HPAC Magazine

Getting The Job Done

Infrastructure and skills development figure prominently but has the groundwork been done? Insights into the 2013 Federal Budget.

June 1, 2013   By Hank Bulmash

Most of us never glimpse the actual federal budget papers. In the old days (before the internet gave us access to everything), they were actually pretty hard to find. Now of course, they are available to all on the Government of Canada website (just Google Canada budget 2013). The web pages are interesting – first of all for the care that the government appears to take with its projections. On the site you can find countless charts (in four colours) and analyses dealing with Canadian economic development, labour supply and our success (or lack of it) in foreign markets.

The papers are also interesting because a budget embodies a story – the idea of what the government expects to happen and how it intends to take advantage of this picture of our future. Those guesses about tomorrow do embody the conventional wisdom of the day as discussed in the corridors of power in Ottawa and that can be interesting.

The story of the 2013 budget is retrenchment. The government plans to eliminate the deficit over time. It will reduce foreign aid and it will limit increases in government spending. Taxes will not be increased – but the government will provide help for Canadians looking for jobs, manufacturers buying equipment and consumers buying baby clothes and sporting goods. Offsetting that are tariff increases averaging about three per cent on a number of other goods coming from countries whose status has been upgraded from developing to fully developed. Those countries include the BRIIC nations of Brazil, Russian, India, Indonesia and China. The small business capital gains exemption will be increased from $750,000 to $800,000. Some insurance-based tax planning vehicles are shut down in the budget. That is no surprise to members of the tax community since those plans did appear to be abusive. Also not a surprise, there will be an increased emphasis on taxing offshore assets.

A new taxpayer snitch program will reward individuals who report taxpayers with offshore accounts if the information leads to increased tax revenues. These are the kinds of programs that make better press than policy. There are few people who have the ability to give evidence on hidden behaviour of this sort. And offsetting this attempt to generate additional revenue, the budget includes a substantial decrease in the budget of Canada Revenue, making it less likely that the organization will increase audit activities.

The budget identifies two major needs in Canada – infrastructure improvement and a skills shortfall.  There are significant proposals dealing with infrastructure improvement. The federal government will allocate about $2 billion annually for this purpose, which will help many businesses in the construction sector.

The key budget provisions for many business people will be the focus on skills improvement. The budget states that the construction sector will need over 300 000 new workers by 2020 – about 40 000 per year. It also notes that 95 000 professional engineers will retire by 2020. The Canadian Electricity Association (CEA) has reported that the sector will have to recruit nearly 50 000 workers by 2016. This is a 50 per cent increase in employment in that workforce.

The budget introduces the concept of what might become a useful new program – the Canada Job Grant (CJG). The idea is that the CJG will be available to businesses with a plan to train unemployed and underemployed workers for an existing job or for a better job. The federal government proposes a plan that will provide a $15,000 grant towards the training of employees. That seems generous, but there are difficulties with the plan – and perhaps even with the motivations of the government in introducing it. 

The Budget states the feds will provide $5,000 towards the training of an employee. This federal contribution must be matched by both the province and by the employer. The feds are so excited by this idea that the government began an expensive ad campaign during the hockey playoffs to promote it. The ads have generated much interest, especially among young people who would like to get into the trades.

And therein lies a rub. Business organizations have responded favourably, but have expressed concern about the type of investment companies will have to make. Must the investment be in cash or could it include other resources such as overheads? That has not been revealed as yet. And unfortunately this is not the only problem with this program. Before announcing this initiative, one might have expected the provinces to be consulted – after all, they will have to make an equal investment to the federal government. It appears there was no consultation and the immediate response of provincial governments has been negative. Quebec has rejected the idea entirely, stating that the program actually reflects a decline in federal investment. Alberta and Ontario have also expressed doubts. The program would require significant provincial involvement and provinces are cash poor.

On the federal scene the NDP has attacked the Tories for spending big bucks on television ads to sell a program that has not even reached a planning stage. The NDP pointed out that the Harper government had withdrawn from labour market planning some time ago leaving it to the provinces to fund. Now they say that the Tories are promoting the idea hoping to take credit for proposals that may never actually develop into a skills delivery system. The Liberals have pointed out that the program, if it ever becomes available, will take years to develop. That is not what the budget promises and hopefully it will not become true.

So, the document is a mixed bag. There are some strong ideas here, but the financial plans of the government have been developed to some extent as a marketing ploy. Business and the populace are hungry for infrastructure development and jobs programs. The government has announced it will deliver them but the fundamental spade work has not been done. <>

Hank Bulmash, CA, MBA, is senior partner with Bulmash Cullemore Chartered Accountants and is president of its consultant subsidiary BusinessLab Inc. E-mail Hank at hbulmash@bulmashcullemore.com.

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