Chapter 2 - Growth for the Middle Class

Introduction

In the last century, it was Canada’s growing and optimistic middle class that built a better country—not just for themselves, but for their children and grandchildren.

The investments they made in Canada’s future prosperity improved the quality of life for every generation that followed. It’s time for Canada to once again make smart, strategic investments that will grow Canada’s economy and make it an even better place to call home.

Canada’s middle class will benefit from the immediate help provided by Budget 2016, but ongoing growth is equally important. By investing in infrastructure now—in the projects Canada needs and the people who can build them—growth for the middle class can be secured well into the future.

At the same time, to deliver new results, Canada must try new things. In Budget 2016, the Government is defining a new vision for Canada’s economy: Canada as a centre of global innovation.

Together, investments in infrastructure and in innovation will form the foundation for a more inclusive society—one that delivers stronger growth and a better quality of life for the middle class and those working hard to join it.

Investing in Infrastructure to Create Jobs and Prosperity for the Middle Class

Investing in infrastructure creates good, well-paying jobs that can help the middle class grow and prosper today. And by making it easier to move people and products, well-planned infrastructure can deliver sustained economic growth for years to come.

At the same time, new challenges have emerged that make the need for investment more acute: things like the rapid growth of Canada’s cities, climate change, and threats to our water and land.

Congestion in Canadian communities makes life more difficult for busy families, and has a negative effect on our economy—when businesses can’t get their goods to market, it undermines growth.

A changing climate is also hard on communities. From floodways to power grids, investments are needed to make sure Canada’s communities remain safe and resilient places to live.

Investing in infrastructure is not just about creating good jobs and economic growth. It’s also about building communities that Canadians are proud to call home.

With historic investments in public transit, green infrastructure and social infrastructure, Budget 2016 will take advantage of historically low interest rates to renew Canada’s infrastructure and improve the quality of life for all Canadians.

In Budget 2016, the Government will implement an historic plan to invest more than $120 billion in infrastructure over 10 years, to better meet the needs of Canadians and better position Canada’s economy for the future.

Chart 2.1

New Infrastructure Spending¹

The Government’s plan will be implemented in two phases.

In addition to funding flowing through the existing programs that support infrastructure, the Government will implement a short-term Phase 1 plan to immediately invest in the infrastructure Canadians need—to modernize and rehabilitate public transit, water and wastewater systems, provide affordable housing, and protect existing infrastructure from the effects of climate change. Phase 1 focuses primarily on infrastructure investments over the next two years.

Phase 2 will deliver on the remaining eight years of the Government’s long-term infrastructure plan. In this phase, the goals will be broader and more ambitious: a more modern, cleaner economy; a more inclusive society; and an economy better positioned to capitalize on the potential of global trade.

This second phase will go hand in hand with the transition to a low-carbon economy. It will make Canada’s largest cities better places to live, through cost-effective, sustainable, integrated transportation networks. And it will aim to deliver fast, efficient trade corridors that allow Canadian exporters to benefit fully from international trade.

In making its investments, the Government will balance support for projects of different size and scope—both those of local and regional importance, and larger, economically strategic projects that can provide transformative change at the national level.

A long-term infrastructure investment plan is an opportunity to make meaningful contributions to Canada’s economic growth and sustainable development by addressing important infrastructure challenges of national significance. Ambitious projects will be supported to reduce urban transportation congestion, improve and expand trade corridors, and reduce the carbon footprint of the national energy system.

New institutions could provide Canada an opportunity to improve infrastructure management across the country by working with our partners to:

• Pursue evidence-based decision-making, arrived at through independent, expert advice;
• Examine new innovative financing instruments to reduce the cost of municipal infrastructure projects so that more are built and they get started earlier;
• Where it is in the public interest, engage public pension plans and other innovative sources of funding—such as demand management initiatives and asset recycling—to increase the long-term affordability and sustainability of infrastructure in Canada; and
• Better support the use of state-of-the-art infrastructure technology to improve the efficiency and effectiveness of existing assets.

The Government will engage with its provincial, territorial, municipal and Indigenous partners, as well as global institutional investors and other stakeholders, and will announce Phase 2 of the long-term plan in the next year.

Phase 1 of Canada’s New Infrastructure Plan

Starting with Budget 2016, Canadians will see real investments made in their communities. Immediate investments that will create jobs and support clean growth across the country.

Phase 1 of the Government’s infrastructure plan proposes to provide $11.9 billion over five years, starting right away. Budget 2016 puts this plan into action with an immediate down payment on this plan, including:

• $3.4 billion over three years to upgrade and improve public transit systems across Canada;
• $5.0 billion over five years for investments in water, wastewater and green infrastructure projects across Canada; and
• $3.4 billion over five years for social infrastructure, including affordable housing, early learning and child care, cultural and recreational infrastructure, and community health care facilities on reserve.¹

The Department of Finance estimates that these and other measures announced in Budget 2016 will raise the level of real gross domestic product by 0.5 per cent in the first year and by 1.0 per cent by the second year (see Annex 2—Economic Impacts of Budget Measures, for details).

This approach is in line with recommendations by the Organisation for Economic Co-operation and Development and the International Monetary Fund, which have argued that governments with the fiscal flexibility to undertake productivity-enhancing investments should do so—both to boost demand in the short term and lay a solid foundation for long-term growth.

The Government is also taking action to ensure that Canadians benefit from the better services that more modern, efficient and sustainable federal infrastructure can provide. Budget 2016 proposes to provide $3.4 billion over the next five years, on a cash basis, to maintain and upgrade federal infrastructure assets such as national parks, small craft harbours, federal airports and border infrastructure. This funding will also support the clean-up of contaminated sites across the country.

In addition to the new funding announced in Budget 2016, the Government will support the infrastructure priorities of communities across Canada. The Government will:

• Continue to make available approximately $3 billion each year in dedicated funding for municipal infrastructure projects through the Gas Tax Fund and the incremental Goods and Services Tax Rebate for Municipalities;
• Work with provincial, territorial and municipal partners to get projects underway, by accelerating spending from the $9 billion available under the New Building Canada Fund’s Provincial-Territorial Infrastructure Component and other existing infrastructure programs;
• Transfer remaining uncommitted funds from older federal infrastructure programs to municipalities through the Gas Tax Fund in 2016–17 in order to ensure funds are directed towards municipal infrastructure priorities in the near term; and
• Ensure that Government institutions are aligned to best support infrastructure innovation, including by transferring responsibility for PPP Canada Inc. to the Minister of Infrastructure and Communities.

Phase 1 of Canada’s New Infrastructure Plan

With Budget 2016, the Government is launching a transformative plan to invest almost $60 billion in new infrastructure funding.

Budget 2016 lays the groundwork for future growth, by making immediate investments in public transit, green infrastructure and social infrastructure. These investments represent $11.9 billion of the Government’s 10-year commitment. In the coming months, the Government will lay out its longer-term priorities for renewing and modernizing Canada’s infrastructure.

Chart 2.2

Budget 2016 Announces Phase 1 of Infrastructure Plan

Building Strong Cities Through Investments in Public Transit

Canadian cities have been growing at a rapid rate, but investment in public transit has not kept pace. This has led to more traffic congestion, and long commutes that make it harder for people to get to work and for families to spend time together.

The gridlock that results has a serious financial impact—costing Canada’s economy billions of dollars in lost productivity each year—and is damaging to the environment.

To improve and expand public transit systems across Canada, Budget 2016 proposes to invest up to $3.4 billion in public transit over three years, starting in 2016–17. Funding will be provided through a new Public Transit Infrastructure Fund.

These investments will help to shorten commute times, cut air pollution, strengthen communities and grow Canada’s economy.

Investing in Green Infrastructure

To ensure that Canada’s communities are healthy and productive places to live, Budget 2016 proposes to invest $5.0 billion over the next five years in infrastructure that protects communities and supports Canada’s ongoing transition to a clean growth economy.

These investments will help Canadian communities adapt to the challenges of climate change. As referenced in Chapter 4—A Clean Growth Economy, the Government will invest in electric vehicle and alternative transportation fuel infrastructure, initiatives to foster regional electricity cooperation, and the development of building codes and standards that integrate climate resiliency requirements.

There is also an urgent need in many Canadian communities to modernize water and wastewater infrastructure. Working with provinces, territories, municipalities and First Nations communities, the Government will invest in this essential infrastructure, and will seek out new partnerships on innovative green infrastructure projects and capacity-building programs.

Building Capacity in Municipalities to Address Climate Change

From reducing greenhouse gas emissions to transforming the way we live, work and move around our communities, municipalities are on the front lines of serving Canadians. When it comes to issues like climate change—a significant challenge that will affect every community in different ways—help from other orders of government is needed.

To support municipalities’ front-line efforts, the Government has announced $75 million in new funding for local governments to address climate change, to be delivered by the Federation of Canadian Municipalities. This investment will support municipality-led projects to identify and implement greenhouse gas reduction opportunities. It will also support the assessment of local climate risks, and the integration of these impacts into asset management plans.

Funding Innovative Green Municipal Projects

Budget 2016 proposes to provide $125 million over the next two years to the Federation of Canadian Municipalities to enhance the Green Municipal Fund, including for projects that reduce greenhouse gas emissions. This Fund, established in partnership with municipalities in 2000, finances and funds innovative, municipal green infrastructure priorities, and has provided over $700 million to projects across the country since its inception.

Developing Community Capacity for Asset Management Best Practices

The Government is also proposing a new $50 million capacity-building fund to support the use of asset management best practices across Canada. Asset management plans guide how core infrastructure assets are to be built, renewed, operated, maintained and replaced. This type of planning helps to maximize the use of public dollars. Smaller communities, in particular, have indicated that they lack corporate capacity to undertake these important planning activities. This funding will be delivered through the Federation of Canadian Municipalities and will strengthen capacity-building in communities for longer-term planning that supports strategic investments.

In addition, Infrastructure Canada will work with Statistics Canada to improve infrastructure-related data. This will support better information on the state and performance of core public infrastructure assets for all levels of government.

Adaptation and Climate Resilient Infrastructure

Canada’s future prosperity rests on its ability to adapt to new challenges, including those that result from climate change and other threats to water and land. The Government is committed to working with provincial, territorial and municipal partners to invest in shared priorities that help grow Canada’s clean economy while helping communities better prepare for these future challenges.

Many communities have already identified projects that are ready for immediate investment by the federal government, including:

• $248 million for the Lake Manitoba and Lake St. Martin Outlet Channels Project. This project will allow the Province of Manitoba to regulate lake levels and provide flood protection to individuals, businesses and communities around these lakes. Without enhanced water control infrastructure, there is a high risk of recurring flood damage, similar to that experienced in 2011; and
• $212 million to upgrade the Lions Gate Wastewater Treatment Plant to make it resilient to climate events. This facility provides primary treatment of wastewater for residents of the District of West Vancouver, the City of North Vancouver and the District of North Vancouver, and is threatened by risks posed by extreme weather and climate change (such as a projected rise in sea levels).

Sustaining Healthy Communities Through a New Clean Water and Wastewater Fund

Water and wastewater infrastructure is essential to keeping our waterways clean and our communities healthy and livable. Many systems across Canada need urgent improvements to ensure that Canadian families continue to have access to clean water. There are also high-risk wastewater facilities across the country that will require upgrades by 2020 in order to meet new, stronger federal environmental regulations.

To address these needs, the Government is announcing a new Clean Water and Wastewater Fund for provinces, territories and municipalities. Budget 2016 proposes to invest $2.0 billion over four years, starting in 2016–17, for immediate improvements to water distribution and treatment infrastructure.

In addition to delivering support for urgent provincial, territorial and municipal water and wastewater priorities, funding will be delivered to communities this year, on an expedited basis. To get projects moving quickly, the Government will fund up to 50 per cent of eligible costs for projects. Investment in this Fund will improve the safety and quality of water for Canadian families, while supporting job creation and a clean growth economy.

Budget 2016 also proposes to provide $1.8 billion over five years to address health and safety needs, to ensure proper facility operation and maintenance, and to end long-term boil water advisories on First Nations reserves within five years, as referenced in Chapter 3—A Better Future for Indigenous Peoples.

Building Stronger Communities

Investing in Canada’s communities is not only about creating good jobs and encouraging clean economic growth. It is also about building stronger communities.

By making new investments in social infrastructure—in things like affordable housing and early learning and child care—Budget 2016 will help strengthen the middle class, promote inclusive growth for Canadians, and lift more Canadians—including children and seniors—out of poverty.

As part of the Government’s Phase 1 commitments, Budget 2016 proposes initial social infrastructure investments totaling $3.4 billion over five years. These investments will help expand affordable housing (including shelters for victims of violence), support early learning and child care, renew cultural and recreational infrastructure, and improve community health care facilities on reserve. As referenced in Chapter 3—A Better Future for Indigenous Peoples, of this new funding, $1.2 billion will be invested in First Nations, Inuit and northern communities.

To ensure that investments reflect the needs of Canadians and Canadian communities, the Government of Canada will consult with stakeholders in the coming months to determine where future investments in social infrastructure should be made.

Expanding Affordable Housing

All Canadians need and deserve housing that is safe, adequate and affordable. Without it, Canadians feel less secure and that makes it harder to accomplish every other goal—from raising healthy children to pursuing education, jobs and opportunity. When affordable housing is in short supply, Canada’s whole economy suffers.

To give Canadians greater access to more affordable housing, Budget 2016 proposes to invest $2.3 billion over two years, starting in 2016–17. Of this amount, $2.2 billion reflects the Government’s commitment to invest in social infrastructure, including $739 million for First Nations, Inuit and northern housing. A significant portion of the $2.3 billion investment will be allocated to provinces and territories, which can identify communities where the need for affordable housing is greatest. Investing in affordable housing will provide targeted support to those who need it most and create good jobs that help grow Canada’s economy in a clean and sustainable way.

To ensure that these investments are most effective and to help the social housing sector achieve self-reliance, the Government will consult with provinces and territories, Indigenous and other communities, and key stakeholders in the coming year to develop a National Housing Strategy.

Doubling the Investment in Affordable Housing Initiative

In response to the persistent, high demand for affordable housing across the country, Budget 2016 proposes to double current federal funding under the Investment in Affordable Housing initiative. Under this initiative, provinces and territories match federal investments and have the flexibility to design and deliver programs that are tailored to address local housing needs and pressures.

To support the construction of new affordable housing units, the renovation and repair of existing affordable housing, measures to support housing affordability such as rent supplements, and measures to foster safe, independent living, the Government will invest $504.4 million over two years, starting in 2016–17. This increased support is expected to benefit more than 100,000 Canadian households.

Increasing Affordable Housing for Seniors

Canada’s senior population is growing, and many seniors now find it difficult to afford housing that is suitable, or that allows them to easily stay in their homes as long as possible.

Budget 2016 proposes to provide $200.7 million over two years, starting in 2016–17, to support the construction, repair and adaption of affordable housing for seniors. While funding will be provided under the Investment in Affordable Housing initiative, provinces and territories will not be required to cost-match these investments. This investment is expected to help improve housing conditions for more than 5,000 low-income senior households.

Supporting Energy and Water Efficiency Retrofits and Renovations to Existing Social Housing

In addition to support provided under the Investment in Affordable Housing initiative, the Government provides ongoing support to 570,000 social housing units across Canada. Many of these units are older, equipped with less efficient energy and water systems and are urgently in need of repairs.

To support these necessary retrofits and renovations, Budget 2016 proposes to provide $573.9 million over two years, starting in 2016–17. This investment will help address the increasing demand for repairs as social housing units age, and will also improve efficiency and reduce energy use, lowering utility costs and making housing more affordable. By improving water and energy efficiency, this investment will also help the social housing sector contribute to Canada’s overall plan to reduce greenhouse gas emissions.

Providing Rent Subsidies for Federally Administered Social Housing Providers

The Government provides support for social housing through long-term operating agreements with social housing providers. As these agreements expire, some federally administered social housing providers may struggle to continue serving low-income households without increasing rental rates. Budget 2016 proposes to reallocate $30 million over two years, starting in 2016–17, to help these providers maintain rent-geared-to-income for households living in social housing. This additional support would be provided on a time-limited basis until long-term approaches to help the social housing sector achieve self-reliance can be developed through consultations with provinces, territories and stakeholders.

Supporting the Construction of Affordable Rental Housing

Not all Canadians can afford to—or wish to—own their own home. As a result, affordable rental housing is an important part of the housing continuum, providing housing options for many households, including low- and middle-income Canadians, seniors and new immigrants.

To encourage the construction of affordable rental housing, Budget 2016 proposes to invest $208.3 million over five years, starting in 2016–17, in an Affordable Rental Housing Innovation Fund, to be administered by the Canada Mortgage and Housing Corporation. Funding would be used to test innovative business approaches—such as housing models with a mix of rental and home ownership—to lower the costs and risks of financing affordable rental housing projects. This investment is expected to support the construction of up to 4,000 new affordable housing rental units over five years, and is being made over and above investments in affordable housing under the Government’s social infrastructure commitment.

Going forward, Canada Mortgage and Housing Corporation will also consult with stakeholders on the design of an Affordable Rental Housing Financing Initiative to provide low-cost loans to municipalities and housing developers for the construction of new affordable rental housing projects. Up to $500 million in loans would be available each year for five years. This initiative would encourage the construction of affordable rental housing by making low-cost capital available to developers during the earliest, most risky phases of development. This initiative could support the construction of more than 10,000 new rental units over five years.

Supporting Shelters for Victims of Violence

No person fleeing domestic violence should be left without a place to turn. To this end, Budget 2016 proposes to provide $89.9 million over two years, beginning in 2016–17, for the construction and renovation of shelters and transition houses for victims of family violence. While funding will be provided under the Investment in Affordable Housing initiative, provinces and territories will not be required to cost-match these investments. This unprecedented investment is expected to support the construction or renovation of over 3,000 shelters spaces over the next two years.

Tackling Homelessness

Homelessness is a reality for too many Canadians and a challenge for every Canadian community.

To help homeless Canadians find stable housing, Budget 2016 proposes to invest an additional $111.8 million over two years, starting in 2016–17, in the Homelessness Partnering Strategy. Through this Strategy, the Government provides direct support and funding to communities across Canada for projects to prevent and reduce homelessness, including Housing First initiatives that help homeless Canadians secure stable housing while providing them with support for underlying issues, such as mental health or addiction. This investment will give communities the support they need to help prevent and reduce homelessness, including Housing First activities, better emergency response services, and supports for youth, women fleeing violence, and veterans.

Supporting Early Learning and Child Care

For Canadian families, high-quality, affordable child care is more than a convenience—it’s a necessity. The Government recognizes the deep connection between child care and the economic security of families, and proposes to invest $500 million in 2017–18 to support the establishment of a National Framework on Early Learning and Child Care. Of this amount, $100 million would be for Indigenous child care and early learning on reserve.

Because child care needs vary from family to family, and because provinces and territories have responded to those needs in different ways, the Framework will be designed to meet the needs of Canadian families, wherever they live.

Developing the Framework will begin in 2016–17, and will be a joint effort—the Government, provinces, territories and Indigenous peoples will all contribute to its creation. Investments under the new Framework are expected to flow in 2017–18.

Investing in Cultural and Recreational Infrastructure

Cultural and recreational infrastructure—places like community centres, museums, parks and arenas—helps to make our communities feel like home. In many communities, these are the places where families can play together, where neighbours can meet, and where Canadians can celebrate the many cultures that make Canada so diverse.

To support these important parts of our communities, Budget 2016 proposes to invest $168.2 million over two years, starting in 2016–17, in the Canada Cultural Spaces Fund. This Fund supports the renovation and construction of arts and heritage facilities, and recipients would include not-for-profit arts and heritage organizations, provincial and territorial governments, municipalities and their agencies, and equivalent Indigenous peoples’ institutions.

In addition, to celebrate the 150^th anniversary of Canada’s Confederation, Budget 2016 proposes to provide $150 million to the Regional Development Agencies over two years, starting in 2016–17. This funding, which is cost-shared with municipalities, community organizations and non-profit entities, will support projects to renovate, expand and improve existing community and cultural infrastructure in all regions of the country, including projects that advance a clean growth economy.

Improving Community Accessibility

It is important that Canadians with disabilities have the ability to fully participate in their communities. Budget 2016 proposes to provide an additional $4 million over two years, starting in 2016–17 for the Enabling Accessibility Fund to support the capital costs of construction and renovation related to improving physical accessibility and safety for people with disabilities in Canadian communities.

National Historic Sites

The National Historic Sites Cost-Sharing Program is delivered by the Parks Canada Agency and provides funding to non-federally owned or administered national historic sites to help protect nationally significant cultural infrastructure. Budget 2016 proposes to provide $20 million over two years, beginning in 2016–17, to the Parks Canada Agency to enhance the program, including expanding it to include heritage lighthouses and railways. This funding will help to ensure that Canada’s national historic sites are maintained for future generations.

Assisting Homeowners Affected by Pyrrhotite

Homeownership is a goal that many Canadians work hard to reach and it is an investment that they want to protect. Unfortunately, some homes in certain regions of Quebec have had serious and costly structural problems as a result of the presence of the mineral pyrrhotite in their foundations. In response, the Government of Quebec has provided significant financial support to affected homeowners to replace foundations and undertake other necessary repairs. To help more homeowners dealing with the consequences of pyrrhotite, the Government will provide up to $30 million over three years, starting in 2016–17.

Improving Access for Rural Communities to the Digital Economy

Few jobs, sectors or aspects of life are untouched by information and communications technology. Access to better, more reliable broadband connections will provide Canadians in rural and remote communities with new opportunities to participate in the digital economy and to take advantage of advances in telehealth, e-learning and remote access to government services.

Budget 2016 proposes to deliver on the Government’s priority of increasing high-speed broadband coverage by investing up to $500 million over five years, starting in 2016–17, for a new program to extend and enhance broadband service in rural and remote communities.

Further details on program parameters will be announced in the coming months.

Revitalizing Federal Public Infrastructure Across Canada

The Government of Canada owns a significant infrastructure portfolio across the country. This federal infrastructure is significant and touches every aspect of life in Canada—it facilitates the movement of goods and people, it ensures the safety of our food and security at our borders, and it brings Canadians together to celebrate our rich and storied past. It is also critical for enhancing productivity and growth in our economy, and contributes to the health and well-being of Canadians, by providing core services such as transport, water, electricity and energy.

Canadians are affected when the federal infrastructure they rely upon is not adequately maintained. This can result in the deterioration of roads, highways, bridges and dams, as well as buildings and laboratories, ports and airports. The Government has a responsibility to Canadians not only to address these assets in need of repair, but also to use the opportunity to enhance clean growth—by focusing on reducing our carbon footprint and pursuing green solutions wherever possible.

With interest rates at historic lows, now is the ideal time for the Government to invest in revitalizing this infrastructure, to ensure that it continues to serve a vital role in our economy and for the benefit of all Canadians, from coast to coast to coast.

Accelerating Federal Infrastructure Investments

Important projects to improve the state of Canada’s federal infrastructure will commence in 2016—creating new jobs and opportunities for businesses across the country. In addition to the immediate benefits in terms of job creation across the country in the construction, engineering and manufacturing sectors, as well as the generation of significant economic spinoff activity, these investments will also ensure that Canadians continue to benefit from modern, efficient and sustainable infrastructure that is the foundation of our quality of life and long-term prosperity.

Budget 2016 proposes to invest up to $3.4 billion over the next five years, on a cash basis, to maintain and upgrade federal infrastructure assets that provide services all Canadians rely on:

• Canada is a vast and beautiful country, endowed with breathtaking, awe-inspiring natural areas. To ensure that Canadians can continue to enjoy our world-class national parks system, up to $191 million will be invested on trails and highways in national parks.
• Harbours are critical infrastructure components of our transportation system, relied on daily by our fishing industry and recreational users. Commercial fishers and recreational boaters will benefit from up to $149 million in investments that will revitalize small craft harbours across the country.
• Environmental stewardship is part of our obligation to ensure that future generations can live in a clean world. To reduce risks to human health and the environment, funding of up to $217 million will be provided for environmental remediation work on contaminated sites.
• The federal government has an important role to play in advancing science, research and innovation, the pillars of strong and advanced economies. Federal laboratories and other federal assets that support science, research and innovation, will receive up to $139 million.
• To modernize and preserve some of Canada’s world-class cultural infrastructure for future generations to enjoy, up to $281 million will be provided to support the construction of a new collection and conservation centre for the Canada Science and Technology Museum; the renewal of the National Arts Centre’s performance venues; and repairs to the National Gallery of Canada, including its iconic windows.
• Canadians look to their governments to keep them safe and secure. Providing reliable infrastructure for its citizens to use, ensuring that safety threats are mitigated against, and preventing harmful and unlawful acts are core responsibilities of any government. The Government will invest up to $232 million in safety and security. Funding will support National Defence infrastructure, as well as the safety of public and marine infrastructure at Canadian Coast Guard bases.
• Funding of up to $91 million will also be provided in support of key government services, including transportation infrastructure for airports and ferries.
• Offering high-quality services to Canadians requires assets that are in a good state of repair. The Government will invest up to $2.1 billion towards repairs and retrofits to its wide range of properties and buildings, as well as the greening of government operations. Examples will include funding to improve military housing, upgrade border infrastructure, modernize the generation of energy for marine communication and traffic services, and reduce the carbon footprint and energy consumption of federal buildings in the National Capital Region.

This funding is over and above the Government’s commitment to provide nearly $60 billion in new infrastructure funding over the next 10 years.

Supporting Water Infrastructure in Saskatchewan

Dams and other water control structures in southern Saskatchewan support the irrigation needs of farmers and ranchers, provide recreational opportunities for Canadian families, and assist in ensuring communities have access to clean and sustainable water sources.

The Government is committed to working collaboratively with the Government of Saskatchewan to continue the transfer of federally owned dams to the Saskatchewan Water Security Agency to better serve Saskatchewan’s water and water infrastructure needs.

Improving Rail Service

For nearly 40 years, VIA Rail Canada Inc. has provided passenger rail services connecting communities across the country. VIA Rail carried 3.8 million passengers in 2015, across a 12,500-kilometre rail network serving 450 cities and towns that extends from Prince Rupert, British Columbia to Halifax, Nova Scotia. The vast majority of passengers (over 90 per cent) travelled within the high-density Windsor-Quebec City corridor.

VIA Rail faces significant capital investment requirements going forward. Budget 2016 proposes to provide $7.7 million in 2016–17 on a cash basis to VIA Rail to support technical studies and other pre-procurement activities related to the renewal of VIA Rail’s fleet, for safety upgrades at grade crossings on tracks owned by VIA Rail, and for investments in improved security at VIA Rail stations.

VIA Rail has developed a proposal for a high-frequency rail service within the Windsor-Quebec City corridor that could see VIA Rail operate on dedicated tracks exclusive to its services. This could permit increased service frequencies, improved on-time performance and reduced trip times. Budget 2016 proposes to provide $3.3 million over three years to Transport Canada to support an in depth assessment of VIA Rail’s high-frequency rail proposal.

Supporting Ferry Services in Atlantic Canada

Ferry services are an important element of the transportation network in Atlantic Canada. Transport Canada provides financial support to routes between Îles de la Madeleine, Quebec and Souris, Prince Edward Island; between Saint John, New Brunswick and Digby, Nova Scotia; and between Wood Islands, Prince Edward Island and Caribou, Nova Scotia.

Budget 2016 proposes to provide $51.9 million in 2016–17 on a cash basis to support the continued operation of these ferry services and for the disposal of the MV Princess of Acadia that has been replaced by the new MV Fundy Rose on the Saint John-Digby route. The MV Fundy Rose meets both national and international environmental standards and emits fewer air pollutants compared to the vessel she replaced.

Building A More Innovative Country

The global economy is shifting—technology is transforming the way Canadians access information, buy goods and services, interact with each other and build communities. At the same time, countries around the world are searching for ways to foster clean growth and support healthy and prosperous societies. To drive growth, to improve the livelihoods of Canadians and to create jobs in areas including manufacturing, digital technology and renewable energy, Canada must be on the leading edge of this change. Innovation is today’s driver of inclusive growth, and Canada must be in it to win.

In Budget 2016 the Government is defining a new vision for Canada’s economy: to build Canada as a centre of global innovation. Canada will be propelled by its creative and entrepreneurial citizens; its leading science and technology; its excellent innovation infrastructure; and its globally competitive companies offering high-quality products and services, thriving within a business environment that supports commercialization and growth. Through 2016 and 2017, the Government will define a bold new plan, its Innovation Agenda, to achieve this vision.

Underpinning the Innovation Agenda will be a plan for change.

Through 2016, the Government will redesign and redefine how it supports innovation and growth, in partnership and coordination with the private sector, provinces, territories and municipalities, universities and colleges, and the not-for-profit sector.

The Innovation Agenda will define clear outcomes—objectives and metrics to measure progress towards this vision.

The Government’s plan will be cross-government and coordinated across key departments. Whether it is clean technology, health sciences, advanced manufacturing, digital technology, resource development or agri-food, the Government’s plan will work to align its support for the key ingredients of innovation—helping to propel Canada’s entrepreneurs and innovators from start-up and commercialization stages to global success.

Through alignment, coordination and simplification, the Innovation Agenda will drive greater clarity of purpose to government support for innovation and ultimately greater support for Canada’s innovators and entrepreneurs.

To help realize this vision, Budget 2016 proposes several interim measures to promote research and accelerate business growth by:

• Focusing new federal support for science on world-class discovery research;
• Maintaining funding for commercialization of promising scientific discoveries and industry take-up of emerging applications;
• First steps in orienting federal business support toward firms with ambition to grow, to help ensure they have the resources and support they need to reach their potential; and
• Building a better evidence base to identify gaps, evaluate performance and inform future decisions.

Strengthening Science and Research

The Government understands the central role of science in a thriving, clean economy and in providing evidence for sound policy decisions. Canada’s universities, colleges and other research institutions play a fundamental role in Canadian society by developing highly skilled and creative workers. They are also the engines of discovery, and collaborate on innovations that help companies compete and grow. Budget 2016 takes action to reinvigorate Canada’s research and science base by investing in infrastructure at post-secondary institutions and federal laboratories, fostering research excellence, and accelerating the diffusion and commercialization of knowledge into applications that benefit industry and society as a whole.

Strategic Infrastructure Investments at Post Secondary Institutions

The prosperity of Canadians relies on the ability of the country to attract and retain talented people, boost innovation and build a sustainable economy. The quality of infrastructure at Canadian post-secondary institutions plays a key role in these efforts. Through the Canada Foundation for Innovation, the Government of Canada already makes significant investments in research infrastructure at Canada’s universities, colleges and research hospitals. Provinces and territories also provide substantial funding for campus renewal every year. Nonetheless, much of Canada’s post-secondary infrastructure is over 25 years old and nearing the end of its useful life. This presents an opportunity to invest in greener and more innovation-friendly spaces.

Recognizing the value to Canada of strong post-secondary institutions, Budget 2016 proposes to provide up to $2 billion over three years, starting in 2016–17, for a new Post-Secondary Institutions Strategic Investment Fund, a time-limited initiative that will support up to 50 per cent of the eligible costs of infrastructure projects at post-secondary institutions and affiliated research and commercialization organizations, in collaboration with provinces and territories. This initiative is aimed at enhancing and modernizing research and commercialization facilities on Canadian campuses, as well as industry-relevant training facilities at college and polytechnic institutions, and projects that reduce greenhouse gas emissions and improve the environmental sustainability of these types of facilities.

These targeted, short-term investments in infrastructure projects will promote economic activity across the country and benefits for the Canadian economy and society well into the future. Work is underway, in consultation with the provinces and territories, to implement this initiative as quickly as possible.

Strengthening Canada’s World-Class Research Capacity and Excellence

Research at Canadian post-secondary institutions and research hospitals creates new insights and leads to the technology breakthroughs of tomorrow that help to respond to major economic, social and environmental challenges and opportunities. The Government understands that the creation of knowledge and development of highly qualified people are vital for Canada’s prosperity in the global economy.

Budget 2016 is taking action to support the excellence of Canadian research by investing in discovery research through the granting councils and providing additional support to world-class researchers and institutions.

I had no thought of any application of this new knowledge—if it could be obtained—nor did anyone ask me to justify my work in this fashion. The assumption at that date was that if the breakthrough in understanding of nature, that is to say in fundamental or basic science, could be achieved, applications would undoubtedly follow. The assumption turned out to be correct.

Recognizing the fundamental role of investigator-led discovery research in an innovative society, Budget 2016 proposes to provide an additional $95 million per year, starting in 2016–17, on an ongoing basis to the granting councils—the highest amount of new annual funding for discovery research in more than a decade. These funds will be allocated as follows:

• $30 million for the Canadian Institutes of Health Research;
• $30 million for the Natural Sciences and Engineering Research Council;
• $16 million for the Social Sciences and Humanities Research Council; and
• $19 million for the Research Support Fund to support the indirect costs borne by post-secondary institutions in undertaking federally sponsored research.

Together with the funding provided to the granting councils in Budget 2015 of $46 million in 2016–17 and ongoing, a total of $141 million in new annual resources will be made available to the granting councils going forward.

Budget 2016 also makes the following investments in attracting and retaining world-class researchers and developing promising discoveries into applications that create value for Canadians.

Ensuring Federal Support for Research Is Strategic and Effective

To ensure that federal support for research, including through the granting councils, is strategic and effective, Budget 2016 also announces that the Minister of Science will undertake a comprehensive review of all elements of federal support for fundamental science over the coming year. In order to strengthen the granting councils and Canada’s research ecosystem, the review will:

• Assess opportunities to increase the impact of federal support on Canada’s research excellence and the benefits that flow from it;
• Examine the rationale for current targeting of granting councils’ funding and bring greater coherence to the diverse range of federal research and development priorities and funding instruments;
• Assess the support for promising emerging research leaders; and
• Ensure there is sufficient flexibility to respond to emerging research opportunities for Canada, including big science projects and other international collaborations.

Supporting Canada’s Continued Leadership in Space

Canada’s participation in the International Space Station’s earth orbiting research laboratory began over 30 years ago with the original Canadarm, a transformative project that seized the imaginations of researchers, astronauts and ordinary Canadians alike and inspired national pride in Canada’s technological achievements. Since then, Canada has demonstrated a unique ability to develop and deliver leading-edge space technologies such as Canadarm2 and Dextre and to conduct ground-breaking research in the Station’s labs.

To secure Canada’s place in the International Space Station, Budget 2016 proposes to provide up to $379 million over eight years, starting in 2017–18, for the Canadian Space Agency to formalize negotiations with the National Aeronautics and Space Administration and undertake the necessary activities to extend Canada’s participation to 2024.

Canada will also continue to take part in other important international collaborations with the potential to build on Canada’s strengths and develop the space industry sector’s capabilities. This includes Canada’s continued participation in the European Space Agency’s Advanced Research in Telecommunications Systems program, for which $30 million over four years, starting in 2016–17, was provided in Budget 2015.

Growing the Agriculture and Agri Food Sector

The Canadian agriculture and agri-food sector is a vital part of our economy that supports both rural and urban communities across the country. At its foundation are the farmers and ranchers that work hard to feed Canada and the world.

Agriculture is an area of shared responsibility, and the federal government works closely with provincial and territorial governments to deliver agriculture and agri-food programs and services through a federal-provincial-territorial policy framework.

The current five-year policy framework, Growing Forward 2 (2013–18), includes spending of $3 billion by federal, provincial and territorial governments, and emphasizes support for agricultural and agri-food innovation, competitiveness, and market development.

In addition, the framework includes a comprehensive suite of business risk management programs to help farmers manage the risks associated with severe market volatility and disaster situations. The level of support provided under these programs varies with market conditions with average annual federal-provincial-territorial spending of approximately $2 billion.

Moving forward, the Government is committed to supporting an agricultural and agri-food sector that is strong and innovative.

Investing in Agricultural Science

Science and research supports the agriculture and agri-food sector’s productivity and competitiveness by contributing to the development of new products and processes, promoting environmental sustainability, and reducing threats from diseases and pests. Public agricultural research is particularly important in addressing emerging issues, such as climate change, which have broad implications for agriculture and agri-food producers across the sector.

The federal government maintains a national network of world-class research centres and is committed to working collaboratively with farmers, provincial governments, academia, non-governmental organizations and other domestic and international stakeholders. Canada has a strong history and foundation in public agricultural research and continues to be an international leader in this field. The research and scientific demands of the sector are continuing to evolve and are increasingly relying on the use of new technologies and novel research approaches.

To support modern agricultural science in Canada, Budget 2016 proposes to provide $30 million over six years, starting in 2016–17, to Agriculture and Agri Food Canada to support advanced research in agricultural genomics. Investments in specialized scientific equipment and expertise will allow Agriculture and Agri-Food Canada to accelerate the DNA analysis and digital recording of the department’s collection of over 17 million physical specimens of insects, plants, fungi, bacteria and nematodes. This will improve public accessibility to this collection and will support research in priority areas, including climate change and the rapid identification and prevention of biological threats to agriculture.

Over the coming year, the Minister of Agriculture and Agri-Food will develop an approach for additional investments in agricultural science and research, informed by the review of federal support for fundamental science to be undertaken by the Minister of Science. This will allow for future investments in agricultural research to be well-positioned within Canada’s broader research ecosystem.

Supporting Business Growth and Innovation

For Canada to become a global innovation leader, more of the country’s creative entrepreneurs and innovative companies will need to seize global market opportunities to grow their businesses. Dynamic, globally connected firms will propel clean economic growth, increase Canada’s productivity and support well-paying jobs for the middle class. As the Government continues to develop its Innovation Agenda, Budget 2016 takes some interim actions to support innovative and growth-oriented businesses in reaching their potential and to help firms put innovation at the core of their business strategy.

Strengthening Innovation Networks and Clusters

Translating Canada’s science and technology strengths into successful, globally competitive companies requires the private sector, post-secondary institutions, governments and other stakeholders to work together more strategically to achieve greater impact. Connections between knowledge producers and users—including researchers and firms—and collaboration within supply chains driven by market opportunities create value through innovation and support economic growth. Information gaps and coordination challenges may prevent these linkages from being developed to their full potential, impacting the strength of innovation ecosystems. To help address these challenges, Budget 2016 proposes to make available up to $800 million over four years, starting in 2017–18, to support innovation networks and clusters as part of the Government’s upcoming Innovation Agenda.

This support will catalyze private sector dynamism, generate greater value from public investments in innovation and enable the pursuit of ambitious initiatives that bring a critical mass of stakeholders together and connect their ideas to the marketplace. Further details about the allocation of this funding will be provided in the coming months.

Helping High-Impact Firms Scale Up

The Government recognizes the vital role that high-impact firms play in creating jobs and generating economic growth. Having more firms realize their untapped growth potential supports a growing and innovative economy. However, these fast-growing firms tend to face common challenges at predictable points along their growth paths. By coordinating federal support such as financing solutions, advisory services and export and innovation support from key federal delivery organizations, these firms are better placed to invest in innovation and secure the talent and capital that will enable their success in the global marketplace.

Consistent with the Innovation Agenda’s goals to better coordinate and align support for Canadian innovators, Budget 2016 proposes to launch a new initiative in 2016–17 to help high-impact firms scale up and further their global competitiveness. Under this client-centric approach, firms will be able to access coordinated services tailored to their needs at crucial transition points, from key organizations starting with Innovation, Science and Economic Development Canada, the Business Development Bank of Canada, Export Development Canada, the National Research Council’s Industrial Research Assistance Program, Global Affairs Canada’s Trade Commissioner Service and the Regional Development Agencies. The initiative aims to target 1,000 firms in the first few years, and expand to more firms thereafter.

Supporting a Strong and Innovative Automotive Sector

The automotive industry is among Canada’s leading employers and exporters, valued at $17 billion per year and directly employing more than 125,000 Canadians from automotive assembly to parts production.

As the global automotive industry is evolving toward the production of cleaner, more connected vehicles, Canada has an opportunity to apply its strengths in areas such as lightweighting and information and communications technologies to designing and building the cars of the future. The Government of Canada partners with the Government of Ontario and the automotive industry to attract strategic, large-scale research and development projects focused on new vehicle technologies through the Automotive Innovation Fund. Budget 2016 announces the extension of the Automotive Innovation Fund, which is currently scheduled to sunset at the end of 2017–18, through to the end of 2020–21. In the coming months, the Minister of Innovation, Science and Economic Development will work, in collaboration with the Government of Ontario and industry stakeholders, to raise the profile of Canada’s strong capabilities and better influence investment location decisions necessary for the long-term competitiveness of the Canadian automotive sector. As part of this work, the Government will examine approaches that will allow it to maximize the impact of federal support offered to the automotive sector, including through assessing the terms of the Automotive Innovation Fund.

Developing a Canadian Cluster Map to Identify and Build on Regional Strengths

Clusters involve an extensive web of complementary linkages between companies and other actors, such as universities and colleges, research organizations and financing sources, in a specific industry sector and location. The presence of strong clusters can entail significant competitive benefits and growth opportunities for a region and the companies located there. Budget 2016 announces the Government’s intent to develop, in collaboration with provinces, territories, research institutions and other stakeholders, a nationwide Canadian Cluster Mapping portal. The availability of cluster mapping data—such as the composition of regional economic performance and patterns of business relationships—through a user-friendly, Internet-based tool will help to inform the design and delivery of programs by all levels of government. It will also enhance the ability of regions to attract foreign investment and help companies to benchmark and identify collaboration and sales opportunities.

Helping Small and Medium-Sized Companies to Innovate and Grow

The National Research Council’s Industrial Research Assistance Program supports innovative and growth-oriented small and medium-sized companies through advisory services, research and development project funding and networking. While further work to develop the Innovation Agenda takes place, Budget 2016 proposes to provide the Program with an additional $50 million in 2016–17 to increase the number of companies served by the Program’s highly qualified Industrial Technology Advisors nationwide. This funding complements the additional investments being proposed to support work experience for recent graduates through the Youth Employment Strategy (see “A Renewed Youth Employment Strategy” in Chapter 1).

Strengthening Canada’s Network of Accelerators and Incubators

Mentoring services, networking opportunities and business development advice provided by business accelerators and incubators can play a significant role in improving the growth prospects of young, technology-intensive firms. Consistent with the Government’s goals of defining outcomes and measures of success, Budget 2016 announces that the Government will work with stakeholders to develop a performance measurement framework for business accelerators and incubators in Canada. This framework will enable these organizations to benchmark their performance and drive improvement, help companies to choose their best options for support, and assist governments at all levels in increasing the effectiveness of public investments in this area.

Linking Canadian Technology Companies to Global Markets and Expertise

Increased access to global markets and expertise can help innovative Canadian technology firms grow. Budget 2016 proposes to provide $4 million over two years, starting in 2016–17, to renew the Canadian Technology Accelerator Initiative. This program supports Canadian information and communications technology, life sciences and clean technology firms by providing mentorship, introductions to potential clients/partners, and desk space in business accelerators abroad. Managed by the Canadian Trade Commissioner Service, the program is available in nine locations in the United States, United Kingdom, France and India.

Supporting Business Innovation Through Optics and Photonics Solutions

The National Optics Institute, headquartered in Quebec City, is a private, non-profit organization that provides research and development support and technical assistance to businesses in the areas of optics and photonics. With applications as diverse as manufacturing, biomedicine, the life sciences, defence and aerospace, the Institute is helping Canadian companies to enhance their competitiveness and reach out to new markets. To support the Institute’s work with Canadian businesses, Budget 2016 proposes to provide it with $50 million over five years, starting in 2016–17, from Canada Economic Development for Quebec Regions.

Marketing Canada as a Premier Tourism Destination

Canada’s tourism sector is an integral part of the economy, supporting over 627,000 jobs in rural areas, small towns and big cities in every region. Increasing awareness of Canada and promoting its spectacular destinations, attractions, events and festivals to an international audience supports growth in this sector. Canada’s national tourism marketing organization, Destination Canada, has a strong track record of working with industry partners to maximize the impact of marketing campaigns.

Budget 2016 builds on this successful model by proposing to provide $50 million over two years, starting in 2016–17, to Destination Canada to seize opportunities with partners by augmenting marketing initiatives in important international markets, such as the United States and China.

Strengthening Northern Economic Development

A strong, diversified, sustainable and dynamic economy for Northerners, including Indigenous peoples, communities and businesses across Canada’s three territories, contributes to Canada’s prosperity. Since 2004, the Strategic Investments in Northern Economic Development program has been a key lever of federal economic development in the North. The program focuses on fostering growth and development in the North including in key sectors such as geosciences, renewable energy, fisheries, tourism and cultural sectors, supporting economic diversification and encouraging Northerners’ participation in the economy.

Budget 2016 continues this momentum. It proposes to provide $40 million over two years, starting in 2016–17, to renew the Strategic Investments in Northern Economic Development program delivered by the Canadian Northern Economic Development Agency.

Mineral Exploration Tax Credit

The 15-per-cent Mineral Exploration Tax Credit helps junior mineral exploration companies raise capital by providing an incentive to individual investors in flow-through shares issued to finance “grassroots” mineral exploration. This credit is in addition to the deduction provided to the investor for the exploration expenses “flowed through” from the company that issues the shares. The credit is scheduled to expire on March 31, 2016. Given this challenging time for junior mining companies, the Government proposes to support their mineral exploration efforts by extending the credit for an additional year, until March 31, 2017. It is estimated that this measure will result in a net reduction in federal revenues of $20 million over the 2016–17 to 2017–18 period.

Expanding Trade Opportunities

An open trade and investment environment allows firms to thrive and provides better jobs for the middle class. The competitiveness of Canadian businesses in the international marketplace will be enhanced by breaking down barriers to trade, both internal and abroad, and providing the appropriate tools and policy framework that allow Canadians to take advantage of new trade opportunities.

The Government recently completed the final steps of the Canada-European Union Comprehensive Economic and Trade Agreement. Canada and the European Commission are committed to swift ratification so that our citizens can quickly reap the benefits of this high-quality agreement. The Trans-Pacific Partnership (TPP) would offer opportunities to grow Canadian trade with Asia-Pacific countries, enhance North American production and improve job quality in Canada. The Government continues to consult Canadians in an open and transparent manner on the merits of ratifying the TPP.

Going forward, the Government is also committed to deepening trade relationships with large emerging markets, including China and India.

Supporting Manufacturers Through Tariff Relief

Canadian manufacturers need a wide range of inputs to produce their high-quality products. Some of these manufacturing inputs are imported and may face tariffs when entering Canada. Such tariffs are a non-recoverable charge that increases the production costs of Canadian manufacturers, affecting their competitiveness at home and abroad. It has been a longstanding practice to eliminate such tariffs to support Canadian manufacturing.

Budget 2016 announces that the Government will eliminate tariffs on about a dozen manufacturing inputs, providing an estimated $9 million in tariff savings over the next five years to Canadian manufacturers in the consumer goods and transportation sectors.

Budget 2016 also announces the Government’s intention to launch public consultations on eliminating tariffs on food manufacturing ingredients other than supply-managed products. These ingredients are primarily used in the agri-food processing industry, Canada’s largest manufacturing employer and an important contributor to Canada’s economy. Eliminating tariffs on imported ingredients will support investment and job creation in this important sector by strengthening the competitiveness of Canadian agri-food processors in domestic and foreign markets.

Supporting Ferry Fleet Renewal

Ferry services are an integral part of Canada’s transportation network, annually carrying over 55 million passengers and 19 million vehicles in locations across the country. To support ferry operators’ plans to renew their aging fleet, Budget 2016 proposes to waive the 25 per cent tariff on ferries of all sizes imported after October 1, 2015. This will provide an estimated $118 million in duty savings over six years, allowing ferry operators, such as those from Newfoundland and Labrador, to reinvest the savings in their fleet renewal plans, enhance ferry services and reduce fares for passengers and commercial users.

Strengthening Canada’s Response to Unfair Trade

A modern and effective trade remedy system is an important part of the Government’s commitment to support Canadian jobs and investment. Fostering the conditions for manufacturing growth and new investment requires open markets both in Canada and abroad, as well as the ability to address unfairly traded goods entering the Canadian market. As part of Budget 2016, the Government is taking steps to improve its ability to effectively remedy dumped and subsidized imports, including through specific legislative amendments. Further, the Government will consult stakeholders to ensure that Canada’s trade remedy system offers Canadian businesses the ability to respond to changing global trade conditions.