OTTAWA—Confident the Canadian federal coffers can weather global economic uncertainty, the Liberal government proposes a $14.4 billion package of tax measures to boost manufacturing and clean energy production, as well as a new fund to drive social and environmental investment and aid for struggling media outlets.

The fall economic blueprint, entitled “Investing in Middle Class Jobs,” does not chart a path to a balanced budget, instead projecting an $18.1 billion deficit this year.

However with an election now less than a year away, Wednesday’s statement was as much a political as it was an economic document, as the Liberals reaffirmed their commitment to a carbon tax and poked critics who would “bury their heads in the sand” on climate change.

It delivers a key measure sought by business groups with tax changes to allow companies that invest in manufacturing or in “clean energy” to fully write off spending immediately on new equipment and machinery. Meanwhile other businesses of all sizes and in all sectors will be able to more quickly write off a greater portion, but not the full amount, of their capital spending.

Altogether, the three tax changes total $14.4 billion over five years in foregone revenue to federal tax coffers.

On top of that, Finance Minister Bill Morneau promised $1.4 billion over five years in spending to help explore new markets for Canadian exports, millions more to remove internal trade barriers and trim regulations, and an extra $800 million over five years will be injected into an existing business innovation fund. That means a total package of $16.48 billion in measures to keep Canadian businesses competitive, said Morneau.

Read more:

Opinion | Susan Delacourt: Bad times at Queen’s Park look much better from Ottawa

Ottawa to provide aid to support Canadian journalism

Morneau focuses on increasing investment in Canada

Big business had urged Morneau to match the U.S. corporate tax rate after President Donald Trump slashed it from 35 per cent to 21 per cent. He portrayed that as an irresponsible course to pursue, saying it would cost tens of billions.

Share your thoughts

The pro-business measures, from a finance minister who last year angered Canada’s business community with corporate tax changes, were only partially offset — from a political perspective — by new spending to boost socially conscious projects and, in Morneau’s words, to boost democracy in Canada by allocating $595 million over five years to aid journalistic outlets.

A new $755-million 10-year “social finance fund,” loosely modelled on the U.K.’s “Big Society” fund, will provide loans to non-profits or for-profit ventures to juice riskier, low-return investments in social housing, job training or environmental measures to improve Canada’s long-term social health — moves that attempt to hew to the Trudeau government’s “progressive” brand.

Conservative Leader Andrew Scheer was not in the Commons to deliver the Official Opposition response to the update.

But Conservative finance critic Pierre Poilievre slammed it, noting that the deficit is “three times the size the Liberal party promised in the last election.”

The measures outlined in the update push the deficit to $18.1 billion in the current fiscal year, rising to $19.6 billion next year before starting downward, reaching a projected $11.4 billion in 2023-24.

New Democratic Party Leader Jagmeet Singh said the Liberals’ “blanket giveaways” to corporations show they “are playing Santa Claus to the corporations but abandoning ordinary Canadians” who he said need more help with affordable housing and prescription drugs. He said the capital spending measures will allow corporations “to buy limousines and corporate jets.”

In a speech to the Commons, Morneau talked up Canada’s economic prospects even in the face of uncertainty from rising interest rates, debt-burdened consumers, slumping oil prices, and ongoing trade disputes with the country’s biggest trading partner south of the border.

Loading... Loading... Loading... Loading... Loading... Loading...

He said Canada’s debt continues to decline as a function of the country’s overall economic output, and he defended the choice not to move quickly to cut the yearly deficit, saying to do so would have entailed drastic spending cuts.

Morneau touted the success the Liberal government had in reaching a new North American free trade pact with the U.S. and Mexico, but said Canada would chart its own way toward economic success and not try to match the U.S. approach by adopting what he called “an “aggressive package of tax cuts for large corporations.” He said to do that in Canada would add “tens of billions in new debt” and so he chose a more “targeted, measured, and fiscally responsible” approach.

Finance Minister Bill Morneau rolled out his fall fiscal update on Wednesday, framing it as the federal government’s response to dealing with the competitiveness challenges posed by aggressive moves south of the border. (The Canadian Press)

The document, a mini-budget, sprinkled other money around: $240 million toward sustaining Canada's wild fish stocks; $14.6 million over five years to boost Canadian content on a new multilateral French-language digital platform with TV5MONDE, a public broadcaster that provides the first global channel in French; and $62.6 million over five years for food security in the north, and a one-time $25 million endowment for Avalanche Canada to promote avalanche safety. Prime Minister Justin Trudeau’s youngest brother Michel died in an avalanche in British Columbia in November 1998.

Craig Alexander, a partner and chief economist at Deloitte, said the update doesn’t serve up the full tax break sought by some corporations but does reward new investment, a less costly move for the federal government at a time when it’s trying to keep its deficit under control.

“If you’re worried about investment leaving the country, this does address it,” Alexander said.

After 10 years of economic good times, Alexander said he would have expected a balanced budget by now.

The Canadian Manufacturers and Exporters, the Business Council of Canada and the Canadian Electricity Association all welcomed the tax changes and other measures to diversify trade and cut red tape.

“However, we all need to recognize that Canada’s competitiveness challenges go much deeper than any single tax measure,” said Goldy Hyder, president of the Business Council. “We will continue to urge the government to adopt a comprehensive strategy to foster business confidence, attract investment and enable the creation of new, high-value jobs.”

At Queen’s Park, Ontario Finance Minister Vic Fedeli, whose Progressive Conservative government has been at odds with the federal Liberals, gave Morneau’s update “a partial thumbs up.”

“We welcome the federal measure to allow businesses to accelerate their expensing of depreciable assets. This is a very big deal. This will help both new business investment and competitiveness across Ontario,” said Fedeli, noting Ontario is matching the federal move on capital cost allowances.

But he expressed disappointment that Ottawa didn’t lower business taxes to compete with those stateside and noted Queen’s Park remains very concerned about the impact of Prime Minister Justin Trudeau’s carbon-pricing scheme.

Asked about the help for media industries, Fedeli said “it’s a federal deal, but I know our choice to help businesses will be cutting red tape” instead of financial aid.

With files from Robert Benzie

It looks as if you appreciate our journalism. Our reporting changes lives, connects communities and effects change. But good journalism is expensive to produce, and advertiser revenue throughout the media industry is falling and unable to carry the cost. That means we need you, our readers. We need your help. If you appreciate deep local reporting, powerful investigations and reliable, responsible information, we hope you will support us through a subscription. Please click here to subscribe.

Read more about: