With the provincial budget now in the public domain and with the help of our Ontario Chamber of Commerce colleagues, we have broken down the budget pieces with an impact on our business community and offered a Peterborough perspective.
Tax Changes
The Ontario Government is harmonizing with the federal government’s eligibility criteria, leaving over 20,000 employers paying $100 million more in Employment Health Tax over the next three years. In addition, businesses will be phased out of the small business deduction if they earn between $50,000 and $150,000 of passive investment income, resulting in an additional $350,000 million in new taxes for Ontario businesses over the next three years.
In an effort to support businesses making significant, long-term investment in research and development (R&D), the provincial government will enhance the Ontario Research and Development Tax Credit (ORDTC). Companies qualifying for the ORDTC will be eligible for an enhanced 5.5 percent exemption (from 3.5 percent) on expenditures over $1 million in a taxation year. The government is also enhancing the Ontario Innovation Tax Credit (OITC) in an effort to encourage smaller companies to make investments in R&D that will aid growth. If a company qualifies for the OITC and has a ratio of R&D expenditures to gross revenues above 20 percent, it will be eligible for an OITC rate of 12 percent. OCC Anaylsis Budget 2018 has chosen to follow the federal government’s lead on changes to the tax code, resulting in a new tax burden on Ontario employers of nearly half a billion dollars over the next three years.
Peterborough Chamber Perspective
We have significant concerns about the impact the tax changes will have on the cumulative burden of doing business and growing a business in Ontario. We are concerned that following the path of the federal guidelines will not encourage business investment and reinvestment. The enhancements to improve the Research and Development and Innovation Tax Credits are welcome. Innovation is an area on which Peterborough has chosen to focus. Cleantech Commons will be a prime example of industry, post-secondary, and municipal government collaboration while there are numerous companies building their business through the Innovation Cluster with deep connections to industry, Fleming and Trent University. The hope is that these changes will encourage continued commercialization of new ideas and innovations in a timely manner.
Digital Infrastructure
In Budget 2018, the government is providing $500 million over three years to expand broadband connectivity in rural and northern communities. This will include an investment of up to $71 million towards improving cellular coverage in Eastern Ontario and up to $20 million to Telesat to support a Low Earth Orbit (LEO) satellite constellation project.
OCC Analysis The OCC has consistently advocated for trade-enabling infrastructure, including both traditional infrastructure and digital infrastructure such as high-speed broadband internet. The OCC is pleased to see this investment in broadband as the province’s competitiveness relies on infrastructure that can connect communities and open access to foreign markets.
Peterborough Chamber Perspective
The Peterborough Chamber understands the importance of broadband to our economy in the City and County of Peterborough. In fact, at the 2016 Ontario Chamber Annual General meeting we asked that broadband be considered as infrastructure. To stay competitive in Peterborough’s core sectors, including agriculture and tourism, reliable digital infrastructure is the key to future success.
Good Jobs and Growth Fund Skills Development
In Budget 2018, the government has made investments in a variety of areas to expand skills and workforce development and Ontario’s apprenticeships. These investments include $935 million over the next three years for the Good Jobs and Growth Plan and $170 million over three years in the new Ontario Apprenticeship Strategy. Ontario is also investing an additional $12 million to extend the Career Ready Fund to 2020–21, supporting 28,000 more experiential learning opportunities for students and employers.
Other investments include innovative post-secondary programming to match Ontario’s changing labour market, institutional and employer partnerships for experiential learning, bridge training programs for new Ontarians, services to increase access to labour market information, and skills training services for employers. In order to prioritize investments and growth to help Ontario businesses grow and retain jobs, the Province will renew, enhance, and extend the Jobs and Prosperity Fund (JPF) with an increase of $900 million over the next 10 years. In addition, the Province’s New Economy Fund will help companies stay at the leading edge of innovation and industry to create and retain over 20,000 jobs and attract $5.7 billion in investments. OCC Analysis The OCC has consistently emphasized skills and workforce development as a priority for Ontario’s business community, with 77 percent of OCC members stating that the ability to recruit and retain talent is critical to their organizational competitiveness. We commend these commitments from the Province and would welcome further investments and program redesign. For our recommendations with respect to skills and workforce development see the OCC’s report, Talent in Transition: Addressing the Skills Mismatch in Ontario.
Peterborough Chamber Perspective
Without a doubt access to talent is the most common ailment we hear impacting employers. While it is good to see investment in a new Apprenticeship Strategy we encourage the government to include a discussion about the impact of ratios in the discussion. Programs for students and those new to the workforce are not the only way to develop a resilient workforce. We are encouraged by initial announcements to revamp the Canada Jobs Grant and Second Career program to help transition workers into new and developing sectors. The Peterborough Chamber is a member of several committees of the Local Employment Planning Council pilot project and we look forward to learning more about our local market through this process.
Regional Economic Development
The Good Jobs and Growth Plan includes an investment in the Southwestern Ontario Development Fund and the Eastern Ontario Development Fund to support the needs of all businesses, particularly those in rural and small communities. The Province will invest an additional $100 million in these funds over the next 10 years and will aim to create and retain approximately 19,000 jobs and attract more than $800 million in investments.
OCC Analysis
The OCC supports an economic strategy that recognizes and is responsive to the province’s many regional differences. The Ontario Chamber Network looks forward to working with the government and public agencies in ensuring that their investments are well spent. Peterborough Chamber Perspective The Eastern Ontario Development Fund has been very good to businesses in the Peterborough area in the past and the program is a good example of public and private sector investment working together to boost the economy. We look forward to celebrating and connecting our members to more of these partnerships.
Health Care and Child Care
The government is prioritizing spending on care in Budget 2018, particularly with regard to expansions to health care and child care.
The Budget includes total health care investments of $5 billion over three years, with $822 million being devoted to hospitals in 2018-9. This investment will support service demands related to growing and aging population, more hospital beds, new patient spaces, and specialty services. As previously announced, OHIP+ will expand to seniors in August 2019. This program will eliminate the deductible and co-payments for Ontarians aged 65 who already use the Ontario Drug Benefit program. This is estimated it cost $575 million per year by 2020-1.
The Ontario Drug and Dental Program is newly announced in the Budget and will begin in 2019. It will reimburse 80 percent of eligible drug and dental expenses for families without workplace or public health benefits at an expense of $800 million for the first two years of the program.
Finally, the government will spend $2.2 billion over three years to increase child care accessibility and affordability, including free preschool starting in September 2020.
OCC Analysis
While hospital funding has been limited in recent years, this influx of spending does not address the fundamental challenges within the health care system nor is it directed towards the solutions identified by the OCC in our report, Health Transformation: An Action Plan for Ontario. Similarly, the expansion of OHIP+ is not aligned with the principles of an effective pharmacare program outlined in our recent Pharmacare Report. As for investments in child care, the government must find ways to supplement and augment the current market rather than override or replace it. Peterborough Chamber Perspective The Peterborough Regional Health Centre recently received an almost $7 million boost recently from the government. We agree with the Ontario Chamber of Commerce that funding is just one piece of the fundamental changes required to find lasting solutions. Affordable child care and pharmacare have the potential to boost our workforce, however, a blanket approach to either of these also has the potential to have negative effects on our economy.
Debt and Deficit
Budget 2018 forecasts a $600 million surplus for the 2017-18 fiscal year. This is because many new programs announced by this government will only be designed in this fiscal year, with new costs not being realized in a meaningful way for the next one or two years. As such, the government is projecting a $6.7 billion deficit in 2018-19 and further deficits for five more years after that.
With regard to debt repayment, the government has argued that debt repayment has gone from 15 cents per year several years ago to 8 cents, which is the lowest in 25 years. Such an analysis does not take into account that the overall size of the provincial budget has increased exponentially in that time.
OCC Analysis
The OCC is concerned with the precarious fiscal situation that many of the government’s new investments will create. While the near-term deficit is projected to be less than one percent of the GDP, this comes at a time when the economy is relatively strong. The Budget also projects slower GDP growth on the horizon due to global factors. Peterborough Chamber Perspective The lack of a meaningful plan to manage debt and deficit in future years has us concerned, particularly as the government has started to identify the current economy as one that is facing uncertainty. There is also concern about the increase in program spending and how future governments would have to deal with the impact of that should the economy take a turn.
Government Transparency and Accountability
Budget 2018 indicates that the government is committed to modernizing and transforming public services through cost-saving program improvements, reducing duplication through harmonization, scaling down investments that do not demonstrate value for money, and establishing investment priorities to manage overall sustainability.
It similarly notes that the government hopes to harness expertise through consultation, noting that industry leaders, academics, and representatives from the general public will be asked to make recommendations regarding how the government can best achieve its outcomes and improve user experience. OCC Analysis Improving government accountability is one of the four pillars of our Vote Prosperity platform. We have long called for improved value-for-money and return on investment assessments of government programs and services as well as more robust consultation with stakeholders. Peterborough Chamber Perspective For the Peterborough Chamber of Commerce Policy Committee this is one of the most important aspects of developing public policy for small business. In a 2018 policy resolution that will be debated at the Ontario Chamber of Commerce Annual General Meeting at the end of April, the committee recommends that future governments consider economic impact and time frame when developing legislation that will impact small business. Comments are closed.
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AuthorThe Peterborough and the Kawarthas Chamber of Commerce acts as a catalyst to enhance business growth, opportunity, innovation, partnerships and a diverse business community. Archives
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