The Conservative government is preparing to commit long-term cash for infrastructure in its 2013 budget in an effort to squeeze more projects – including partnerships with the private sector – out of limited public funds.
In one of the very few areas of expected new spending, Finance Minister Jim Flaherty's 2013 budget will renew an existing infrastructure program that is entering its final year. While Ottawa and most provinces are strapped for cash, governments at all levels are facing growing calls to tackle gridlock and fix aging infrastructure.
Some sources are expecting a new infrastructure plan that will run at least until 2024, but others stress that it is still early in the budget process and no decisions have been made as behind-the-scenes planning enters high gear.
Creating economic growth out of tight federal finances is shaping up as a key theme of the next budget. The ultimate goal: to balance the books in time for the next federal election in 2015. Last year's budget was tabled in late March and the release of the 2013 budget is not considered imminent.
Mr. Flaherty is scheduled to discuss his plans for the budget Wednesday in Ottawa in a luncheon speech to the Economic Club of Canada. That morning, the Canada West Foundation, the Canadian Chamber of Commerce and the Federation of Canadian Municipalities will release a report that is expected to urge the government to stretch the new infrastructure plan over the long term.
The argument is that a long-term deal would give provinces and municipalities the flexibility to borrow against future revenues. By stretching out the funding, the plan would result in predictable sums over several years, making it easier for governments to budget around the numbers and draw private partners into projects.
"These [projects] are going to be in place and are going to be paid for over decades, so the private sector needs a demonstration that the public sector is going to be there so they can base their investments on that," said Warren Everson, senior vice-president for policy with the Chamber.
Canada's Finance Minister is getting no help from the economy. Economists are projecting slim growth for the coming year, and lower commodity prices are already hurting Ottawa's bottom line.
"We used to live in a world of 3-, 31/2-per-cent growth," said Glen Hodgson, chief economist of the Conference Board of Canada. "We now think Canada is slipping into a world of 2-per-cent growth. Two-per-cent growth is much harder to fund health care, education, things we value as a country."
In that context, sources say there is a strong push to find measures tied to innovation and productivity that could boost private-sector growth at little cost to Ottawa.
On the innovation file, the government received a major research paper on the topic in October, 2011, led by Tom Jenkins, the executive chairman at Open Text. Many of the recommendations – such as reworking science and research credits and the way Ottawa funds venture capital in Canada – were included in the 2012 budget. However, other recommendations are still being reviewed by Ottawa and could form part of the 2013 budget.
Mr. Jenkins was named in September as a special adviser to Public Works Minister Rona Ambrose on the topic of defence procurement. The Jenkins report had highlighted this as a huge opportunity to boost growth and innovation in Canada by encouraging more involvement from Canada's private sector in defence procurement, while respecting trade commitments. The government has said it plans to spend $240-billion on military equipment, infrastructure and services between 2008 and 2027.
The expected focus on innovation is part of a broader federal plan to boost productivity, a plan that includes recent changes to immigration, employment insurance and trade.
An internal report on productivity that was delivered to Mr. Flaherty in advance of the 2012 budget states that "the area of greatest concern for productivity in Canada is business innovation." The report, obtained by The Globe and Mail under Access to Information, notes that Canadian businesses spend less on research and development than their G7 counterparts "despite having the most generous government incentives in the G7."
The report also notes that Canadian firms invest less in machinery and equipment than other G7 countries.
Editor's note: An earlier version of this article incorrectly identified Tom Jenkins as the CEO of OpenText. In fact, Jenkins is the executive chairman and chief strategy officer at OpenText. This online version has been corrected.