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March 2017

OCC RAPID POLICY UPDATE - 2017 FEDERAL BUDGET ANALYSIS



2017 Federal Budget

 
 

OCC RAPID POLICY UPDATE

2017 Federal Budget Analysis

Today, the Government of Canada tabled its 2017 Budget. What follows is a summary of the key highlights from Ontario’s business perspective.

 

SKILLS

  • Budget 2017 increases federal funding through the Labour Market Transfer Agreements by $2.7 billion over six years.
  • The Government also intends to establish a body that will collaborate with employers and other stakeholders across the country to identify skills gaps.
  • The Budget provides for more grants for adults who wish to return to school, more work-integrated learning placements for students and resources that increase flexibility for those individuals on Employment Insurance who also wish to pursue job training.

OCC Analysis

The spotlight placed on skills in Budget 2017 is an important acknowledgment from the federal government of one of the top concerns to the business community: finding the right people with the right skills. The critical importance of this issue to our members is why Skills & Workforce Development is one of the OCC’s key priorities for 2017. While the commitment to skills training in the budget is welcome, we urge the federal government to do more to tackle this issue through all appropriate tools and policy levers - including immigration, as discussed in Passport to Prosperity: Ontario’s Priorities for Immigration Reform

 

INNOVATION & BUSINESS GROWTH

  • The Government intends to invest up to $950 million over five years in business-led “superclusters” that are driving innovation and have the potential to accelerate economic growth.
  • Budget 2017 also makes allowance for an additional $400 million in funding through the Business Development Bank of Canada over three years.
  • A new Venture Capital Catalyst Initiative, dedicated to increasing late stage venture capital, is also part of a plan to grow innovative start-ups.
  • Investments in Budget 2017 will support Canada’s earlier pledge to double its investments in clean energy research
  • The Budget overall is focused on key growth industries such as clean technology, agri-food and digital.

OCC Analysis

The OCC has placed an emphasis on clusters as a key feature of innovative, high-growth sectors, most recently in Adopting Our Advantage: Supporting a Thriving Health Sector in Ontario. In that report, we also called for improved venture capital funding, particularly to help innovative businesses surpass the commercialization valley of death, and then successfully scale.

Specifically, in our Federal Pre-Budget Submission, we called on the government to renew the Venture Capital Action Plan or to consider encouraging or incentivizing investment in this sector through a dedicated VCAP fund. The Venture Capital Catalyst Initiative is an important effort to address the need for this kind of funding among innovative Canadian entrepreneurs.

The recognition of agri-food as an innovative, key growth industry is welcome, as the OCC highlighted the importance of this sector in our recent report, Fertile Ground: Growing the Competitiveness of Ontario’s Agri-Food Sector.

 

INFRASTRUCTURE

  • Budget 2017 formalizes the creation of the Canada Infrastructure Bank which will be responsible for investing at least $35 billion over 11 years, using loans, loan guarantees and equity investment through public and private sector capital.
  • Through Canada’s Trade and Transportation Corridors Initiative government intends to invest $10.1 billion over 11 years to modernize Canada’s transportation system.
  • To advance Canada’s efforts to build a clean economy, the Government will invest $21.9 billion in green infrastructure, including initiatives that will support the implementation of the Pan-Canadian Framework on Clean Growth and Climate Change.
  • The federal government will invest more than $11.2 billion in a National Housing Strategy, which focuses on a range of initiatives designed to build, renew and repair Canada’s affordable housing stock. This also includes a 225 million dollar investment to improve social housing conditions for Indigenous Peoples not living on-reserve.

 

OCC Analysis

While we recognize the critical importance of investments in social infrastructure, Canada’s export economy relies upon its roads, ports, waterways, railways, airports and pipelines to move Canadian products and services to the markets of its trading partners.

As highlighted in the Ontario Economic Report, both the price and availability of appropriate shelter impacts the ability of Ontario business to attract global talent, reducing our competitiveness. Therefore, an investment in social infrastructure is essential to the business community. However, the OCC is concerned that not enough of the dedicated federal infrastructure spending will go towards the trade-enabling infrastructure that improves productivity and promotes economic growth.

In our Federal Pre-budget Submission, the OCC asked that the Government of Canada demonstrate a greater commitment to investment in trade-enabling infrastructure.The establishment of a Canada Infrastructure Bank is therefore a positive development, as alternative financing and funding of infrastructure is an important component of this commitment. Throughout 2017, the OCC will be actively engaged on this file through our Environment & Infrastructure policy program.

Previously, the OCC has called on the federal government to allocate infrastructure funds on a per capita basis, potentially increasing the amount of federal infrastructure funds Ontario receives by $1 billion every year. Like many of our concerns regarding the fiscal gap, this was unaddressed in the 2017 Budget.

 

Other notable announcements:

  • The federal government has formally reached new health funding agreements with the provinces and territories: $11 billion over 10 years, with dedicated funding for increasing home care and mental health resources. Budget 2017 provides for hundreds of millions of dollars in new funding.
  • The Budget provides funding for the launch of a new Development Finance Institution that will promote economic growth, create jobs, advance women’s economic empowerment and reduce poverty in areas where alternative financing is scarce.
  • Budget 2017 also includes further investment in the Aboriginal Skills and Employment Training Strategy program, as well as funding for improved health care services, infrastructure investment (including housing), and increasing the capacity for self-government.
 

Questions or comments?
Contact Karl Baldauf, Vice President of Policy & Government Relations.

Read the Full 2017 Federal Budget

 

Read the OCC's media release

 
 
 
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Ontario's Cap and Trade Program

 

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Government Announces New Energy Strategy: Ontario's Fair Hydro Plan

 
 
 

Government Announces New Energy

Strategy: Ontario's Fair Hydro Plan

 
 

The Government of Ontario responded to the Ontario Chamber of Commerce's (OCC) call to support the growth of the provincial economy through the reduction of electricity rates. The Fair Hydro Plan will seek to mitigate the rising cost of electricity in Ontario. Expected to take effect in summer 2017, the Plan will provide an approximate savings of 17% (25% when including the previously announced 8% HST rebate) to consumer's hydro bills. Ontario's Fair Hydro Plan will also link future rate increases to the rate of inflation over the next four years and provide further rate relief to the province's most vulnerable citizens.

 

Key Details of the Announcement


1. Refinancing the Global Adjustment (GA)
The proposed plan will refinance the costs associated with the Global Adjustment (GA), providing immediate relief to consumers by “smoothing out” the payment of energy contracts over a longer time period. The Ontario government predicts that this refinancing will achieve an average of 17% savings for the individual ratepayer (25% when including the previously announced 8% HST rebate). The government intends to introduce legislation that would, if passed enable the Independent Electricity Operator (IESO) and Ontario Power Generation (OPG) to refinance the GA over a longer period of time, ultimately lowering the current cost paid by consumers. Under current forecasts, the immediate reduction in the GA would be approximately $2.5 billion per year on average over the first 10 years, with annual interest costs not exceeding $1.4 billion.


2. Helping Vulnerable Consumers
The Fair Hydro Plan includes initiatives to help Ontario’s most vulnerable consumers. The province plans to pass legislation to enable these new measures. Together these new initiatives will cost the government up to $2.5 billion over the next three years to be funded through provincial revenue. These initiatives include:


Broadening Rural or Remote Electricity Rate Protection (RRRP)
Currently, the RRRP provides a rate subsidy to rural/remote customers who are faced with higher distribution costs compared to urban areas. The new program will increase the number of qualifying customers from approximately 350,000 customers to 800,000 customers.

Enhancing the Ontario Electricity Support Program (OESP)
The proposed OESP enhancement would see monthly credits increased by 50%, expanded to cover more low-income Ontarians and increase uptake to as close 100%.


First Nations On-Reserve Delivery Credit
The on-reserve credit will remove the monthly service charge for customers saving approximately 21,500 on-reserve First Nations a monthly amount of $85.

Establishing a New Affordability Fund
The proposed affordability fund will provide Local Distribution Companies (LDC’s) an additional tool to help customers in need. The province will work with Hydro One, in consultation with other LDC’s to establish a Trust to serve as the administrator of the Affordability Fund.

3. Enhancing Competitiveness for Small Manufacturers and Industrials
Due to our ongoing advocacy work, the OCC is pleased to see that the Fair Hydro plan will expand the Industrial Conservation Initiative (ICI) extending eligibility to small manufactures and industrials with an average peak demand of over 500 kilowatts.

Our Position

The OCC has repeatedly heard from Ontario's business community that energy rates are unsustainable. In fact, 51% of businesses ranked energy concerns among their top three policy priorities.

Once implemented, Ontario's Fair Hydro Plan will bring immediate relief to the business community by “smoothing” the GA rate over a longer time period and tying rate increases to inflation over the next four years. While this will alleviate challenges associated with the cost of electricity in the near-term, the Ontario Chamber Network advocates for further amendments to the province's energy strategy in order to ensure the long-term sustainability of our energy system.


Later this year, the OCC will release a report that will provide recommendations to further enhance the long-term sustainability of the energy sector

What’s Next?

As part of the Fair Hydro Plan, the OCC will partner with the Ministry of Energy to deliver a targeted outreach campaign to help business better understand and participate in provincial programs such as the ICI.
In spring 2017, the government is expected to release its Long-term Energy Plan. The OCC will continue to advocate for the reduction of input costs on businesses and looks forward to working with the government to deliver on its energy priorities. In addition, we encourage the government to continue to find ways to update provincial legislation in a way that supports Ontario's economic growth.

 

 
 

 

 

 

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