Special Report

Breaking down new Conservative leader Erin O’Toole’s innovation platform

Conservative Party of Canada leadership candidate Erin O'Toole speaks during the English debate in Toronto on Thursday, June 18, 2020. The Canadian Press/ Tijana Martin
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Ontario MP Erin O’Toole became leader of the federal Conservative Party in the early hours of Monday, beating former longtime cabinet minister Peter MacKay and Toronto lawyer Leslyn Lewis.

While successful leadership candidates’ proposals don’t always transfer to a party’s election platform or governing agenda, O’Toole presented Tory members with a host of ideas on Canada’s innovation economy. The new head of the official opposition proposed targeted incentives for sectors like telecommunications and cleantech, as well as big-picture reforms similar to those of his party’s 2019 federal election platform. Here’s what you need to know.

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Talking Point

During the just-concluded Conservative leadership campaign, winner Erin O’Toole proposed new incentives for sectors like cleantech and telecommunications, as well as big-picture reforms of the federal taxation and business support systems. While candidates’ policy promises aren’t always reflected in parties’ election platforms or how they govern once in power, O’Toole’s campaign brought forward several innovation-economy ideas. 

A former RCAF navigator first elected in 2012, O’Toole has worked in the corporate world. He was in-house counsel for consumer packaged goods giant Procter & Gamble, then a lawyer at the now-defunct firm Heenan Blakie, where he represented Facebook in federal government relations.

“Erin O’Toole looks forward to presenting his policy positions to Canadians,” said Chelsea Tucker, a campaign spokesperson, when The Logic asked whether he is still committed to the innovation economy proposals in his platform. “Some of the policies are quite clear, for example, Huawei will not be involved in 5G in Canada if Erin O’Toole is Prime Minister.” 

That’s more certainty than the Liberal government has offered thus far. Public Safety Canada and the country’s intelligence agencies have been reviewing foreign equipment manufacturers’ role in upcoming wireless networks since at least September 2018; in May, Prime Minister Justin Trudeau said his government was still considering the file. Canada’s Five Eyes intelligence sharing partners the U.S., U.K. and Australia have all imposed some form of Huawei ban, and President Donald Trump’s administration has since expanded its campaign against Chinese technology firms to appmakers. 

O’Toole’s platform includes a tax credit for “broadband providers on the cost of replacing Huawei components in their 5G wireless infrastructure,” which it says will accelerate the buildout of internet services. No major Canadian telcos have yet announced that they’re proceeding with the Chinese firm’s equipment in their new networks. Rogers is using Ericsson, while Bell and Telus are buying from both the Swedish firm and Finnish competitor Nokia. But the last two, which share infrastructure, have Huawei tech in their older networks, and removing it would reportedly cost $1 billion or more. The equipment maker also has 4G partnerships with SaskTel as well as Iristel and subsidiary Ice Wireless, which primarily operate in the North. 

It’s not clear how O’Toole’s incentive would encourage broadband expansion, rather than simply cover the cost of replacing existing hardware. He also promises to “connect all of rural Quebec to high-speed internet.” Internet access, particularly in rural and remote areas, is a longstanding priority for federal and provincial governments of all parties. The Liberal government’s 2018 fall economic statement included faster write-down periods for capital expenses on telecommunications equipment. Their March 2019 budget also established a $1.7 billion broadband fund, for which Ottawa will shortly begin accepting applications.

O’Toole pledged a “thorough review of the tax code” and a repeal of Liberal government changes that limited small businesses’ use of their special lower rate. During last year’s election, the Tories promised a similar evaluation of the tax system, for which lobby groups including the Business Council of Canada and the Canadian Chamber of Commerce have long called.      

The new Conservative boss also promised to end “corporate welfare” and instead “reduce taxes for all businesses,” citing funding to Loblaws and MasterCard. While he didn’t identify specific programs he’d eliminate, the financial services company’s $49 million award came from the Liberal government’s flagship Strategic Innovation Fund (SIF). The Conservatives’ September 2019 proposal to cut $1.5 billion in “handouts” also named several projects that received money from the $3.5 billion SIF.

Also like the Tory election platform, O’Toole’s climate change plan involves eliminating the carbon tax and emphasizes cleantech innovation. It promises to increase R&D funding and tax incentives such as quicker write-off periods for carbon capture and storage as well as the “commercialization of GHG reduction technologies.” It also proposes to encourage the export of small modular reactors, nuclear plants much smaller than the ones typically built that can operate in remote areas, and which several provinces are pursuing. 

The Liberal government has also funded projects to remove CO2 from the air—in June 2019, SIF awarded $25 million to Carbon Engineering, a B.C.-based startup backed by Bill Gates and Canadian energy magnate Murray Edwards. In December 2019, Trudeau instructed then-finance minister Bill Morneau to cut the tax rate for “companies that develop and manufacture zero-emissions technology” in half during this mandate.

O’Toole promises to ensure “Canadians get a better deal for their data” and to implement open banking, although his leadership platform doesn’t provide any detailed policy proposals. The Liberal government has been working on both files for the last two years, and innovation economy executives have expressed concern about the slow pace of developments. But O’Toole’s platform does not t include a digital service tax, which every party proposed in the fall. The Liberals have yet to introduce its three per cent levy, as the OECD continues to negotiate a new global system for multinational companies, including tech giants. 

While the new Conservative leader said he’ll lift the federal sales tax for subscriptions to Canadian digital platforms—the absence of the levy on international platforms is a longstanding concern for domestic competitors—he won’t bring video streaming services under the remit of the Canadian Radio-television and Telecommunications Commission. “Regulation of services like Netflix is unnecessary,” the platform stated, citing market competition. In January, the Liberal government-appointed panel reviewing the country’s broadcasting and telecommunications laws recommended Canadian content spending requirements for all streaming services and TV channels.

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O’Toole also promises to give provincial governments more power to “address skills shortages and attract immigrants to areas of the country with static or declining populations.” Nearly half the new economic-class permanent residents admitted to Canada in 2018 under the economic immigration system came through existing provincial programs.  The system was largely established by the last Conservative government, although the Liberals have added a fast-track work permit program for highly-skilled, in-demand talent and plan to launch a municipal nomination pilot scheme.  

The Conservative leader’s other proposals include reducing EI premiums for small firms that bring on new hires; allowing entrepreneurs to take up to $50,000 out of their retirement savings to start or buy a business; and unspecified vocational training incentives.