OTTAWA — Finance Minister Chrystia Freeland has promised this year’s budget will lay out the Liberal government’s “master plan for the Canadian economy going forward.” Having spent huge sums to combat COVID-19 and its impacts on firms and workers, Ottawa is weighing billions of dollars worth of demands for immediate relief from sectors still struck by the pandemic against calls for tax cuts and spending measures to boost productivity and business investment long-term.
Ahead of the budget each year, the House of Commons Standing Committee on Finance solicits ideas and asks from businesses, industry associations, universities and non-profits on what the government’s priorities should be for federal spending in the upcoming fiscal year. The Logic reviewed nearly 500 such submissions to see which issues, policies and programs were most sought after. Freeland is currently expected to deliver the budget some time next month. Here’s what players in Canada’s innovation economy want to see in it.
Talking Point
The House of Commons Standing Committee on Finance solicits pitches from businesses, industry groups and a host of other organizations as part of the annual budget-making process. Finance Minister Chrystia Freeland’s likely to deliver a budget next month, and some of the ideas and asks here are likely to make it into her plan.
Digital ID
The players
Businesses and lobbying groups are asking the government to prioritize a strategy for bringing digital-identity services to Canada. The Digital ID & Authentication Council of Canada, whose membership includes major banks, as well as provincial governments and federal agencies, wants those services to be available to Canadians by December 2022. That includes issuing a government ID credential in conjunction with provinces, territories and Immigration, Refugees and Citizenship Canada.
Interac, which is developing its own digital ID solution with SecureKey Technologies, said in its submission that the country’s plan should be underpinned by “foundational government credentials” like birth certificates, citizenship documents and driver’s licences. SecureKey said the government should ensure those credentials are interoperable between public and private entities. – Jon
Privacy
The players:
The Liberals’ proposed overhaul of Canada’s decades-old law governing personal information expired with last summer’s election. In December 2021, Innovation Minister François-Philippe Champagne told The Logic he planned to introduce updated private-sector privacy legislation this year. While the bill won’t be tied to the budget, several firms used the consultations to push Ottawa to move quickly on the file.
Insurer Manulife expressed concern at the “fracturing of the national privacy regime as provinces begin to move forward with their own approaches.” Quebec amended its law last year, while policymakers in Alberta and B.C. are considering updates to theirs. Ontario’s Progressive Conservative government is developing its own law for the first time. “A variety of different privacy approaches in a market the size of Canada will create disincentives for investment and growth,” Manulife warned.
The Canadian Chamber of Commerce is also calling for Ottawa to act imminently, in order to prevent “a patchwork of provincial rules.” The Business Council of Canada, which represents the CEOs of many of the largest firms in the country, has also previously backed the original bill; the federal privacy commissioner criticized it as a “step back” from the current regime, while the Council of Canadian Innovators (CCI), a scale-up lobby group, said in September 2021 the government hadn’t sufficiently consulted on it. – Murad
Intellectual property
The players:
Several industry associations are urging the federal government to institute a patent-box regime, under which profits generated from a company’s patented intellectual property would be taxed below the regular corporate rate. Quebec introduced such a policy in March 2020; the province charges just two per cent on such income, down from the regular 11.5 per cent. Internationally, the U.K. also offers a patent box, while Australia is considering one.
The measure is a longstanding request of the CCI, which in its submission said such a policy would reduce the “incentive for high-growth Canadian firms to take their intellectual property outside” the country. It made the same recommendation in 2021. This year, Canadian Manufacturers and Exporters joined the push. Companies like the Vancouver-based biotech AbCellera and General Electric’s local subsidiary have supported the policy in the past.
Elsewhere, the Intellectual Property Institute of Canada wants Ottawa to subsidize companies to file their first patents with a credit worth up to $25,000 of associated costs, a move that would benefit its membership of IP lawyers and agents. – Murad
Universities
The players
Universities and their lobbying groups want the federal government to allocate more funding to research, with most suggesting a country-wide target of 2.5 per cent of GDP within five years and a 10 per cent boost annually over the same period to the budgets of the granting councils. While pandemic programs boosted their budgets, the four granting agencies spent $3.88 billion in the 2019–20 fiscal year; in April 2017, a panel led by former University of Toronto president David Naylor set a target of up to $4.8 billion annually.
Post-secondary institutions want government help to turn more of that research into products, services and startups. Policy experts and innovation-economy executives have expressed concern that too many publicly funded ideas are commercialized elsewhere or not at all, and some provincial governments are establishing or exploring new programs aimed at generating and capitalizing on that IP locally. Depending on their own specialties, universities would like Ottawa to prioritize support for AI, advanced manufacturing, agri-food, medical genomics, quantum and small modular reactors.
Some institutions are also seeking backing for specific projects. Oshawa, Ont.-based Ontario Tech University is asking for $10 million for a $30-million clean-energy centre, while the University of Manitoba wants more funding for Winnipeg’s National Microbiology Lab, including for biotech commercialization. – Murad
Space
The players:
Submissions from space companies broadly call for updated laws and regulations governing their activities. The would-be moon miners particularly want eventual offworld mineral exploitation first to be formally permitted, and ideally to be treated like mining in foreign countries for regulatory and tax purposes. They’d also like to be able to use flow-through share structures similar to terrestrial mining companies.
GHGSat, which makes satellites for monitoring greenhouse-gas emissions, is seeking a three-year, $30-million pilot program that would see the federal government buy satellite images and analytics as a step toward bulk purchases of Earth-observation data that would be turned over for government, scientific and non-profit uses. This is in keeping with a federal strategy announced in January without any dollars attached to it.
MDA, Canada’s storied maker of Canadarms and numerous satellites, wants major new spending on Canada’s space program and for the government to create a dedicated council to set and promote a national space strategy. – David R.
Energy
The players:
Energy companies and their lobby groups are pressing the federal government to introduce subsidies that would offset the cost of massive carbon-capture, -utilization and -storage (CCUS) projects. The Liberal government has been eyeing subsidies for at least two major carbon-capture projects by 2030, and is expected to introduce an investment tax credit in its upcoming budget.
What is still unclear is just how large the expected tax credit will be. The Canadian Association of Petroleum Producers and the Alberta government have called on Ottawa to cover as much as 75 per cent of the cost of developments, which often come with billion-dollar-plus price tags. Teck wants “significant funding” under Canada’s CCUS strategy. Pipeline giant Enbridge recommends that Ottawa “expand the mandate” of the Canada Infrastructure Bank as part of the effort to reach net-zero emissions, as well as establish a “projects list” of eligible CCUS developments to encourage investment. Rival pipeline company TC Energy made similar recommendations.
Plans for a CCUS tax credit have already faced political pushback. A joint budget submission from 23 environmental groups including Ecojustice and the David Suzuki Foundation stress that “no new investments can be provided for fossil fuels starting this year” in order for Canada to meet its ambitious environmental targets. That includes the phase-out of “inefficient fossil-fuel subsidies,” according to the submission. – Jesse
Infrastructure
The players:
The infrastructure companies make their budget asks in the context of obvious recent problems: natural disasters and supply-chain jams.
The public-works association wants aggressive federal support for flood-plain mapping—intelligence that would lead to aggressive public spending on construction efforts to mitigate the risks of future floods. It also seeks investments in sustainable infrastructure and that recognize the value of natural assets.
The association representing railways wants federal spending on intercity rail, tax credits for short-line railways (which typically serve industrial freight customers) and investment in rail safety.
And the West Coast ports all seek federal investment in their capacity to handle various forms of freight—from Ridley Terminals’ request for support for transportation of hydrogen and ammonia as green fuels, to the Vancouver and Prince Rupert port authorities’ call for a budget-backed strategy to reinforce and expand Canadian trade corridors that would, naturally, connect through seaports. The Vancouver authority is also seeking support for a major expansion in Delta.
The Green Budget Coalition, an umbrella group of environmental organizations, has a different focus from the other entities. Among its requests is $10 billion to $15 billion a year for 10 years to support green-building retrofits, through direct rebates, skills building and a loan-guarantee program. – David R.
Autos
The players:
Many of the auto sector’s big asks from the government center on navigating the Liberal government’s mandate to sell only new zero-emissions light vehicles by 2035. For example, Electric Mobility Canada suggests raising the price cutoff for zero-emissions-vehicle (ZEV) incentives to accommodate more expensive models.
Unifor is asking the government to give consumers a financial incentive to trade in older, “higher polluting” vehicles for fuel-efficient alternatives, while Electric Mobility Canada suggests a similar “cash for clunkers” program and a $5,000 rebate for consumers who convert from internal-combustion vehicles to ZEVs. The Canadian Automobile Dealers Association proposes a scrappage program take the form of a first-come, first-serve incentive between $1,500 and $3,000 for vehicles 12 years or older. The Automotive Industries Association of Canada, on the other hand, is urging the government to reject any scrappage rebate programs, arguing that maintaining existing vehicles is more environmentally sustainable than rebates that prompt new purchases.
On the manufacturing side, the Canadian Vehicle Manufacturers’ Association has asked the government to design its program, proposed in last year’s budget to reduce taxes on zero-emissions technology manufacturing, to match the longer timelines of auto manufacturing. It also calls for more staffing and infrastructure upgrades at ports to keep cross-border trade going. AddÉnergie, which makes Flo EV chargers, is asking for an additional $1 billion for two programs that support charging-station installation, and asks the government to address supply-chain issues created by Buy America measures.
The battery supply chain is also a hot topic, with the Prospectors & Developers Association of Canada requesting increased funding for the Critical Battery Minerals Centre of Excellence to compile geoscientific data, while the Mining Association of Canada asked for the corporate income tax reduction for zero-emissions technology manufacturing expand to cover domestic raw materials for EVs. – Anita
Climate finance
The players:
Bold climate commitments became ubiquitous among Canada’s largest banks and institutional investors in the past year. Now the hard work begins.
The Institute for Sustainable Finance (ISF) housed at Queen’s University is asking for $20 million over five years to “accelerate Canada’s transition to sustainable finance.” The ISF wants to play a core role in helping implement recommendations from a 2019 government-commissioned expert panel led by Tiff Macklem, since appointed governor of the Bank of Canada. The group urged policymakers to incentivize the transition from fossil fuels to clean energy and apply a sustainability lens to the financial system—advice that the ISF says the government has been slow to implement. The money would help the Kingston, Ont.-based centre improve access for industry and government to climate data and analytics, which has been a major challenge.
The Canadian Standards Association (CSA), meanwhile, is seeking government support for a Canada-specific system to determine what assets can be deemed “sustainable,” a subjective term that’s often co-opted for greenwashing. The “transition taxonomy” is meant to help companies and investors demystify how to measure and curb emissions along with financial-risks related to climate change. The guide would “mobilize capital markets toward lower carbon solutions and [greenhouse-gas] reductions, and will be the first in Canada,” reads the CSA’s submission. – Catherine
Open banking
The players
There’s a common theme in submissions from fintechs and related groups: they want the government to introduce the long-awaited framework for open banking, also known as consumer-directed finance, in the upcoming budget. Open banking would give consumers the right to share their financial data held in banks directly with third parties. Several of the submissions asked the government to commit to adopting the recommendations of its advisory committee on open banking, which suggested among other things the implementation of the system by January 2023 and a dedicated official within government to oversee it.
Some called for the federal government to look beyond just implementing the system. Wealthsimple, for example, said the government should consult on giving fintechs “write access” to that data, allowing people to edit bank-account data through third-party services—for example, initiating a payment from a person’s bank account through a fintech app. The open banking advisory committee recommended only that fintechs have “read access,” allowing them only to receive data from banks. – Jon
Payment system access
The players
Fintech companies and their representatives want Parliament to amend the Canadian Payments Act (CPA) to give more types of businesses access to Canada’s national payment systems. This would include being able to use the Real-Time Rail, the national payment system that is expected to launch in mid-2023.
Fintechs want to use the Real-Time Rail to process small-value payments on behalf of consumers at cheaper prices than existing offerings. As of now, access to the country’s payment systems is limited to a relatively small group of financial institutions, according to rules outlined in the CPA. But around the time of the last federal budget, the government introduced the Retail Payment Activities Act, which paved the way for greater participation by tasking the Bank of Canada with regulatory oversight of payment-service providers. The central bank has since embarked on an aggressive staffing campaign to fulfill its new mandate.
Without amending the CPA, however, these businesses can’t technically access the Real-Time Rail. It’s a foregone conclusion that the act will eventually be changed to let them use it. But one question is whether those amendments will be made in time to let fintechs access it when it launches. It also remains to be seen whether the changes will bring any changes to the governance of Payments Canada, the organization in charge of overseeing the payments systems. – Jon
Health
The players:
The pharma companies and their industry association all want the government to abandon changes to the regulations that set the prices of patent-protected drugs—changes that would almost certainly push down the maximum prices the makers can charge. “Do not pursue,” says AbbVie; “Repeal the regulatory updates,” says Eli Lilly; “Suspend and fundamentally rethink,” says Innovative Medicines Canada; “Halt,” says Merck.
They also want federal investments in health, either through strategies to boost life sciences in general or pharmaceutical development in particular, or (in Merck’s and Eli Lilly’s cases) an increase to the Canada Health Transfer to the provinces and territories.
Medtech Canada, which represents companies that make medical gear, wants policies to help provinces spend on new health technology, protective equipment, labs and virtual care. – David R.
