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federal budget 2017

Finance Minister Bill Morneau delivers the federal budget in the House of Commons on Parliament Hill in Ottawa on March 22, 2017.CHRIS WATTIE/Reuters

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In his second budget, Finance Minister Bill Morneau laid out a vision of activist government steering the country in a rapidly changing economy – a sharp contrast with President Donald Trump's prescription of tax cuts and deregulation.

In Mr. Morneau's budget Wednesday, the Liberal government promised long-term funding for a host of business-related programs in areas such as human resources and skills development; research, development and commercialization of new technology; and green infrastructure.

It provides support for innovation and the formation of clusters in advanced manufacturing, agri-food, clean technology, digital technology, health and bioscience, and reducing the environmental footprint of resource extraction. But while there is a raft of spending announcements, the government said the overall impact on the bottom line will be modest.

"Our approach is responsible, but it is making sure we can continue with our ambitious plan for Canada," he told reporters before delivering his speech in the House of Commons.

However, the president of the Canadian Chamber of Commerce, Perrin Beatty, complained the Liberal government failed to respond to the competitiveness challenges posed by Mr. Trump's pro-business approach.

"The U.S. election was a game-changer, yet the budget is written as if nothing has changed," Mr. Beatty said. "As our No. 1 trading partner rolls back regulation and cuts taxes, Canadian businesses face more regulation and increased costs imposed by all levels of government for fees, taxes and essential inputs like electricity."

Easing some fears in the business community, the Finance Minister appears to have delayed some major decisions, including changes to various tax credits and the treatment of the capital-gains levy – and he kept the increase in overall spending modest, especially over the first two years.

The budget offered little assistance for the beleaguered oil and gas industry, with the exception of a one-time $30-million payment to the Alberta government to help it finance its stimulus program.

In fact, Mr. Morneau eliminated tax preferences used by smaller oil and gas producers to write off the cost of drilling and development.

And while Mr. Trump retreats from climate policy, the government used the budget to reinforce its commitment to its pan-Canadian climate-change plan, pledging a wide array of spending to spur the development and adoption of clean technology. It announced it will soon release a draft plan for carbon-pricing to be imposed next year in provinces that do not have their own carbon levies or do not meet the federal standards.

Some business leaders expressed relief that the government generally held the line on taxes, but also welcomed the spending on innovation and skills development.

"On the plus side, the need to innovate in this global economy is a target for the government," said Avery Shenfeld, chief economist at the Canadian Imperial Bank of Commerce.

"But the negative is that – while we're not raising corporate taxes to any great extent in the budget and raising taxes on investors – we're not cutting them either," he said.

"With the U.S. moving in a clearly different direction, it's going to raise the bar for Canada to compete. And the government seems to be taking a wait-and-see attitude and will respond in a future budget if they have to."

Manufacturers will welcome the government's support for innovation, particularly the establishment of advanced manufacturing research clusters that aims to drive the broad adoption of new technology, said Dennis Darby, president of the Canadian Manufacturers & Exporters Association.

All told, the government has earmarked $8-billion over five years for its innovation agenda, including a host of training initiatives and support for industries such as clean tech and advanced manufacturing.

"Our members will see this as a positive step toward getting more competitive," Mr. Darby said. "Jobs in manufacturing today all involve advanced manufacturing. … We've been underinvested in that area for years."

He said the training and education measures are targeting a critical issue for manufacturers. Some 40 per cent of the association's members say they see a shortage of skilled workers, and a quarter say the problem has led them to forgo planned investments.

Small-business owners will feel they dodged a bullet, said Dan Kelly, president of the Canadian Federation of Independent Business. "It's a fairly stay-the-course budget," Mr. Kelly said. "There's a sprinkling of money over hundreds of initiatives. But there are no giant new spending proposals on the table. So for those of us who prefer small government, that's progress."

However, the business lobbyist criticized the planned increase in Employment Insurance premiums, which will go up by 3 per cent next year to help pay for an extension of maternity benefits and skills training. He noted that the EI increase will come a year before employers face seven consecutive years of increases in Canada Pension Plan premiums.

"Those payroll-tax hikes are the worst possible form of taxation to a small-business owner," Mr. Kelly said. "Small firms tend to be more payroll intensive; large firms tend to be more capital intensive."

Alberta Premier Rachel Notley said the $30-million designed to stoke the province's economy will be directed toward cleaning up abandoned oil and gas wells.

She considers the cash a way to stimulate the economy, create jobs, all while addressing an environmental hazard in the province.

"We will leverage this money to aim more resources at putting Albertans back to work and reclaiming orphan wells," she told reporters Wednesday afternoon. The provincial government will release further details in the coming days, she said.

The $30-million will put only a small dent in the orphan well problem. There are tens of thousands of inactive wells in Alberta, and cleaning them up will cost hundreds of millions of dollars.

"We're not going to fix it overnight," Ms. Notley said. "But what we do need to do is make sure we slowly move toward a higher level of reclamation, a higher level of investment, in that important task of securing these wells and making sure that our land and our water supply are safe."

With a report from Carrie Tait

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