Prime Minister Justin Trudeau pitched his government’s budget to Bay Street on Tuesday, arguing that billions in new government spending on green technology was needed to “crowd in” private capital, while offering a populist message that “real wealth” is not created on bank trading floors.
In a Tuesday evening speech in Toronto, Mr. Trudeau focused on the green industrial policy promises in the latest federal budget, unveiled two weeks ago. These add up to $21-billion in new spending over the next five years, largely in the form of tax credits to encourage private investment in low-carbon technologies.
The government made its green spending blitz in response to massive U.S. subsidies contained in last year’s Inflation Reduction Act. The U.S. government plans to spend around US$370-billion in the coming years to help decarbonize the American economy, sparking concerns in Canada about competitiveness and capital flight south across the border.
Mr. Trudeau framed his government’s response to the U.S. act as a pro-active move.
“Our budget is not a defensive economic posture,” he told business leaders gathered at a conference hosted by Bank of Montreal and Eurasia Group.
“The strategic clean economy investments we’ve been making since 2015 are about growing the economic pie for everyone, and securing new investment opportunities for a lot of you here on Bay Street.”
The measures in the budget include an investment tax credit for clean energy manufacturing that is worth $4.5-billion over five years and a tax credit for clean hydrogen production, worth $5.6-billion. The government has also launched a $15-billion fund aimed at investing alongside private-sector investors in low-carbon projects.
While Mr. Trudeau highlighted the investment opportunities created by the green energy transition, he also took a passing swipe at the banking sector.
“Real wealth isn’t made on the trading floor. It’s created in factories, in fields, in labs, in mines,” he said.
“People are the engine of our economy. We can never forget that. And I proffer this warning, because there was a time not too long ago, when the establishment seemed to lose sight of that,” he said, highlighting earlier drives for lower regulations and what he called “unencumbered globalization.”
Ottawa has not been shy about tapping Bay Street for additional revenue over the past two years. The budget announced plans to amend tax treatment on dividends of Canadian shares held by financial institutions, which is expected to yield $3.15-billion in taxes over five years.
That follows two measures in the 2022 budget: a one-time 15-per-cent tax on bank and insurance company income above $1-billion, and a 1.5 percentage point increase on their corporate income taxes for profits over $100-million.