Canada’s Deputy Prime Minister and Finance Minister Chrystia Freeland delivered the 2023 Federal Budget on March 28, 2023 and the Canadian Manufacturers & Exporters (CME) / Canadian Manufacturing Coalition (CMC), which the CHPTA is a member of, welcomed initial steps the Budget took to respond to the US Inflation Reduction Act (IRA), drive net zero transitions, improve labour shortages, and alleviate supply chain disruptions.

In the lead up to the budget, the CME/CMC was very vocal, urging the government to act to support manufacturers. Ongoing labour shortages, the US’ Inflation Reduction Act (IRA)’s negative impact on manufacturing investment in Canada, and the high costs of transitioning manufacturing production to a net-zero future all needed to be addressed or Canada risked missing out on the next generation of manufacturing production.

“We were pleased to see the budget respond to our biggest challenges and believe that the investments made today into Canada’s industrial capacity are good first steps in strengthening our sector,” said Dennis Darby, President and CEO of CME, in a press release. “We will continue to work with the government in the days ahead to get details and ensure the commitments made today are maximized and upheld.”

The CME/CMC noted that the 2023 budget answered these calls by proposing the following measures:

  • Clean Technology Manufacturing Investment Tax Credit matches similar manufacturing credits found in the IRA and addresses some concerns about potential lost investment in Canada.
  • Clean Electricity Investment Tax Credit will help Canadian manufacturer’s transition to net-zero production.
  • Expanded scope of the Tax Credit for Carbon Capture will help us compete with the IRA.
  • Funding to improve immigration backlogs, extended support for Work-Sharing, and funding to increase work integrated learning spaces were all CME asks to improve labour shortages.
  • A new Transportation Supply Chain Office to help industry with disruptions to supply chain transportation networks.
  • A commitment to review the SR&ED incentive system is long overdue and welcome news by manufacturers.

Missing from the Budget this year was CME/CMC’s ask to extend the 10% Atlantic Investment Tax Credit to all Canadian jurisdictions and for targeted help for SME’s for net-zero transition.

“Manufacturing has always been a cornerstone of the Canadian economy, generating 10 per cent of Canada’s GDP, more than 60 per cent of our merchandise exports, and directly employing 1.7 million Canadians and supporting 3.4 million more workers through supply chain activity and employee spending. With the commitments made in Budget 2023, we have the building blocks to help manufacturing drive Canadian prosperity for years to come. We always need to do more, however, and we look forward to working with the government to achieve all our mutual goals” concluded Darby.

Meanwhile, financially, the Budget – titled “A Made-in-Canada Plan” – expects a deficit of $43 billion for 2022-23 and forecasts deficits of $40.1 billion for 2023-24, and $35 billion for 2024-25.

  • The deficit for the fiscal year ending this week grows to $43 billion, or 1.5% of GDP, from the $36.4 billion Freeland forecast in her November budget update. By 2027-28, the government expects a shortfall of $14 billion, instead of the $4.5 billion surplus it previously projected
  • Federal debt as a proportion of GDP will climb to 43.5% in the fiscal year that begins April 1, from 42.5% this year. It’s expected to decline to 42.2% in 2025-26 and 39.9% by the end of the forecast horizon

Green investments

U.S. President Joe Biden’s Inflation Reduction Act offers massive incentives for investments in the green economy. It has acted as a magnet for investment south of the border — so much so that the Liberal government has responded with $1.2 billion this year and almost $21 billion over five years to help Canada keep pace.

As mentioned, the Budget offers three investment tax credits. The first — equal to 30% of the cost of investments in new machinery and equipment used to manufacture or process key clean technologies and to extract, process, or recycle critical minerals — is expected to cost of $4.5 billion over five years.

The Clean Hydrogen Investment Tax Credit will cover somewhere between 15 and 40% of eligible project costs; higher rebates will go to projects that produce the cleanest hydrogen. The hydrogen credit is worth about $5.6 billion over five years.

The budget also provides $6.3 billion over five years to fund the Investment Tax Credit for Clean Energy, which will offer a credit of 15% for investments in non-emitting electricity, natural gas fired electricity generation and energy storage.

Lastly, the Investment Tax Credit for Carbon Capture, Utilization and Storage will cost about $520 million over five years and is available to businesses that invest in storing carbon dioxide or use it in other industrial processes.

To be eligible for the highest rates for these investments credits, businesses must pay their employees a total compensation package that is equal to the existing union wage for the same or comparable jobs, including pensions and benefits.

The budget also earmarks $650 million over ten years for monitoring, assessment and environmental restoration work in the Great Lakes, Lake Winnipeg, the St. Lawrence River and other major bodies of water.

Workers and trade

The Liberal government is also offering up a number of programs and initiatives to improve skills and working conditions including $197.7 million in 2024-25 to create work placements for students through partnerships between employers and post-secondary institutions.

Tradespeople are also being offered a deduction of $500 to $1,000 to help with the cost of new equipment.

The budget is also proposing an anti-scab law prohibiting the use of replacement workers during a strike or lockout in federally regulated industries. It says legislation will be introduced before the end of the year.

Source: CME
Source: CBC News
Source: CTV News