about Canada's economic future," Hyder said in the letter, which was sent to the minister Tuesday. "Budget 2019 is an important opportunity to introduce measures to help Canada reach its full potential while preparing for the next downturn."

The council said it was pleased with the tax measures in last fall's fiscal update, which addressed Canadian business competitiveness in the wake of the new corporate tax regime in the U.S. But the BCC's vice president of international and fiscal policy argues the upcoming federal budget needs to offer a long-term commitment to competitiveness.

Training to compete

"Making sure you have a competitive economy is like saying you want to be a world class athlete. You can't go to the gym once ... and then say, 'I'm fit'," said Brian Kingston in an interview with CBC News.

"If you're going to be competitive, it has to be not just a multi-year, but a multi-decade effort."

The budget is widely expected to focus largely on skills and training. Morneau has spoken often about the effects of automation and other new technologies on Canada's workforce, and the need for life-long learning and skills retraining.

The BCC's letter points to a work-integrated learning (WIL) program that was started by the council's Business/Higher Education Roundtable, a joint venture of businesses and higher education institutions. Kingston said the council is seeking federal funding for the WIL and other programs that give students real-life work experience while they study.

There is no specific dollar amount attached to that request, but Kingston said the BCC is looking to expand it from a pilot program to something much more comprehensive.

Regulation is another area the council wants to see addressed in the budget.

"Canada's regulatory system is broken," Hyder writes.

The council conducted a survey of 70 CEOs; more than two-thirds of them said that over the past three years they've had to cancel, scale back or postpone projects because of excessive or inefficient regulation.

"That's indicative that something is truly wrong with the regulatory environment in Canada," said Kingston. "If companies are actively not deciding to go ahead with a new investment and they're citing regulations as the number one reason, that's something we should all be very concerned about."

Kingston concedes there is no silver bullet to solve the problem, but the council would like to see the budget propose a regulatory modernization bill that would order annual reviews to purge unnecessary regulations.

The council also wants the budget to set a timeline for eliminating at least some interprovincial regulatory barriers.

Getting ready for the next downturn

While the Trudeau government has pushed back repeatedly against claims that it is breaking its 2015 election promise to balance the budget by 2019, the BCC is urging Ottawa to come up with a clear plan to bring the budget back to balance, even if it won't happen in the short term.

Morneau continues to argue that as long as the debt as a percentage of the economy (the debt-to-GDP ratio) is below a certain level and continues to decline, there is no rush to get to balance. He also likes to point out that Canada's economy is one of the fastest-growing in the G7, and enjoys record-low unemployment.

But Kingston said the council is worried about what will happen when the economy eventually sours.

"You can't control it, you don't know when it's going to hit. And you better have a reserve in place or you're in trouble," he said.

Increased Employment Insurance payments and lower tax revenues, combined with pressure to spend to stimulate a sagging economy, can sink a budget, he said. "Debt to GDP can balloon overnight."

BCC leaders expect to meet with Morneau sometime between now and the tabling of the budget, which is expected March 19.