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Archived - Chapter 3
Working With Domestic and International Partners

Introduction

Important elements of the Economic Action Plan involve cooperation with partners in provincial and territorial governments and the private sector in Canada. Ultimately, the success of national policy responses will depend on the degree of international coordination among Group of Twenty (G20) countries.

This chapter reviews action required of other partners in delivering the Action Plan: Parliament, provincial governments and the private sector. It also sets out timelines for engagement with G20 countries.

Role of Parliament

None of the spending measures contained in the Economic Action Plan can proceed without securing relevant authorities from Parliament. The Budget Implementation Act, 2009 and the 2009–10 Main Estimates are currently before Parliament.

• The House of Commons has approved the Budget Implementation Act, 2009, which now requires approval by the Senate before it can come into force.
• The 2009–10 Main Estimates contain a central Vote of $3 billion to allow departments to start implementing elements of the Plan, which are not included in the Budget Implementation Act, 2009. Without this provision, departments would not be able to implement large elements of the Plan before late June or early July.

Subject to Parliamentary approval, these Acts would provide authority for over $13 billion in measures. Supplementary Estimates will also be tabled in Parliament this spring to provide spending authority for most of the remaining measures in the Economic Action Plan.

Partnerships With Other Levels of Government

Canada is the most decentralized of the major industrialized economies. The fiscal positions of the provinces are, on average, as strong as that of the federal government, with total provincial debt about one-half of the size of the federal debt. Further, federal transfers to provinces and territories continue to increase strongly (see box entitled "Fiscal Balance").

At the First Ministers’ Meeting on January 16th, Premiers and Territorial Leaders agreed to work with the Government of Canada on a number of important actions to provide stimulus to the Canadian economy, including the timely implementation of cost-shared stimulus initiatives, full labour mobility, further harmonizing business regulations, and accelerating infrastructure investments.

Close to $12 billion of the stimulus planned in Canada’s Economic Action Plan is from expected contributions of provincial, territorial and municipal governments. These funds are in the areas of social housing, provincial and municipal infrastructure, and aid to the auto sector, in partnership with the Government of Ontario (Table 3.1).

In addition to providing matching funding, provinces will play a significant role in administering and putting into action a number of measures—notably training programs and infrastructure projects.

The Government is engaged in negotiations and discussions, and is working to finalize agreements with provincial and territorial governments on a range of measures from the Action Plan. In addition to those referenced in the above table, these include a number of measures under the Canada Skills and Transition Strategy: Employment Insurance training programs, support for long-tenured workers, the Strategic Training and Transition Fund, the Targeted Initiative for Older Workers, the Apprenticeship Completion Grant, the Foreign Credential Recognition Program, the Aboriginal Skills and Training Strategic Investment Fund and the First Nations Child and Family Services Program. The Government is also consulting with provincial and territorial governments on enhancements to the Working Income Tax Benefit.

Provincial and territorial government approval and administrative processes may need to be accelerated—in similar fashion to recent action taken by the federal government—to ensure that economic stimulus is delivered in a timely fashion. The Government will be firmly adhering to its "use it or lose it" approach to the measures in the Economic Action Plan. The underlying principle is the need for these measures to be implemented this year, when the stimulus is most needed, rather than later on, once the recovery has taken effect.

It is also important to ensure that the actions in the stimulus plan are truly incremental to existing programs already underway or planned. There is significant activity scheduled to take place in the next two years, particularly in areas such as training and infrastructure, where the Government had invested over $33 billion before the $12 billion in new infrastructure measures contained in the Action Plan. In order for the new investments to be truly incremental and have the anticipated impacts on the economy and job creation, both of these tranches of investment need to proceed at the same time, rather than having the new measures displace the existing measures.

Reporting is an important element of the Government’s accountability framework. The Government will be reporting in detail on Government actions taken to implement this Plan and progress achieved. The Government would welcome separate reports from provincial and territorial governments or the opportunity to work cooperatively with provincial and territorial governments on joint assessments of progress.

Provinces and territories have begun to take action. For example, the British Columbia Budget, released on February 17, 2009, included significant investments in infrastructure in partnership with the federal government and substantial support for the 2010 Olympic Games in Vancouver. The province will spend over $14 billion on capital infrastructure over the next three years. Over the coming days and weeks, other provinces will also be coming forward with their Budgets (Table 3.2). The Government looks forward to working collaboratively with provincial and territorial governments on concrete actions and investments to bolster the Canadian economy through these challenging times.

Federal, provincial and territorial Ministers of Finance will meet on May 25 to take stock of economic conditions and review progress made in all jurisdictions in implementing the economic stimulus, with a particular emphasis on drawing lessons from measures and approaches that are clearly working and making adjustments in areas where more progress is needed.

Fiscal Balance

The fiscal positions of the provinces are, on average, as strong as that of the federal government, with total provincial debt about one-half of the size of the federal debt.

Budget 2007 took measures to restore fiscal balance, with over $39 billion in investments over seven years:

• A renewed Equalization program.
• An enriched Territorial Formula Financing program.
• Increased long-term support for post-secondary education.
• A new approach to long-term funding support for training.
• A new long-term plan for infrastructure.

The Government is keeping its commitment to restoring fiscal balance with long-term growing transfer support to provinces and territories. For 2009–10, major federal transfers are now at an unprecedented level of $52 billion and they will continue to grow.

• The Canada Health Transfer (CHT) will be $24 billion in 2009–10 and will continue to grow at 6 per cent a year.
• The Canada Social Transfer (CST) will be $10.9 billion in 2009–10 and will grow at 3 per cent a year.
• Equalization will be $14.2 billion in 2009–10 and will continue to grow in line with the economy.
• Territorial Formula Financing (TFF) will be $2.5 billion in 2009–10.

International Efforts

The actions included in the Economic Action Plan fulfill Canada’s commitments at the November 2008 G20 leaders’ summit to provide timely stimulus to domestic demand, while maintaining long-run fiscal sustainability.

Canada will continue to support international efforts to deal with the current turmoil and to limit the impact of future economic downturns on financial markets.

Stabilization of the global financial system is a precondition for economic recovery globally and in Canada. Since the beginning of the crisis, governments around the world have taken extraordinary measures to address the problems in financial markets. However, there is still work to be done—specifically cleansing bank balance sheets of illiquid assets. Decisions taken in the coming weeks in the United States and in other major economies to address problems in their financial sectors will be critical. The proper and timely implementation of such programs is the key to restoring confidence in financial markets.

Canada has been fortunate in that our banks are sound, are prudently regulated and generally have conservative lending practices. Consequently, they have not been adversely affected to the same degree as other banks around the world. All the major Canadian banks reported profits in their most recent quarter and have been able to raise significant amounts of capital in private markets. This is supporting ongoing lending to Canadian consumers and businesses. However, over the medium term, sustained availability of financing must be combined with action in other countries to reinforce financial stability and restore economic growth.

G20 leaders are meeting in April to take stock of global economic conditions. In addition, leaders will review reports of working groups on financial sector regulatory issues, including the results of a working group co-chaired by Canada on enhancing sound regulation and strengthening transparency in the financial sector.

Private Sector Efforts

The Government carried out extensive public consultations and relied heavily on the advice of business leaders, economists and the thousands of Canadians who participated in online consultations in pulling together its Economic Action Plan.

The private sector has a continuing role to play in working cooperatively with the Government to ensure that the Government has full information to implement and administer programs in a manner that has the maximum economic impact. The Government is holding consultations on several measures where it can benefit from input from the business community and Canadians.

The Government is also concluding discussions with third-party organizations and finalizing funding agreements with private sector partners who will be delivering components of the Action Plan, such as the Institute for Quantum Computing, the Canada Youth Business Foundation, the YMCA/YWCA and the Canada Health Infoway.

The Government is counting on continued cooperation from the financial sector in providing access to credit. In a market economy such as Canada’s, the allocation of credit to households and businesses is a function carried out by financial institutions operating in a competitive, efficient and prudently regulated market. In the current challenging financial circumstances, it is critical that Canada’s financial institutions, which are sound and well capitalized, make every effort to meet the needs of creditworthy borrowers. The Government is providing significant support through the Extraordinary Financing Framework to ensure that our financial institutions have adequate access to liquidity and term funding. This funding allows financial institutions to on-lend to their retail and business customers through their normal credit granting operations.

Financial Crown corporations, such as Export Development Canada and the Business Development Bank of Canada, complement private sector lenders in extending credit to Canadians. The Government is ensuring that financial Crown corporations have sufficient resources and flexibilities to service their clients and meet their mandates under all economic circumstances. Canada’s Economic Action Plan expands the resources and scope of action for financial Crown corporations to increase their lending activities substantially, both individually and through collaborative initiatives with the private sector such as the Business Credit Availability Program. Financial Crown corporations are ensuring that these additional flexibilities and resources are used to provide incremental credit support as soon as possible.

The Government will continue to consult extensively with Canadians and businesses in Canada. For example, the Economic Advisory Council to the Minister of Finance has met once since the Budget was tabled and will continue to provide the Minister with updates and advice on both the economic situation and progress in implementing the Economic Action Plan. In addition, the Minister of Finance is forming the Advisory Committee on Financing to advise the Minister on financing conditions and the design, scope and scale of initiatives under the $200-billion Extraordinary Financing Framework.

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