Federal Budget 2016: What it means for Businesses & Hamilton

· by Huzaifa Saeed

The Federal government tabled their 2016 budget yesterday. The much-anticipated budget comes in the aftermath of an ambitious spending platform promised by the Liberal government. The Budget takes a remarkably different tone compared to a decade of fiscal restraint under the Conservatives, with the overall deficit set to hit over $100 Billion through ambitious spending programs targeting infrastructure, an innovation agenda, clean technology, aboriginal people as well as a focus on supporting lower and middle-class families.

The spending agenda, fueled by low borrowing costs hopes to provide a boost to the Canadian economy from its current trajectory of stagnating annual growth. The government’s new spending measures are expected to boost nominal GDP growth by 0.4 percentage points in 2016 and by another 0.3 percentage points in 2017.

The deficit is expected to peak in 2016–17 at $29.4 billion and then slowly decline over the remainder of the forecast, with the Liberals moving away from an earlier intent to balance the books in the current forecast period.

Budget Highlights:

  • Infrastructure: $120 billion over 10 years, focusing first on public transit, water, waste management and housing infrastructure. The government only announced Phase 1 of the Infrastructure Plan this year which includes $3.4 billion in public transit, $5 billion for water and green infrastructure projects and another $3.4 billion for social infrastructure (affordable housing, child care, cultural and recreational infrastructure). Public transit will be the largest portion of the infrastructure fund and in a major legislative shift, the Federal government is now willing to commit up to 50% of the cost of transit projects, compared to 1/3rd previously. The government also announced that Phase 2 of the infrastructure plan, which contains the “fast, efficient trade corridors that allow Canadian exporters to benefit fully from international trade” and measures to modernize the economy, will be announced in the next year. The latter was in our pre-budget submission and we will continue to advocate for its importance to Hamilton over the next year.
  • Environment: The largest emphasis was seen with over $1 billion in funding over the next four years to support clean technology in the forestry, fisheries, mining, energy and agriculture sectors. Budget 2016 also proposes $2 billion over two years to establish the Low Carbon Economy Fund, which will assist provinces and territories in reducing greenhouse gas emissions. Accelerated Capital Cost Allowance rates will be expanded for a variety of clean energy technologies, including electrical energy storage and electric vehicle charging.The government is also proposing $14.2 million to the Canadian Environmental Assessment Agency as well as $16.5 million to the National Energy Board and Natural Resources Canada to improve consultations and environmental assessment processes. Additionally, $345.3 million over five years is earmarked to Environment and Climate Change Canada, Health Canada and the National Research Council to take action on air pollution.
  • Small Business: The previous budget had legislated (and the platform had promised) that the Small Business Tax rate would fall by 0.5% per year from 11% to 9% in 2019. The rate will stay at 10.5%, and the government has deferred the decreases that were coming in future years. The government has also tightened the rules so that investment income is no longer eligible for the small business rate. As well, the budget announces new rules so that partnerships and corporate structures cannot be used to separate businesses into smaller entities that qualify for the lower rates (And will spend up to $444 Million, to track down and recover these taxes).
  • Post Secondary Infrastructure & Innovation: In the 2016 budget, there is $2.26 billion of funding announced, almost all of it destined to Canadian universities via the strategic infrastructure investment fund. This will allow McMaster and Mohawk to build on existing strengths and make new capital investments leading to research commercialization. The budget also announced a plan to create a national cluster map, highlighting and subsequently directing investments based on regional strengths. We are hopeful that such an exercise will play to Hamilton’s knowledge capital in Life Sciences, Advanced Manufacturing, and other industries. The government’s support for private sector innovation was modest, with additional support for incubators and an extra $50 million for the National Research Council’s Industrial Research Assistance Program. We are eager to see how the new investment will focus on commercialization and building clusters as per our Canadian Chamber Policy submission in 2014 & pre-budget submission. The budget also highlights a new initiative in 2016–17 to help high-impact firms scale up and further their global competitiveness,  with a starting set of 1,000 firms to receive priority financial and logistical support. We will work with stakeholders within Hamilton to ensure local businesses get a fair shot at consideration for the initiative.
  • Talent:  Additional funding will double the number of jobs to be created by the Canada Summer Jobs Program by investing $339 million over three years. This will see the creation of 35,000 new jobs per year under this program. Self-employed entrepreneurs and private businesses with fewer than 50 full-time employees are eligible to apply for this funding. Over $85 million will also be invested in supporting union led apprenticeship programs. Startup and small business entrepreneurs will have access to youth through a $73 million investment supporting new co-op and integrated learning opportunities for companies called the Post-Secondary Industry Partnership and Co-operative Placement Initiative.
  • Steel Manufacturing:  Hamilton’s steel producers and manufacturers will be particularly interested in the following quote (pg 128): “As part of Budget 2016, the Government is taking steps to improve its ability to effectively remedy dumped and subsidized imports, including through specific legislative amendments. Further, the Government will consult stakeholders to ensure that Canada’s trade remedy system offers Canadian businesses the ability to respond to changing global trade conditions.” Steel dumping, in particular, has been cited as a major cause for the downturn in the industry and will continue to be an advocacy priority for our Chamber.
  • Culture and arts: $1.9 billion over five years to support Canadian arts and culture organizations and cultural infrastructure, including $675 million over five years for the Canadian Broadcasting Corporation and its French arm Radio-Canada, and $550 million to the Canada Council for the Arts over five years. Read more

Further reading:

For more information or comment from the Hamilton Chamber of Commerce please contact: Huzaifa Saeed | Policy & Research Analyst | Hamilton Chamber of Commerce | t: 905-522-1151 ext: 230 | e: h.saeed@hamiltonchamber.ca