Letters August 20, 2023

Federal government must address three key priorities

Goldy Hyder – President and Chief Executive Officer, Business Council of Canada

Economic Strategy Energy Indigenous relations Industry and innovation Natural Resources Public Finances

Letter to the Right Honourable Prime Minister Justin Trudeau, P.C., M.P., in advance of the August 2023 cabinet retreat

Dear Prime Minister,

You are gathering next week with your reconstituted cabinet amid increasing signs that the global economy is weakening. Here at home, our domestic economy is straining under the weight of high interest rates, low productivity, and persistent inflation. Canadians are struggling with affordability and anxious about their futures and those of their families.

Your government is responsible for delivering the policy solutions Canadians and businesses need to help them achieve prosperity through long term economic growth. To that end, we were encouraged to learn that Minister Anand is undertaking the strategic policy review which had been promised in Budgets 2022 and 2023. More needs to be done, and we urge you to focus on the following three priorities:

Adopting a Meaningful Fiscal Anchor

The federal debt has more than doubled over the last three years. Public debt charges in April and May increased by over $1.3 billion, which is 23% year over year. As a result, a much larger portion of government revenues will need to go towards debt servicing costs. That is why we continue to call on you to adopt a meaningful fiscal anchor. Specifically, we endorse former Bank of Canada Governor David Dodge’s proposed anchor of limiting debt servicing costs to 10% of revenue.

The recent downgrade of U.S. debt by Fitch Ratings is a cautionary tale and a cause for grave concern. The upcoming fall economic statement must demonstrate your government’s strong commitment to fiscal responsibility by introducing an anchor that guides the country towards sustainable spending, taking both the effects of inflation and interest rates into account.

Delivering a Plan for Permitting reform

Budget 2023 committed to developing a concrete plan – by the end of this year – to speed up approvals for major projects to facilitate the energy transition, lower emissions, and ensure we can deliver Canadian natural resources and critical minerals to our international allies. While a collaborative process is underway, the United States and Europe are moving much more aggressively to shorten approval timelines for projects needed to achieve their security and climate objectives.

We therefore urge you to expedite delivery of the plan and introduce any legislative changes required for its implementation by way of Budget Implementation Act, Part II. We further urge you to include in your plan measures to improve access to capital for Indigenous communities and businesses. Indigenous equity partnerships are essential to the efficient, effective approval of new projects and can contribute significantly to economic reconciliation.

Seizing the Energy Transition Opportunity

The centrepiece of Budget 2023 was a suite of measures aimed at bolstering investment in the transition to clean energy. But an announcement of intent is insufficient when other countries, most notably the United States, have processes already in place to deliver the incentives that attract new investment from around the world, including from Canadian firms.

Canadian companies and global investors urgently require the details about the terms for each tax credit to determine how they will de-risk potential investments. Absent details about how those incentives will be delivered, we risk losing out on a generational influx of both domestic as well as foreign direct investment. For the same reason, the government must follow through on its promise to make carbon pricing more predictable for clean growth projects.

Addressing these priorities would have an immediate, positive impact on the Canadian economy, improving the prospects for sustainable and equitable long-term growth and enhancing prosperity for all Canadians. Failing to address the above priorities, however, invites greater uncertainty and risks exposing Canadians to a further erosion of their living standards.

Yours very truly,