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The federal budget missed an opportunity to renew Canada’s federation
TREVOR TOMBE AND DANIEL BÉLAND
CONTRIBUTED TO THE GLOBE AND MAIL
PUBLISHED APRIL 8, 2022
Trevor Tombe is a professor of economics at the University of Calgary. Daniel Béland is director of the McGill Institute for the Study of Canada and the James McGill Professor at the Department of Political Science at McGill University. Both are members of the Intergovernmental Fiscal Relations Commission.
Canada is among the most decentralized countries on earth, and so our federation is necessarily at the heart of any effort to secure our future prosperity.
After all, our country is not run by a single government in Ottawa, nor by 13 provincial and territorial capitals. Instead, thousands of individual governments spanning multiple levels, including municipal and Indigenous ones – each with distinct responsibilities, authority, governance structures, financial resources and connections to Canadians – all play a role. Each must work together for the country to succeed.
For fiscal federalism in Canada, however, the 2022 federal budget released Thursday mattered less for what it contained than for what it did not.
While it was rich in new spending and taxation initiatives, the budget does very little to renew our federation and sustainably address important, long-run challenges. And, rather than work with provinces on shared priorities, the budget appears largely indifferent to provincial demands.
To be sure, the budget does touch on key issues relevant to our federation, such as housing and health care. Helping boost the supply of new homes and supporting first-time buyers may well be warranted. But without joint provincial and municipal action, it is likely to come up short.
The proposed expansion of dental insurance to lower-income children, seniors and persons living with a disability is another major federal initiative. While this will no doubt benefit many Canadians, and may indeed be a worthwhile initiative, the lack of a shared federal-provincial vision to renew our health care system will exacerbate intergovernmental tensions. Indeed, Quebec Premier François Legault has already said “there will be a confrontation” over initiatives such as dental care that he sees as intrusions into provincial jurisdiction.
We aren’t arguing for less federal action in critically important areas. Far from it. But action should be co-ordinated across all orders of government, and focused on the clear long-term challenges that Canada’s fiscal arrangements will face in the coming years and decades.
Some pressures are fundamental, resulting from external sources. These include climate change, an energy transition that will alter the global demand for fossil fuels, rising economic volatility and a rapidly aging population.
It was also particularly notable that the budget appeared uninterested in reforming health care funding arrangements. It did highlight that the Canada Health Transfer will grow to $56-billion by 2026/27. (That’s one-third higher than 2019/20 levels, and roughly $4-billion higher than it would have been that year had the COVID-19 pandemic not occurred.) But this is not owing to any policy choice by the federal government; rather, it was an automatic and built-in feature of the transfer program that was in place before the Liberals took office. This funding will also be needed to help sustain an exhausted system, not rebuild and reform it.
More needs to be done in this area, especially as Canada, like many countries, experiences rapid population aging. The share of the population over age 65 is projected by Statistics Canada to be nearly one-quarter by 2050, and potentially as high as one-third in Newfoundland and Labrador. The implications for health care costs and economic growth are significant. Yet, no major federal transfer program currently incorporates demographics.
The budget also ignores rising levels of provincial debt, which raises long-term financial sustainability concerns. Recent moves by the federal government – accelerated by the pandemic and continued in this budget – to increase involvement in areas traditionally under provincial jurisdiction that also require provincial contributions may be adding to the pressure.
Finally, other difficult challenges reflect entrenched political dynamics that ebb and flow throughout Canada’s history and warrant special attention. The increasingly challenging grievances raised by governments of oil- and gas-producing provinces – such as Alberta’s equalization referendum and other Fair Deal initiatives – demand attention, yet receive none.
Our future prosperity depends on properly addressing these challenges, and will necessarily involve federal, provincial, municipal and Indigenous governments. Who should do what (and who should pay for it) are central questions that we need to get right.
In this rapidly changing world, Canada cannot effectively function as a disjointed federation, and efforts to sustainably reform federal arrangements behind closed doors will not be successful in the end. That’s why we need an open and collaborative process to rethink our intergovernmental fiscal relations, and strengthen our federation for the future – a process that was missing from the 2022 budget.
CONTRIBUTED TO THE GLOBE AND MAIL
PUBLISHED APRIL 8, 2022
Trevor Tombe is a professor of economics at the University of Calgary. Daniel Béland is director of the McGill Institute for the Study of Canada and the James McGill Professor at the Department of Political Science at McGill University. Both are members of the Intergovernmental Fiscal Relations Commission.
Canada is among the most decentralized countries on earth, and so our federation is necessarily at the heart of any effort to secure our future prosperity.
After all, our country is not run by a single government in Ottawa, nor by 13 provincial and territorial capitals. Instead, thousands of individual governments spanning multiple levels, including municipal and Indigenous ones – each with distinct responsibilities, authority, governance structures, financial resources and connections to Canadians – all play a role. Each must work together for the country to succeed.
For fiscal federalism in Canada, however, the 2022 federal budget released Thursday mattered less for what it contained than for what it did not.
While it was rich in new spending and taxation initiatives, the budget does very little to renew our federation and sustainably address important, long-run challenges. And, rather than work with provinces on shared priorities, the budget appears largely indifferent to provincial demands.
To be sure, the budget does touch on key issues relevant to our federation, such as housing and health care. Helping boost the supply of new homes and supporting first-time buyers may well be warranted. But without joint provincial and municipal action, it is likely to come up short.
The proposed expansion of dental insurance to lower-income children, seniors and persons living with a disability is another major federal initiative. While this will no doubt benefit many Canadians, and may indeed be a worthwhile initiative, the lack of a shared federal-provincial vision to renew our health care system will exacerbate intergovernmental tensions. Indeed, Quebec Premier François Legault has already said “there will be a confrontation” over initiatives such as dental care that he sees as intrusions into provincial jurisdiction.
We aren’t arguing for less federal action in critically important areas. Far from it. But action should be co-ordinated across all orders of government, and focused on the clear long-term challenges that Canada’s fiscal arrangements will face in the coming years and decades.
Some pressures are fundamental, resulting from external sources. These include climate change, an energy transition that will alter the global demand for fossil fuels, rising economic volatility and a rapidly aging population.
It was also particularly notable that the budget appeared uninterested in reforming health care funding arrangements. It did highlight that the Canada Health Transfer will grow to $56-billion by 2026/27. (That’s one-third higher than 2019/20 levels, and roughly $4-billion higher than it would have been that year had the COVID-19 pandemic not occurred.) But this is not owing to any policy choice by the federal government; rather, it was an automatic and built-in feature of the transfer program that was in place before the Liberals took office. This funding will also be needed to help sustain an exhausted system, not rebuild and reform it.
More needs to be done in this area, especially as Canada, like many countries, experiences rapid population aging. The share of the population over age 65 is projected by Statistics Canada to be nearly one-quarter by 2050, and potentially as high as one-third in Newfoundland and Labrador. The implications for health care costs and economic growth are significant. Yet, no major federal transfer program currently incorporates demographics.
The budget also ignores rising levels of provincial debt, which raises long-term financial sustainability concerns. Recent moves by the federal government – accelerated by the pandemic and continued in this budget – to increase involvement in areas traditionally under provincial jurisdiction that also require provincial contributions may be adding to the pressure.
Finally, other difficult challenges reflect entrenched political dynamics that ebb and flow throughout Canada’s history and warrant special attention. The increasingly challenging grievances raised by governments of oil- and gas-producing provinces – such as Alberta’s equalization referendum and other Fair Deal initiatives – demand attention, yet receive none.
Our future prosperity depends on properly addressing these challenges, and will necessarily involve federal, provincial, municipal and Indigenous governments. Who should do what (and who should pay for it) are central questions that we need to get right.
In this rapidly changing world, Canada cannot effectively function as a disjointed federation, and efforts to sustainably reform federal arrangements behind closed doors will not be successful in the end. That’s why we need an open and collaborative process to rethink our intergovernmental fiscal relations, and strengthen our federation for the future – a process that was missing from the 2022 budget.
Canada West Foundation, with support from the Institute for Research on Public Policy, establishes the Intergovernmental Fiscal Relations Commission
Intergovernmental Fiscal Relations Commission
There is an urgent need to re-assess federal, provincial and municipal expenditure responsibilities, tax powers, and intergovernmental transfers in Canada to address looming fiscal imbalances.
To address these ongoing concerns, a steering committee made up of academics and policy researchers from across Canada has proposed an Intergovernmental Fiscal Relations Commission. An independent team of academic experts and policy practitioners from a variety of disciplines across the country will recommend practical reforms to the system of intergovernmental fiscal relations in Canada. Like a Royal Commission, it will take a coordinated deep dive into complex questions; unlike a Royal Commission it would be independent of government appointments or political priorities.
Once established, the Commission will publish research papers, policy briefs and op-eds and make recommendations for the reform of fiscal relations among the federal, provincial and municipal governments within the framework of the existing Canadian Constitution.
The Fiscal Relations Challenge in Brief
Fiscal relations challenges have been a long-standing concern of provincial leaders and at times federal governments. It is a complex and controversial subject that contributes to strained federal-provincial relations. Perceptions of fairness and concerns about sustainability of critical health and social programming are at issue. One on-going concern is that federal transfers are determined by the federal government independently of the provinces, despite their impact on provinces who deliver services within their jurisdiction.
The second challenge is that the current mix of expenditure responsibilities, tax powers and intergovernmental grants is unsustainable. Prior to the Covid-19 crisis, provincial governments were running deficits and increasing debt levels over the longer-term (Parliamentary Budget Officer). As we have seen with the current Covid-19 crisis, the federal government is in a much stronger fiscal position compared to provinces-territories and municipalities to deal with the costs of this response.
The third challenge is that Canada’s fiscal relations ignore the increasingly important role of municipalities. While municipalities are the jurisdiction of provinces under the Constitution, the growth of city states means the role of municipalities cannot be ignored any further.
The Steering Committee
Daniel Béland
Professor and Director
McGill Institute for the Study of Canada
Charles Breton
Executive Director
Centre of Excellence on the Canadian Federation
Institute for Research on Public Policy
Colleen Collins
Vice-President
Canada West Foundation
Bev Dahlby
Former Research Director at the School of Public Policy
University of Calgary
Steve Orsini
Distinguished Fellow
Munk School of Global Affairs and Public Policy
University of Toronto
Trevor Tombe
Associate Professor
Department of Economics
University of Calgary
There is an urgent need to re-assess federal, provincial and municipal expenditure responsibilities, tax powers, and intergovernmental transfers in Canada to address looming fiscal imbalances.
To address these ongoing concerns, a steering committee made up of academics and policy researchers from across Canada has proposed an Intergovernmental Fiscal Relations Commission. An independent team of academic experts and policy practitioners from a variety of disciplines across the country will recommend practical reforms to the system of intergovernmental fiscal relations in Canada. Like a Royal Commission, it will take a coordinated deep dive into complex questions; unlike a Royal Commission it would be independent of government appointments or political priorities.
Once established, the Commission will publish research papers, policy briefs and op-eds and make recommendations for the reform of fiscal relations among the federal, provincial and municipal governments within the framework of the existing Canadian Constitution.
The Fiscal Relations Challenge in Brief
Fiscal relations challenges have been a long-standing concern of provincial leaders and at times federal governments. It is a complex and controversial subject that contributes to strained federal-provincial relations. Perceptions of fairness and concerns about sustainability of critical health and social programming are at issue. One on-going concern is that federal transfers are determined by the federal government independently of the provinces, despite their impact on provinces who deliver services within their jurisdiction.
The second challenge is that the current mix of expenditure responsibilities, tax powers and intergovernmental grants is unsustainable. Prior to the Covid-19 crisis, provincial governments were running deficits and increasing debt levels over the longer-term (Parliamentary Budget Officer). As we have seen with the current Covid-19 crisis, the federal government is in a much stronger fiscal position compared to provinces-territories and municipalities to deal with the costs of this response.
The third challenge is that Canada’s fiscal relations ignore the increasingly important role of municipalities. While municipalities are the jurisdiction of provinces under the Constitution, the growth of city states means the role of municipalities cannot be ignored any further.
The Steering Committee
Daniel Béland
Professor and Director
McGill Institute for the Study of Canada
Charles Breton
Executive Director
Centre of Excellence on the Canadian Federation
Institute for Research on Public Policy
Colleen Collins
Vice-President
Canada West Foundation
Bev Dahlby
Former Research Director at the School of Public Policy
University of Calgary
Steve Orsini
Distinguished Fellow
Munk School of Global Affairs and Public Policy
University of Toronto
Trevor Tombe
Associate Professor
Department of Economics
University of Calgary
The HST in Ontario was introduced 10 years ago in the wake of a global financial crisis. What are the lessons? Read Policy Options, IRPP
Ontario introduced its HST in response to the 2008 financial crisis, despite marked opposition. It's already been a decade since Ontario introduced the HST in the wake of the financial crisis. Steve Orsini and Carol Layton had a front-row seat and see some important lessons for the post-pandemic recovery.
July 1, 2020 is the 10-year anniversary of Ontario’s Harmonized Sales Tax (HST), a key part of Ontario’s comprehensive tax reform package. The package included major changes to the province’s corporate and personal income taxes designed to enhance Ontario’s tax competitiveness and the progressivity of its tax system. A decade ago, replacing the 50-year-old Retail Sales Tax with a value-added tax was one of the biggest tax reform initiatives in Ontario’s history. It removed billions of dollars in hidden sales tax on business inputs including exports and, to level the playing field, substantially expanded the tax base to include a vast array of exempt services.
This base expansion generated considerable opposition as consumers were now subject to an 8 percent tax on a lot more of their purchases (the GST already applied). It was an all-of-government effort to implement, and involved strong collaboration with the federal government, the private sector, think tanks, and Indigenous partners.
Despite overwhelming opposition to the idea and the fact that it was considered to be political suicide, Ontario relentlessly pushed forward with the HST in response to the financial crisis of 2008. At the time, the International Monetary Fund concluded that 2008 experienced the most severe economic and financial meltdown since the Great Depression. The big auto companies in the US and Canada were on the verge of collapse. Canada was seeing a sizable deterioration of its economic performance and fiscal position. While this period does not even closely compare to the economic and fiscal situation we face today, the question remains – are the lessons learned 10 years ago relevant today?
In 2008, Dalton McGuinty, who was then Ontario premier, already needed to do something bold to improve Ontario’s competitiveness. Don Drummond and Derek Burleton of the TD Bank had written a seminal analysis calling for a provincial strategy to boost Ontario’s lagging productivity and competitiveness. Faced with even greater economic threats as a result of the recession, the premier asked this critical and timely question: if you could do one thing to boost competitiveness, what would you do? He got the same answer time after time – tax reform including corporate tax cuts and sales tax harmonization; and that is what he directed provincial officials to make happen.
The reform of Ontario’s tax system was introduced in the 2009 budget, aptly titled Confronting the Challenge, Building our Economic Future. It was a comprehensive tax plan implemented over an ambitious 15-month timeline. Ontario would move to a Harmonized Sales Tax, based on the federal GST value-added tax, to boost investment and productivity. (As it now stands, almost three decades after the introduction of the Goods and Services Tax (GST), all provinces from Ontario east have a value-added tax in place.)
To help through the adjustment period, and to provide ongoing tax cuts, the province provided $10.6 billion in tax relief for people over three years, which included a broad-based permanent income tax cut, enhanced low income tax credits, and direct payments through the Sales Tax Transition Benefit. The government also introduced $4.5 billion in business tax relief over three years, including specific measures to help grow and scale-up small businesses. The tax plan resulted in significant revenue loss for the federal and Ontario governments in order to boost the economy when it needed it most. It helped to pave the way for long-term economic growth.
The tax reform package dramatically cut in half Ontario’s marginal effective tax rate on new business investment, improving Ontario’s competitive position relative to other jurisdictions. It was viewed then as the single most significant action the government could take to strengthen the Ontario economy for the long term.
There is no denying that the financial and economic challenges a decade ago are modest compared to what the provinces, territories, municipalities, and the national government are facing today. It is hard to imagine any part of the economy that is not dramatically impacted. The pandemic has also revealed significant social and economic vulnerabilities, such as our fragile long-term care system, weak supply chains, and the disregard of those providing essential services. The combination of the pandemic and the abrupt fall in energy prices is having dramatic effects right across Canada.
On the other hand, governments and the private sector have shown great ingenuity in responding to the pandemic, such as by providing expanded public health services, temporary emergency relief, personal protective equipment, web-based tools to support business continuity, and logistics, distribution and delivery of essential services. Perhaps for some, the pandemic was the imperative to make changes long overdue.
What are the lessons from the post-2008 financial crisis that can be applied today? Three key observations are worthy of note drawn from the experience a decade ago when implementing the HST.
First, we are obligated to successive generations to leave them better placed to tackle the stunning list of challenges that they will face including climate change, income inequality, and growing government debt. Dramatically improving Canada’s competitiveness was the mindset in 2009, when Ontario made the difficult political decision to proceed with the HST notwithstanding tremendous opposition.
The long-avoided decision to move to the HST was a bold move a decade ago. What will be today’s bold moves to set the country on a path to recovery and address both the glaring gaps and the opportunities the pandemic has revealed? Besides strengthening public health and our long-term care system, government will need to address the pervasive nature of precarious employment, the persistent issue of regulatory burdens that can undermine productivity and the achievement of better outcomes, and the digital divide leaving large segments of society behind.
The second lesson is that large unforeseen events, such as today’s COVID pandemic and the 2008 financial crisis, are inevitable. However, there is no guarantee that all key actors will work together to find a path forward so that we come out of this situation better then when we went into it. The key is to continue to put aside inflexible partisanship and intergovernmental positioning in order to deal with the emergency and to develop an action plan that will better serve society now and in the future.
Like the tax reform in 2009, we will need strong conviction, durable partnerships, and rigorous analysis in order to make the right decisions to rebuild our economy. We need the federal government, provinces, municipalities and key stakeholders coming together to chart new fiscal arrangements for the future that will strengthen and enhance the effectiveness of our federation.
Third, history has shown that in the aftermath of a critical event, how society responds to the event can shape our future prosperity. Those that create more inclusive institutions that foster greater equity, entrepreneurship and innovation can produce better outcomes and greater social cohesion.
Like the recovery plan after the 2008 financial crisis, Canada will need a comprehensive approach to building a more productive and competitive economy – one that will capture new global markets, outpace burgeoning government debt and generate a more inclusive and sustainable society. To start, Canada will need a comprehensive, all-of-society approach to building a more innovative ecosystem – from knowledge workers to idea generation to commercialization to capturing more of the benefits in Canada. Given the size of the current challenge, we will need to redouble our efforts to ensure that we come out of this situation stronger and more resilient.
This article is part of the The Coronavirus Pandemic: Canada’s Response special feature. Published June 18, 2020
Photo: Fitness enthusiasts protest the HST at the provincial legislature in Toronto on May 19, 2010. THE CANADIAN PRESS/Maria Babbage
The COVID-19 pandemic has catapulted the digitization of society
Steve Orsini
One key difference between the 2008 and 2020 global economic crises, excluding the tragic loss of life from COVID-19, is the rapid digital adoption in 2020 that is transforming all facets of life. The COVID-19 pandemic has catapulted the digitization of society more than ever before.
While the digital economy was expanding before the pandemic, virtually everything has gone digital thereafter. Health care, education, the courts, shopping, the arts and social interactions all transformed overnight. As these changes continue to proliferate, society will need to create the supporting policies, institutions, infrastructure and oversight to support a digital economy. At the same time, it will also need to address the digital economy’s potentially adverse effects, where workers become more precarious, global tech giants become more dominant and the digital divide becomes more imbalanced.
Critical to Canada’s success will be an all-of-government approach to fostering an innovative ecosystem – idea creation, commercialization, diffusion and adoption, synergistic spinoffs, reinvesting downstream benefits at home – and providing the necessary support systems – advanced education, leading-edge R&D, universal broadband and 5G, supercomputing powered by AI and big data, data governance and privacy protocols, removal of regulatory barriers and rent-seeking protections, and a competitive taxation and fiscal regime for intellectual property. History shows that creating inclusive institutions promotes entrepreneurship and economic growth that can foster greater innovation and a more socially cohesive society.
Without an innovative ecosystem, Canada’s ability to compete internationally, shrink its growing debt and provide for a more caring and inclusive society will become much more difficult to achieve. Just like the major tax reforms that were needed after the 2008 recession to strengthen Canada’s competitiveness at a critical time, major reforms are urgently needed in the post-COVID-19 world for Canada to become a more innovative, inclusive and interconnected society.
One key difference between the 2008 and 2020 global economic crises, excluding the tragic loss of life from COVID-19, is the rapid digital adoption in 2020 that is transforming all facets of life. The COVID-19 pandemic has catapulted the digitization of society more than ever before.
While the digital economy was expanding before the pandemic, virtually everything has gone digital thereafter. Health care, education, the courts, shopping, the arts and social interactions all transformed overnight. As these changes continue to proliferate, society will need to create the supporting policies, institutions, infrastructure and oversight to support a digital economy. At the same time, it will also need to address the digital economy’s potentially adverse effects, where workers become more precarious, global tech giants become more dominant and the digital divide becomes more imbalanced.
Critical to Canada’s success will be an all-of-government approach to fostering an innovative ecosystem – idea creation, commercialization, diffusion and adoption, synergistic spinoffs, reinvesting downstream benefits at home – and providing the necessary support systems – advanced education, leading-edge R&D, universal broadband and 5G, supercomputing powered by AI and big data, data governance and privacy protocols, removal of regulatory barriers and rent-seeking protections, and a competitive taxation and fiscal regime for intellectual property. History shows that creating inclusive institutions promotes entrepreneurship and economic growth that can foster greater innovation and a more socially cohesive society.
Without an innovative ecosystem, Canada’s ability to compete internationally, shrink its growing debt and provide for a more caring and inclusive society will become much more difficult to achieve. Just like the major tax reforms that were needed after the 2008 recession to strengthen Canada’s competitiveness at a critical time, major reforms are urgently needed in the post-COVID-19 world for Canada to become a more innovative, inclusive and interconnected society.
COVID-19 Will Force a Change to Canada's Fiscal Arrangements - Policy Options
As the Prime Minister, premiers and mayors debate who will pay for the cost of the pandemic, a rethink of fiscal federalism will be needed. See Policy Options Article
Lessons from the pandemic reveal how to rebuild our economy (Published in Toronto Sun - April 22, 2020)
OPINION: Lessons from the pandemic reveal how to rebuild our economy (Longer Version of OpEd)
Rocco Rossi and Steve Orsini
Published: April 22, 2020
It seems like each day the world changes before our eyes with the COVID-19 pandemic unleashing unprecedented disruption. With an unclear end in sight, it is not easy to think about the future. However, to best thank all those who have sacrificed to fight this pandemic, we need to define the fundamentals for our economic recovery.
While we have yet to understand the scale of the downturn, it is clear this economic contraction is like no other. The policy response to the pandemic has been to utilize every tool in the toolbox to mitigate the damage to people, communities and the economy. Government supports have been largely operational and temporary. However, as we rebuild, short-term measures will need to be supplemented with foundational reforms.
There are various questions to consider in laying out a path forward. How do we gradually reopen the economy while protecting our most vulnerable and preventing a resurgence? What are the building blocks for restoring individual livelihoods, industries and future economic growth? How do we rebuild the economy after unprecedented and unrestrained borrowing that will exacerbate fiscal pressures in the future? How do we ensure Canada returns to a position of prosperity while combating climate change? To begin to answer these questions, we believe there are six fundamental principles we need to consider as we tackle this extraordinary challenge together.
First, we need to think about those workers who have been impacted by the pandemic and who have risen to support us all. If it had not already become clear from our heroic health-care and essential services workers to entrepreneurs turning their companies into PPE machines that our skilled workers are central to our economy, it will be unarguable in the post-pandemic world. Centring human resources in our economic recovery will require developing greater workforce resiliency and the ability to provide uninterrupted education, reskilling and lifelong learning to everyone.
Second, greater importance must be placed on maintaining and strengthening our public health and social safety nets. We need to invest in our support systems, not just to deal with pandemics, but also to promote social cohesion where everyone benefits from economic prosperity.
Third, the contribution of small and medium-sized (SME) businesses to future economic growth is essential. Despite government efforts to provide relief to SMEs, it is becoming more apparent that this will not be enough. Sadly, we are losing countless small businesses and our economic landscape will be very different in the “new normal.” Any economic recovery plan must focus on rebuilding and supporting the growth of small businesses, while building greater resilience.
Fourth, we need to expand and diversify our trade relations. While Canada has entered into important trade agreements, we have not fully capitalized on them. As countries begin to reopen their economies, we will need to overcome pre-crisis restrictive trade practices both domestically and internationally.
Fifth, broadband is the new transit. This crisis has exacerbated the divide between Canadians that have access to high speed internet and those who do not. Governments must enhance our telecommunication systems to ensure telecommuting, online education and big data are available to all.
Sixth, we need to rethink our regulatory and tax systems. Our regulatory structure is still too cumbersome and the architecture of our tax system was established before the internet. Recent tax changes in the US is undermining Canada’s competitiveness in intellectual property. We need to refocus our regulatory and tax systems to foster innovation and productivity while removing barriers to growth, particularly for SMEs.
A new approach to human resources, support systems, SMEs, trade, broadband access, and regulatory and tax reform is the foundation of successful economic recovery for Canada. But first we need leadership and vision to bring these fundamentals together into a strategic recover plan.
This country cannot afford to take an ad hoc, incremental approach to economic growth. It will be difficult — make no mistake — but the right recovery plan has the potential to make us more resilient than we were pre-pandemic.
— Rocco Rossi is President and CEO of the Ontario Chamber of Commerce and Steve Orsini is a Munk School Distinguished Fellow, CD Howe Senior Fellow and former Ontario Secretary of Cabinet
Rocco Rossi and Steve Orsini
Published: April 22, 2020
It seems like each day the world changes before our eyes with the COVID-19 pandemic unleashing unprecedented disruption. With an unclear end in sight, it is not easy to think about the future. However, to best thank all those who have sacrificed to fight this pandemic, we need to define the fundamentals for our economic recovery.
While we have yet to understand the scale of the downturn, it is clear this economic contraction is like no other. The policy response to the pandemic has been to utilize every tool in the toolbox to mitigate the damage to people, communities and the economy. Government supports have been largely operational and temporary. However, as we rebuild, short-term measures will need to be supplemented with foundational reforms.
There are various questions to consider in laying out a path forward. How do we gradually reopen the economy while protecting our most vulnerable and preventing a resurgence? What are the building blocks for restoring individual livelihoods, industries and future economic growth? How do we rebuild the economy after unprecedented and unrestrained borrowing that will exacerbate fiscal pressures in the future? How do we ensure Canada returns to a position of prosperity while combating climate change? To begin to answer these questions, we believe there are six fundamental principles we need to consider as we tackle this extraordinary challenge together.
First, we need to think about those workers who have been impacted by the pandemic and who have risen to support us all. If it had not already become clear from our heroic health-care and essential services workers to entrepreneurs turning their companies into PPE machines that our skilled workers are central to our economy, it will be unarguable in the post-pandemic world. Centring human resources in our economic recovery will require developing greater workforce resiliency and the ability to provide uninterrupted education, reskilling and lifelong learning to everyone.
Second, greater importance must be placed on maintaining and strengthening our public health and social safety nets. We need to invest in our support systems, not just to deal with pandemics, but also to promote social cohesion where everyone benefits from economic prosperity.
Third, the contribution of small and medium-sized (SME) businesses to future economic growth is essential. Despite government efforts to provide relief to SMEs, it is becoming more apparent that this will not be enough. Sadly, we are losing countless small businesses and our economic landscape will be very different in the “new normal.” Any economic recovery plan must focus on rebuilding and supporting the growth of small businesses, while building greater resilience.
Fourth, we need to expand and diversify our trade relations. While Canada has entered into important trade agreements, we have not fully capitalized on them. As countries begin to reopen their economies, we will need to overcome pre-crisis restrictive trade practices both domestically and internationally.
Fifth, broadband is the new transit. This crisis has exacerbated the divide between Canadians that have access to high speed internet and those who do not. Governments must enhance our telecommunication systems to ensure telecommuting, online education and big data are available to all.
Sixth, we need to rethink our regulatory and tax systems. Our regulatory structure is still too cumbersome and the architecture of our tax system was established before the internet. Recent tax changes in the US is undermining Canada’s competitiveness in intellectual property. We need to refocus our regulatory and tax systems to foster innovation and productivity while removing barriers to growth, particularly for SMEs.
A new approach to human resources, support systems, SMEs, trade, broadband access, and regulatory and tax reform is the foundation of successful economic recovery for Canada. But first we need leadership and vision to bring these fundamentals together into a strategic recover plan.
This country cannot afford to take an ad hoc, incremental approach to economic growth. It will be difficult — make no mistake — but the right recovery plan has the potential to make us more resilient than we were pre-pandemic.
— Rocco Rossi is President and CEO of the Ontario Chamber of Commerce and Steve Orsini is a Munk School Distinguished Fellow, CD Howe Senior Fellow and former Ontario Secretary of Cabinet
Need for Global Leadership and Collaboration
The world faces significant challenges that cannot be solved by nations acting alone. Here is a presentation that I made to public policy schools on the need for global leadership and collaboration. The Covid-19 pandemic only underscores the need for international collaboration. We urgently need global leadership and Canada can continue to play a leadership role. As Barack Obama once said, "We Need More Canada!"
McGill's Max Bell Briefing on "How Can Globalisation be Governed?" In this webinar, Peter Nicholson looks how at globalization plays out with problems like COVID-19 and climate change. Many of the issues flagged in my presentation are clearly highlighted in this webinar.
Digital Government
I recently got an email for an OPS employee that reminded me of the incredible efforts the OPS has been making to digitize government. I know there are passionate public servants building the OPS for the future.
Kicking the Can Down The Road: Urgent Need for Global Thought Leadership
During the 2008-09 global financial crisis, countries, including Canada, were able to take decisive action to stabilize the global economy. Canada also took some bold and unpopular steps such as sales tax harmonization. With the threat of AI replacing jobs, global warming and income inequality, the world needs to come together to tackle these issues head on. Here is the presentation I gave to a well-informed group of tax professionals on the need for global thought leadership.
Supporting Jobs and the Environment by Growing and Greening Canada's Energy Production
The new LNG plant being built in BC (LNG Canada) will, according to the recent federal Expert Panel on Sustainable Finance, produce some of the cleanest natural gas in the world. Exporting natural gas to Asia would have a net positive impact on Climate Change as one natural gas plant could replace 40 coal-fired plants, reducing up to 90 million tonnes of carbon dioxide (CO2) per year, which represents more than 10% of Canada’s total GHG emissions. Estimates show that the world will consume more fossil fuels over the next decade whether Canada supplies this energy or not. Canada needs to play a leadership role by exporting more of its natural gas and by investing a lot more in cleaning our oil sands production to eventually become net-zero in GHG emissions. We can grow the economy and support the environment at the same time. See my presentation to the Munk School of Global Affairs and Public Policy.
Fostering Greater Competitiveness and Innovation Through Regulatory Modernization
Some of my thoughts on how Canada can foster a more competitive and innovative economy through regulatory modernization.
Fostering More Efficient Government Services Through a Digital Self Sovereign Identity
See how the British Columbia government is leading the charge with "OrgBook," which uses leading-edge blockchain based technology to provide the public with open, trusted, verified business information.
Transformational and Renewal Initiatives as Secretary of the Cabinet
Putting Public Servants in the Driver’s Seat
The Canadian Government Executive Magazine provides a concise overview of transforming the OPS in its December 2017 issue - "Changing our culture from the ground up to transform the Ontario Public Service for the future."
Toronto Global's Amazon Bid
While Toronto was not selected as Amazon's HQ2, we achieved much more than expected by working together. The submission was actively supported by all three levels of government—Canada, Ontario, and the Toronto Region’s municipalities. Toronto Global played a crucial role in pulling the bid together and I had the pleasure to support Ontario's efforts with many talented people in the Ontario Public Service.
OPS of the Future Action Plan
The work of the Ontario Public Service (OPS) has become increasingly complex. External social, economic, financial, and demographic factors are accelerating the urgency for organizations to transform. In order to respond effectively, we must continue to transform the way we work so that the OPS is better positioned to embrace and adapt to change. I believe the 2018 action plan will help drive change to find new and better ways to deliver on our vision and mission as we create the OPS of the future.
Promoting Diversity and Inclusion in the OPS
In 2017, I launched the OPS Inclusion & Diversity Blueprint – a roadmap to creating a workplace that harnesses the richness and strength of our diversity. This Blueprint, which reflects broad-based employee input, sets out a path to enhance our diversity by implementing bold new approaches to creating our workforce for the future. Together we can create an Ontario Public Service where we all feel valued and proud to belong.
