Remarks: A non-partisan path forward

Remarks from Michael Wernick to the Canada 2020 4th Annual Indigenous Economic Development Forum

November 27, 2019 (The Westin Ottawa)

Kwe Kwe, Tan’si, Ullakuut, Bouzhou, Bonjour and Good Morning.

Let me also begin by acknowledging that we are gathered on the traditional territories of the Algonquin peoples of this part of Turtle Island, and by thanking Elder Venra who helped us get today’s gathering started in the right way.

I also want to thank Canada 2020 for the invitation to join today’s dialogue, and acknowledge the many wonderful speakers and panellists gathered here today, many of whom I have had the honour to meet along the path I have taken. 

The diversity of Canada’s Indigenous peoples, their history and their present realities, is such that it is rare that any statement holds true for all. Rather it is weaving or braiding those diverse experiences and realities together that brings us closer to finding common ground and a way forward.  That is the great service Canada 2020 is providing to us today.

All I can offer in the next few minutes is to share, with great humility, some reflections from my own journey, suggest where that common ground may be found, and propose a menu of specific actions that could be taken. My contention is that we have an opportunity right now for a non-partisan agenda that would make a tangible difference.

My own journey with Indigenous issues began in 1985, as the desk officer at the Department of Finance for Indian and Northern Affairs, and for the next 34 years I returned many times to the path of Indigenous issues, always as a servant of the Crown, always in the executive branch of the federal government.  Half of my career I worked for red governments and half of it for blue.

Pulling together the biography you have in front of you, that traces my journey it jumped off the page that along the way there were some big setbacks, when exciting breakthroughs stumbled and collapsed at the last step, disappointing not just the government of the day – but also the Indigenous leaders who had taken great risk to work collaboratively rather than sit back and reject. 

The 1987 Constitutional Conference chaired by PM Mulroney, the Charlottetown Accord, the Royal Commission on Aboriginal Peoples and the Gathering Strength response, the Kelowna Accord, the First Nations Education Act, the First Nations Governance Act.  These events have reinforced a view I often heard, and still do, in some circles of punditry and politics that Indigenous issues are intractable, and that the career of every Minister and every National Chief will ultimately end badly.  

I reject that view.  Along the way there have also been important breakthroughs. The entrenchment of constitutional protections in sections 25 and 35 of our Constitution just one generation ago (I was in the crowd on the Hill that rainy day in April) has changed the power balance and opened up a path that runs not through legislatures but through the courts. More than 20 Supreme Court rulings have established a body of law and principles such as Honour of the Crown, duty to consult, duty to diligently implement, and concepts of Aboriginal title and Metis rights that have real impact. The law has created leverage and opportunity for Indigenous peoples here in Canada that no other Indigenous peoples in settler countries have achieved.  

In particular the 26 modern treaties addressing land claims or self government or both have given communities and people meaningful tools to regain a degree of sovereignty and build a better future.

I especially want to lift up the Inuit leaders, past and present, who have built something unique in the world over the past 20 years, and the Yukon First Nations who left the Indian Act and achieved self government a generation ago.

These agreements, as well as dozens of litigation settlements, were in part intended to address some of the most egregious wounds created by our troubled history, which was a key recommendation of the Royal Commission in 1996.  In some ways they can never be enough, but by acknowledging and facing up to the past they have allowed at least some healing and freed up energy and effort toward shaping the future.  Among them I would note the residential schools settlement and more recent settlements related to childhood experiences, the apologies for forced relocations, the settlements of the Lubicon and Bigstone Cree claims, the creation of the Qalipu First Nation, the Paix des Braves in Quebec.  

This is not to overlook the flaws and imperfections in how many of these initiatives have been implemented, or to deny that there is so, so much more left to do. 

I do contend they illustrate that with good will, mutual respect and courage, common ground can be found and progress achieved  – but also that the quest for the perfect and pure can be the enemy of the good and may needlessly prolong misery.

Each success creates hope and momentum, and concrete lessons that can carry forward to new successes. Emulating and spreading success stories is often the most effective approach to creating positive change in the world.

Our history tells us that there is no reason for Indigenous issues to be caught up in divisive party partisanship.  Each of the eight Prime Ministers and ten Ministers I have served – yes I started and ended with a Trudeau – has in his or her own way attempted with personal commitment and at some political cost to tackle the profound challenges of what we now call reconciliation and each has seen achievements and setbacks along the way.  I can also say have seen the best and the worst from provincial governments of all stripes, red, blue and orange.

So my assertion is that there is ample room right now for a non-partisan or multi-partisan agenda here in Ottawa, and indeed an urgent need for an intergovernmental agenda bringing together all governments in our federation. 

Given the high failure rate of grand scale broad spectrum political initiatives like the Charlottetown and Kelowna Accords, and of some of the more targeted structural reforms, it seems to me that the best approach is one of relentless step by step change, working together, and that a good place to start in 2020 is in fact economic reconciliation.  

Whether you come from the red, blue or orange camps in national politics, or from the pragmatist or ideologue camps in Indigenous politics, from the public or private sector, no one wants a future of poverty, unemployment and dependency. There are many good practices and ideas we can quickly build on, especially if we speak directly and honestly with each other.

To paraphrase someone I admire who spoke to Canada 2020 earlier this year – there are no blue ideas or red ideas or orange ideas  – just ideas, good and bad.

I don’t think it has anything to do with majority or minority government: many of the big initiatives that failed in the past were initiated by majority governments and some important successes were achieved by minority governments.

I do think it has to do with common ground. I can see at least five areas on which to build.

The first point of common ground should be to say more often to each other that there can be no broad progress in any community anywhere on social, health and justice outcomes if there is no economy.  People want a degree of personal autonomy, they want jobs and opportunity to build something for themselves and a future for their families, whether it is a career, a home, a retirement nestegg, or a business. 

Communities need an economy that will generate revenues to pay for services and that can be monetized to finance infrastructure.  The government in self-government means collecting revenues and accounting for their use, not dependency on transfers. 

The second point of common ground, conversely, should be that in 2020 economic growth must be sustainable and must be inclusive.  Indigenous peoples knew this before the rest of us began to catch on and catch up. We must ensure economic and infrastructure projects in and near Indigenous communities are held to the highest standards of environmental impact and that these communities are leading, not following, the great energy shift under way.

I would add under the social dimension of sustainability that we must be vigilant not to see the historic inequality between indigenous and non-Indigenous Canadians morph into a new form of inequality among Indigenous Canadians.

Third, and this may be contentious for some, we know that economic outcomes are hugely affected by the quality of governance. I am a big fan of the 2012 book Why Nations Fail and the compelling case it makes for inclusive governance.  We must chart a course where we do not end up with everyone working for Indigenous governments and their state owned businesses, but nor do we end up with unaccountable oligarchs. 

Fourth, the ingredients of activating economic growth and activity are the same for everyone – land and resources, location, access to supply chains and markets, access to start up and patient capital, people and their skills and talents, and a blend of innovation and entrepeneurship.  Indigenous economies are not exempt from the principles of economics.

Fifth, there is no single economic growth strategy or toolkit that will work for all Indigenous peoples.  We have to be moving on all fronts. There will have to be very specific approaches for Inuit and Metis and we will have to pay much greater attention to the half of Indigenous people who come to study, work and live in non-Indigenous communities but often have profound ties, including voting rights, in their home communities.

The good news is that there is a diversity of opportunity spreading into new sectors and industries –  natural resource extraction and processing, ecotourism cultural tourism, cultural creation, clean energy, broadband infrastructure, selling into procurement supply chains, environmental monitoring, air and bus transportation of people, use of drones for surveying or wildlife monitoring, shipping and logistics, introducing airships and hoverbarges to replace failing ice roads, cleaning up orphan wells and contaminated sites, removing old munitions, greening of military bases, building and maintaining housing and community infrastructure, hosting data and server farms in secure locations, selling directly into Amazon and Alibaba.

We know that for many communities despite the opportunities there are all too many obstacles and impediments in the way.  Location, scale, lack of capital, lack of skilled labour, lack of reliable infrastructure, lack of broadband – these are still all too common and require focus and effort.

We also know that some key obstacles are created by the unique legal underpinnings of most Indigenous communities.  As short as that path would be, and perhaps it is worth a shot, I do not think we will ever see consensus for a simple one page bill that says “the Indian Act, 1951 is repealed, effective five years from Royal Assent”.  Because there is not going to be an easy consensus about what will follow, not just in Parliament, but in Indigenous politics. What happens after exit?

Since the big breakthrough in 1982 all of the subsequent constitutional rounds failed. We have only managed two exit strategies to date. One road is the modern treaty. The other is the workarounds that are optional, not mandatory. Many in this room will be familiar with at least one of them (though perhaps by acronym): the First Nations Land Management Act, the First Nations Oil and Gas Act, the First Nations Commercial and Industrial Development Act, the First Nations Fiscal Management Act and its creations the First Nations Tax Commission and the First Nations Financial Authority. 

However, If we are candid, most First Nations leaders in fact want to retain three essential legal features of the Indian Act – inalienable communal land, shielding from provincial laws of general application, and exemption from taxation of income earned on reserve.  

That is understandable, but it does mean there is no simple version of a successor regime, and it will mean extra work to create winning conditions for economic activity.  The good news is that this is quite achievable.  I personally think there is a potential third exit strategy – of updating the historic treaties with new constitutionally protected side agreements and implementation agreements – but that is a big topic for another conference another day.

My own view has long been that the way to get rid of the Indian Act is the Jenga strategy – you know the game where you have a pile of logs and you pull one out, the another, then another until eventually the structure just collapses.  If we pull more communities out one by one by concluding modern treaties and increasing take up of tools like the First Nations Land Management Act, and if we pull out just a few more pieces of the Indian Act regime, we get closer to the day when it comes crashing down.  Perhaps we are closer than we know.

So I want to close by putting forward some very specific initiatives, that would move us forward. My focus is on creating economic activity, and I am setting aside for now some other important aspects of our broader reconciliation journey. I speak for no-one but myself.  Here are twelve specific things we can do.

  1. to Premiers Kenney, Moe and Pallister – uncertainty about Aboriginal title is pulling back economic growth in your provinces. So let’s clarify who owns what across the West and let’s expand the Indigenous land base to its rightful dimensions.  Premier Kenney gave a really important speech to the Peter Lougheed dinner last week and spoke of a can-do, get it done Western sprit.  So, why not work with your two colleagues and sign a pledge right now to complete, within the next five years, the Treaty Land Entitlements that were promised more than a century ago.  To paraphrase the late Gord Downie – we are behind by a century.  Your governments control most of the Crown Land. and you own the natural resources.  Don’t hide behind the federal government. 
  2. to the same three Prairie Premiers I would also say – it is time to stop kicking the can down the road of Metis claims and hiding behind the courts. The Metis have been here a long time, they are recognized in the Constitution, and they aren’t going anywhere.  Let’s start by convening a Summit in 2020 bringing together the three Premiers, the Prime Minister and the Metis Nation and then keep at it.
  3. to all Premiers – you jealously guard jurisdiction over securities markets and incorporation – so you could make it a filing requirement that a company above a certain size can’t be listed on the stock exchange, unless it has published publicly its plan for economic reconciliation with Indigenous peoples and updates it every year.
  4. to both the federal and provincial governments who procure billions of dollars of goods and services – the tools you now use for Indigenous participation sound good but in practice they are puny and underpowered – table scraps for small business – it is time to take the more successful American models used there since the 1970s, and put in place much more robust and ambitious procurement levers.  They should look more like the best in class benefit agreements with a focus on real reportable and binding commitments to training and employment of young people.
  5. how about closing the next First Ministers Conference by signing a pledge to work together and get every single Indigenous community on good quality broadband within five years. And not just one computer in the band office or school – real connection for students in their own homes and for businesses to join the world of digital commerce.
  6. to the federal government, commit that within five years you will turn over all the funds collected as “Indian Moneys” to First Nations Governments or trust funds run by First Nations. Pass a one page bill now to repeal the Indian Moneys sections of the Indian Act five years from Royal Assent. That will create some urgency and inject several hundred million dollars of working capital and pull one more log out of the tower. Google Allan Clarke’s paper in Policy Options on this one, or go and see him. He is here today.
  7. Bear with me, but in practice there is an impediment to securing insurance and financing, a deterrent to investment, and a source of disputes about cleanup because of perceived legal uncertainty about who owns the infrastructure grids, buildings and houses on reserves – the band or the Government of Canada.  The only people who benefit from this confusion are lawyers.  Find a passing bill, and tack on a short amending provision that says something like “unless set out elsewhere, community buildings and infrastructure are the property of the band government”.
  8. Not all businesses behave well and there is a need for consequences.  There is a lack of teeth in the ability of First Nations governments to enforce their own laws because the maximum fines they can levy are far too small – just 1000 dollars for many matters. That could easily be amended with a few short lines to up to 10 or perhaps 50 or something like 100 thousand for environmental offences. 
  9. All governments know how important good infrastructure is to economic growth. It is often a centrepiece of their economic gameplans. One of the biggest obstacles to catching up on badly needed infrastructure is that both Indigenous governments and my old department usually work on a pay-as-you-go, all cash, basis with very little use of other financing tools.  The federal government could spin off a new Crown Corporation by 2021 – a First Nations Infrastructure Corporation – modelled on the one in BC, one that has the entire toolkit to tap into financial and capital markets, a board with a First Nations majority, and a relentless focus on building things.  If we can’t get political buy in for a national one, then set up some regional ones and build experience.  At the same time let’s rapidly scale up the use of the First Nations Finance Authority, which has proven it works.
  10. there is a great opportunity for Indigenous entrepreneurs to grow big scale businesses that operate and maintain buildings for others – whether they are housing or community facilities. Because these buildings wear out roughly twice as fast on reserve as off reserve it takes twice as much money to maintain the stock. We need a few First Nations owned companies modelled on Brookfield to take the risk and administrative load off small band governments, extend asset life and improve environmental performance.
  11. to First Nations leaders I would say there are two thorny problems that impede economic development that the Government of Canada cannot tackle – you are the only ones who can. It will take time and require a lot of political courage. One is overlapping assertions of Aboriginal title, which is pretty much all of them.  These are familiar in British Columbia, where I think we have to admit after thirty years of well meaning effort that the BC Treaty Commission has essentially failed to find a way to deal with overlapping claims. Every time a modern treaty was reached it was litigated by the neighbours, in front of Canadian courts.  We need a dispute resolution panel based on international relations practice that will arbitrate overlapping assertions or mediate co-management and sharing agreements. The AFN could take the lead in consulting and designing such a panel and make a proposal by June of 2021.
  12. The other is land tenure and land allocation within reserves.  This is a subject no one wants to talk about. Back in 1951 the Government of the day tried to increase security of tenure for individuals without breaking the common property model and moving to the fee simple model.  In many parts of the country people began to use certificates of possession, while in others there are various forms of custom allocation. The result sixty eight years later is all too often a mess, and one that not only holds back economic development but will over time create growing division and inequality within communities.  No federal government is ever going to grasp this nettle. The AFN should set up its own Land Reform Commission and make a proposal by 2022 on how to update the land tenure legislation that underpins all those communities yet to achieve full self government, starting with an overhaul of the certificate of possession regime.

And of course, there are many more pragmatic things that can be done to address access to capital, to build a skilled workforce and to grow more entrepreneurs and business leaders.  I can’t touch on them all.  You have sone very qualified people coming up later in this conference.

I am quite sure some people may not like some or indeed any of my proposals. Fair enough. Make your own. I know from experience some people will argue I am just making a more comfortable Indian Act and we should wait for a bigger reform – but I would say after nearly seventy years it is time to fix what can be fixed and move on from there.

What I really hope you will take away is a message of optimism and a greater sense of ambition. That there is ample common ground for an agenda of economic reconciliation. That there is no reason for it to be derailed by partisan politics or minority Parliaments. 

After 34 years on this road, my core belief is that what we call Indigenous Issues can and will yield to good policy, good governance, and good administration. Relentless pragmatic changes, one step at a time. will take us further along the path to a much brighter future.

People have earned the right to a sense of scepticism. Trust can be difficult to build and is quick to crumble. But pessimism and defeatism It is not what Canada is all about. Not in 2020. Not ever.

Thank you. Merci, Nakurmik. Meegweetch.

Canada 2020 Policy Lab: Tax Competitiveness

Tax Competitiveness

Canada 2020 will be hosting a Policy Lab on Tax Competitiveness on Tuesday, June 19th, 2018 in the Canada 2020 Studio Space in Ottawa.

On June 19th, Canada 2020 is convening a 3/4-day session on Tax Competitiveness. In an interview with Bloomberg, Finance Minister Bill Morneau stated, “Job 1 on the center of my desk for the next six months is going to be about competitiveness in Canada… we have to do our homework to get to a conclusion.”
In order to help the Finance Minister with his homework, Canada 2020 is holding a Policy Lab on Tax Competitiveness where we will work
through the following questions:

  • How much of an impact will the U.S. tax changes have on both U.S. and Canadian competitiveness?
  • What can Canada do to address competitiveness concerns, without simply rewarding companies for doing what they would have done anyway?
  • Does the federal government need to make changes to the personal income tax system to prevent losing highly qualified talent to the United States?
  • Beyond simply altering headline rates, what changes to the tax code can the federal government make to enhance Canadian competitiveness? What changes would provide the best bang-for-the-buck?

To learn more about Canada 2020 Policy Labs, click here. To apply to be a part of the Canada 2020 Policy Lab on Tax Competitiveness, click below:

Canada 2020 Policy Lab: Open Banking in Canada

Open Banking Policy Lab

Canada 2020 will be hosting a Policy Lab on Open Banking on Wednesday, May 7th 2018 in the Canada 2020 Studio Space in Ottawa.

On May 7th, Canada 2020 is convening a full-day session on Open Banking – an idea proposed in Budget 2018 by Finance Minister Bill Morneau. While still in its infancy, the idea has the potential to radically transform the banking sector by increasing a consumer’s access to their own financial data across platforms and institutions.
The Canada 2020 Policy Lab will help us think through a number of issues and opportunities surrounding Open Banking, with particular emphasis on:

  • What are the most important regulatory bottlenecks slowing growth of the FinTech sector? Would a move towards open banking help address these bottlenecks?
  • Should Canada develop and implement rules similar to the European Union’s Payment Service Directive (PSD2)?
  • Does the government need a national open banking strategy? If so, what should be in it?

To learn more about Canada 2020 Policy Labs, click here.
To apply to be a part of the Canada 2020 Policy Lab on Open Banking, click below:

The Canada 2020 Policy Lab

Policy Lab

Better Public Policy Through Collaboration

Canada 2020 Policy Labs are collaborative sessions deployed on emerging public policy issues that require creative thinking, across and outside of the traditional silos of policy development. Their intent is to leave the politics behind, by creating an open space for sharing information and perspectives.

What is a Policy Lab?
A Canada 2020 Policy Lab is a half-day or full day-long retreat at the Canada 2020 Studio in Ottawa, Ontario. The goals of a Policy Lab are to make connections between the participants, to share information and resources, and to make progress on complex public policy issues affecting Canadians.
Policy Lab Process
Prior to the lab, 20-60 relevant subject matter experts are invited to participate.
Each participant is encouraged to submit a resource list of publicly available materials: reports, news articles, videos, etc. that they feel are relevant to the topic. These will be compiled into a master resource list, which will be distributed to all participants a week before the Lab.
Participants may also submit additional perspectives, which will be distributed to all participants a week before the Policy Lab. A week before the Policy Lab, a schedule of the day’s activities will be released to all participants, along with a final list of questions that will be discussed.
Policy Lab Outcomes 
A short summary document will be written by Canada 2020, which details what was discussed, points on which there was consensus, points where there was disagreement, and recommended next steps.
At the end of the Policy Lab, the resource list will be made available to the public.
A successful Policy Lab should lead to further exploration of a topic by participants or Canada 2020 – through original research, stakeholder meetings, larger conferences or events, or public engagement.
Each Policy Lab will have spots reserved to the public. You can tell us why you think your input would be valuable to the discussion by filling out an online questionnaire. Applications will be specific to Policy Labs and will be posted on Canada 2020’s website.

Upcoming Canada 2020 Policy Labs

  • Canada 2020 Policy Lab on Open Banking in Canada (May 7th, 2018) – Open Banking Report on Findings and Resolutions
  • Canada 2020 Policy Lab on the National Pharmacare Initiative (May 29th, 2018) – report coming soon
  • Canada 2020 Policy Lab on Tax Competitiveness (June 19th, 2018) – report coming soon


How to Innovate FinTech in Canada

This is an excerpt from Canada 2020’s upcoming report ‘Being Innovative: Canada’s Next Big Challenge.’ The report will be released in early November, 2016.
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By Mike Moffatt
Assistant Professor, Western University
Financial Technology (known as fintech) investments are growing rapidly in Canada, with OMERS Ventures reporting that 100 fintech start-ups in Canada have collectively raised more than $1 billion in funding since 2010.
As part of our research for the Canada 2020 innovation project, we held a roundtable discussion in Toronto with representatives from big banks, non-governmental organizations, fintech startups, venture capital companies and government.
We wanted to talk about how Canada can be more innovative in a sector which is so important to our country’s economy. Here’s some of what we heard:
Market structure and incentives:
When asked, “What is the biggest barrier to innovation in Canada’s financial sector?” a common answer was the structure of the industry and the incentives that it creates. Canada’s financial sector is dominated by six big banks. Due to the oligopolistic nature of the industry (caused, in part, by high barriers to entry), Canada’s Big Six are more profitable than similarly sized banks in other countries. Combined, Canada’s six largest banks earned $35 billion in profit last year.
In the view of some start-ups, this creates an incentive for the banks to fight disruptive innovations, as those disruptions put oligopolistic profits at risk. However, the counter-argument was given that the banks recognize that these innovations are inevitable, so the banks have an incentive to be active participants, rather than facing challenges from outside, such as from global players like Google and Apple.
Stability versus innovation:
Innovation is a tricky concept in the financial services industry since innovations are seen as playing a role in the Financial Crisis. The roundtable unanimously recognized that regulators have an important role in protecting consumers as well as in protecting the integrity of the financial system from systemic risks. It was recognized that regulators have the near-impossible task of finding a way to protect the system while not stifling useful innovations and keeping abreast of rapidly changing technologies.
A concern was raised that regulators are judged solely on their ability to prevent “bad things from happening,” which comes at a cost of innovation. One participant gave an analogy of judging road-safety regulatory bodies solely on the number of crashes, saying their response would be to “[make] all roads five miles per hour.” A suggestion was made that financial industry regulators be given a dual mandate of consumer protection and innovation development.
Cultural barriers to innovation:
A concern was raised that Canadian investors and managers may be too risk averse to be full participants in a highly innovative industry. As one participant put it, “[In Canadian MBA programs] there’s not a lot on how to take risk … . In [New York], the mentality of grads out of the U.S. is to take risks. There’s an acceptance that if you do that and fail that’s OK. In Canada, there’s stigma around failure.” A suggestion was made that foreign investors from countries with higher appetites for risk, such as China, may be able to fill some of the financial (but not necessarily managerial) gaps.
Immigration issues:
If there are talent (or cultural) gaps in the system, immigration might offer an answer. However, one roundtable participant noted that it takes so long to bring executive-level talent into Canada under the Temporary Foreign Worker Program that a candidate will have typically moved on to other opportunities by the time their application is approved.
Access-to-capital gaps:
Members of the roundtable stressed the importance of looking at the entire life-cycle of a fintech company when discussing possible gaps in access to capital. The consensus was that seed funding for good ideas was available through angel investors and family members; as one participant put it, “There’s no shortage of people willing to write $50,000 cheques.” The bigger challenge appears to be finding enough money to reach scale, with our fintech roundtable reporting that it is more difficult to find second-round funding than it is first. Canadian venture capitalists were seen as requiring higher rates of return or lower risk than their U.S. and Chinese counterparts, and there was a perceived talent gap between the quality of Canadian and American venture capitalists. Fintech companies partnering with banks was seen as an option, though there were concerns that accessing capital this way would come with too many restrictions.
Members of our roundtable saw increased collaboration as a way to increase innovation in the sector. One participant felt that there were tighter ties between the investment and fintech start-up communities in the United States, which allowed for information sharing and the building of trust and stated, “Interaction, sharing ideas among startups, isn’t something you get a sense of in Canada. We need a safe spot for founder-to-founder, investor-to-investor interactions.”
Final thoughts:
Overall, the roundtable saw fantastic innovation potential in Toronto’s financial services industry thanks to banks that compete on the international stage and a critical mass of skilled graduates between Waterloo and Toronto. Increased innovation would benefit consumers, by giving them additional choices, more convenience, greater access to capital and lower costs when choosing financial products. A failure to innovate would see the profitable parts of the industry swallowed up by large U.S. players, with Canadian banks largely becoming commodity producers.
Mike Moffatt is an Assistant Professor at Western University’s Ivey School of Business.
This is an excerpt from Canada 2020’s upcoming report ‘Being Innovative: Canada’s Next Big Challenge.’ The report will be released in early November, 2016.

7 Ways #Budget2016 Takes the Long-View for Canada

Prime Minister Justin Trudeau released his new budget on Tuesday, and with it made his first official mark on the Canadian economy.
The immediate headline is the massive string of deficits that the Liberal government will run as they seek to deliver on their election promise of “strengthening the middle class.”
But despite the red ink, reviews`are (mostly) positive for Growing the Middle Class. It recognizes there are no quick fixes to the Canadian economy, and that investing now means we will see economic growth in the future.
There are lots of budget reaction pieces you can read, but we wanted to point out the ways Growing the Middle Class will affect Canada not just tomorrow — but 5, 10, even 20 years from now.
Here’s 7 ways the new budget takes the long-view for Canada

1. The Canada Child Benefit means we’ll have healthier, more educated kids

The future of Canada’s economy rests in the health of its children.
Growing the Middle Class puts families — and specifically children from lower and middle income families — first.
It includes $10 billion more over two years for a new Canada child benefit, absorbing and replacing both the Canada child tax benefit and the universal child care benefit.
The government bills this new benefit as “a plan to help families more than any other social program since universal health care.”
The amount of the benefit will depend on size of family and income but the government says nine out of 10 families will get more help than they do under existing programs, and that 300,000 young Canadian children will move out of poverty.
There is strong evidence that investing in children pays off significantly. In 10 years time, those children will be entering post-secondary institutions, and starting careers.
However, the fact that tax credits for children’s fitness and arts expenses are being phased out over two years, with maximum eligible expenses cut in half for 2016 and eliminated entirely in 2017 is a real shame. With childhood obesity levels on the rise, and the number of physical education hours for children in school dropping, it seems counter-intuitive to stop helping parents with the cost of extra-curricular activities.

2. We are about to fundamentally change how we move around our cities

During the last campaign, one of the major platform points for the Liberal Party was infrastructure. More specifically, Justin Trudeau promised to make the single biggest investment in infrastructure in Canadian history.
Today, they’ve done that — and it has massive implications for the way we move to, from and around our cities.
By investing $120 billion in infrastructure spending over the next decade, we can expect to see major upgrades to our roads and highways, electricity and waterway systems, as well as the way our cities are connected . That’s not to mention the nearly $12 billion upgrades we’re about to make to our public transit systems, affordable housing and more.
After the economic collapse in 2008, the Harper government’s response was the Action Plan — a half-measure of infrastructure spending mostly targeted at Conservative ridings. If handled correctly, this investment has the opportunity to make Canada’s cities world class examples of smart, modern infrastructure.

3. More young Canadians than ever before will have a post-secondary education

A good education should be accessible to all Canadians, and Growing the Middle Class
attempts to level the playing field a bit.
The government will increase the Canada Student Grant amount by 50 per cent, from $2,000 to $3,000 for students in low-income families, and from $800 to $1,200 per year for students from middle-income families. There are approximately 250,000 students across Canada who come from low-income families. The government says “this can mean the difference between getting a degree and dropping out.”

4. Our scientists, researchers, universities and start-ups are about to get a lot more collaborative

The government’s Innovation Agenda is major part of Growing the Middle Class, with an investment of $800M over four years to support innovation networks and clusters to increase collaboration.
Recognizing the value of post-secondary institutions in and their role in innovation, Budget 2016 include a $2-billion investment over three years for a new Post-Secondary Institutions Strategic Investment Fund.
“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.”
Algonquin College was quick to applaud this move, stating ‘colleges will be better equipped to create world-class programs and conduct the research our entrepreneurial start-ups need to grow and prosper.’

5. By 2021, Canada’s economy will be less reliant on fossil fuels — andhopefully a leader in clean energy

We say hopefully because Canada has had the opportunity to lead on renewables for years now and continually deferred investing in clean technologies.
That appears to be about to change. Building on the $2-billion Low Carbon Economy Fund that Prime Minister announced at the First Ministers’ meeting in early March, the government will be accelerating clean technology development with a $130-million investment over five years for clean technology research.
Budget 2016 also provides $62.5 million over two years to Natural Resources Canada to support the deployment of infrastructure alternative transportation fuels, including charging infrastructure for electric vehicles and electricity storage.

6. The goal of opening government and promoting electoral reform

Compared to other budget items, one could argue that these two are minimal investments. But to us, open government and electoral reform are a giant philosophical leap in good governance. Budget 2016 includes $17.8 million investment over five years to make government more accessible to Canadians.
Included in the plan is a pledge to create a single, central website for Canadians so they can request information from any institution. Cynics and those who know the tangled web of IT infrastructure in federal departments will say this is an insurmountable task — but the goal is a worthwhile one if it means Canadians can access all of their personal information. Under the government’s plan, requests for information will be filled in 30 days or less — if they take longer, there will be a written explanation.
Electoral Reform is also part of the budget, providing $10.7-million over four years to encourage consultations on voting reform and how to engage more Canadians in the electoral process.

7. A long overdue improvement in Canada’s Indigenous communities

The living conditions of Canada’s indigenous people have been a global embarrassment and our country’s shame.
We are happy to see that budget 2016 includes $8.4 billion in spending over the next five years to ensure “Indigenous peoples share in Canada’s prosperity.”
The government’s budget outlines that half of that is earmarked for education, improving schools on reserves and hiring teachers.
In addition, nearly $2 billion will be invested in water and wastewater infrastructure and drinking water monitoring over five years “so every Canadian child has access to clean drinking water, no matter where they live.” In our view, this is an improvement that is long overdue for a country as rich as Canada.

Rethinking the scope of health care in Canada: a renewed federal role

How Canada ensures it provides a universal, affordable, and high quality health care system that accommodates technological innovation and changes in delivery over the next few decades is a particularly important challenge. The increasing concerns about adequate financing, demographic shifts, and inequality both within and across generations only add to the complexity of the discussion. With a new federal government with an ambitious policy agenda, this summit is not just well-timed, it is a critical part of the conversation.
The recently elected federal liberal government campaigned on strengthening Canada’s publicly funded health care system.  It rightly pointed out that while Canada’s healthcare system remains a point of pride for Canadians, there are a number of areas, including financing prescription medications, home care and mental health, where Canadian Medicare lags behind many countries in the OECD.

The Comprehensive Care Canadians Need

The current conception of medically necessary care in Canada excludes many services necessary for especially vulnerable Canadians. A number of health policy advocates and scholars (including me at times) have called for the federal government to consider providing pharmacare, additional services for the elderly, and support for disadvantaged Canadians. Elements of all of these are critical to providing comprehensive care.
Canada has failed to keep up with the changing nature of health care delivery.  This failure can perhaps be explained by the way our system is organized around methods and places of delivery. Disruptions to traditional ideas of delivery have taken many forms:  prescription drugs now treat many conditions, technologies take care out of the hospital or doctor’s office, and people wish to communicate with health care providers and the health care system in a variety of new ways.  As health care has evolved, Canada’s health care system has passively privatized, as new forms of delivery are predominantly paid for privately (through private insurance or out of pocket). A consequence of this passive privatization is that the system is not as equitable or universal as we might like it to be. Indeed, it has left many residents of Canada behind.

Maintain the Integrity of the Public System

Now is the time for the federal government to play a leadership role in updating the design of Canada’s healthcare system: to modernize it to meet its goals of both improving the health of Canadians and protecting Canadians from the economic consequences of poor health and medical costs. And to do so in a way that promotes equality and universality.  The federal government should protect the boundaries of the public system by providing the legislative (and perhaps financial) foundation for a more comprehensive and equal health care system. A reconceived and comprehensive publicly financed system would have the benefit of helping define the ongoing role of the private sector at the same time, and so potentially avoiding future challenges to the integrity of our public system.
This would be a huge advance in the role of the federal government.  Rather than simply transferring money, the federal government could encourage healthcare innovation that improves the way in which we treat the healthcare needs of the Canadians.
We need to clarify the role and scope of the publicly financed portion of the health care system. That is, we must clearly define what the public benefit will cover and for whom.  In the absence of such streamlining, the healthcare system cannot be expected to achieve its goals, and the private system cannot step into an optimally helpful supplementary role. Knowing what healthcare was used to be easier. Care performed in hospitals or by doctors was considered to be a core benefit available for all.  If a doctor didn’t do it, it wasn’t medicine.  The task is considerably more difficult now.
For Canada’s system to keep pace we must put in place a systematic way of evaluating what is appropriate for public funding. Going beyond the questions of how, by whom or where the care is delivered seems to me to be our best chance of having our publicly financed institutions evolve along with the technology of health care delivery and system management.  Any framework that tackles this project of evaluating what we want to fund will also have to consider what we do for people who want more, better or faster service. How do we tackle the private side of health care financing?  In part, I’d suggest, by getting the public side right.

Moving into the Future of Healthcare

Whether through medications or “disruptive” technology,  or other as-yet unforeseen  avenues, new ways of treating people, preventing disease and of interacting with the health care system will continue to multiply in the years to come.  How, therefore, do we design a public benefit that recognizes this fluidity and unpredictability?
First, we should note that while health care technologies change rapidly, the underlying health needs of the population change much more slowly and in more predictable ways.  We have many of the same diseases and health problems that we had fifty years ago, even if the way we treat them has changed several times over those decades.  Therefore, we should design the public benefit around these health needs, not around providers, or treatments. The question shouldn’t be: should insulin be covered or should services by psychologists be covered (at present neither are universally covered in Canada). Rather, the system should be framed so that funding is targeted at diabetes and mental health disorders, and the most effective treatments for those conditions.  If we agree that chronic conditions such as diabetes and mental health are among our health care needs (and I think most of us would agree they are), then the most effective way of treating them should be publicly financed.

Healthcare Needs Should Define Treatment

Of course, it is not the case that our health care needs do not change at all. They do, although much more predictably and more slowly than health care interventions. We can predict, for example, that our long term care needs will increase as the population ages.  What is more difficult to plan for is what exactly long-term care delivery will look like in 20 years.
We are then left with dealing with the concept of “most effective.”  Ongoing advances in both technology assessment and “best practices” development among physicians offer reasons to be optimistic (examples would include NICE in the UK and the Israeli Medical Basket committee as far as technology assessment is concerned, and places like Intermountain Health and the Mayo Clinic as far as best practices implementation among physicians is concerned). There are models out there for effectiveness assessment that we can look to for ways to improve , in other words. Most effective does not mean newest or more expensive. Sometimes more effective treatments will even cost less.  What’s most important, however, is that by focusing on effectiveness we need not be restricted to those methods of treatment that we currently envision as part of the health care system.

A Plan for Moving Forward

So what does all of this mean? In my view, the federal government should re-conceive the requirement for federal funding and for compliance with the Canada Health Act so that all eligible residents are provided with a benefit that covers a comprehensive set of health care needs, not specific services. Advisory panels (these could be national and would reflect the required expertise) would determine the most effective way of treating these needs on an ongoing basis and provinces would then be expected to cover these forms of treatment as part of their commitment to Medicare.  In this way the federal government would take on a leadership role in defining what universal health care coverage ought to mean in Canada. And while the federal government would not deliver most care, it would continue to assist in providing the funds to finance it.
It would no longer be the case that entire areas of essential health care like prescription medications would be left to the private sector. Private financing that alters the incentives in the public system (for example, by covering services like essential medications or treatments that complement doctors and hospital services) should be discouraged.   Because the standards of care provided in the public system are established based on the latest expertise and evidence, they should lead to a relatively high level of quality.  Therefore, the private domain would be defined by treatment for which there are more (cost-) effective options or for items that we do not consider part of the broad essential needs of a population. This sounds limited, but the scope for non-essential health care is in fact broad and so it is likely that the market would continue to thrive. The public domain, however, would be defined by the best evidence on how to meet a broad set of communally agreed-upon population health needs.
There will, of course, be some who perceive any private financing as inequitable. There will likely always be treatments that, while not cost-effective or evidence based, appeal to people who have the resources to purchase them.  Allowing for avenues for individual choice in pursuing these options (we already allow for executive health care services in Canada where individuals or corporations pay for a much more exhaustive set of preventative health services) seems to me a reasonable compromise in a free society with a strong commitment to public benefits. But if we get the public system right, privately financed care will only mean the kinds of differences in access that we tolerate in a market society; it will not add to inequalities in health and quality of life. And safeguarding equality in these essential areas should be our primary goal.

Mark Stabile is Professor of Economics at the University of Toronto, Sciences Po, and INSEAD (as of 2016) and a fellow at the Martin Prosperity Institute at the Rotman School of Management. From 2007 to 2015 he was the founding director of the School of Public Policy at the University of Toronto. He is a member of the advisory board for Canada 2020.


Recent federal boutique tax credits not helping those who need it most, or even most families with kids

Many, many years ago, I was a smoker.  When I decided to quit, I told my friends and family and I think that made it a little easier to stick to my own plan.
I think, in theory, balanced budget legislation might be a bit like that – a commitment device.  Having made a public statement, governments might feel more committed and follow-through on difficult choices to avoid unnecessary deficits.
In practice, it doesn’t seem to work out that way.
The research finds that balanced budget legislation needs political will to have any effect and if you have that political will, then you don’t really need the legislation.
A look through the last decade of federal and provincial budgets reveals that balanced budget legislation doesn’t predict more balanced budgets. Jurisdictions with a balanced budget law balanced the books in 5 of the 10 years. But so did jurisdictions without such a law.
If balanced budget laws don’t necessarily have the desired positive effects, is it possible they can also encourage governments to do sub-optimal things just to show a $0 deficit?
Models of government behavior say that they will feel pressure to spend public money to keep stakeholders [read: voters] happy.  Also, they want to be seen to be busy doing things in office. Governments need stuff to announce: There are pressers to be organized! Talking points to be read! Photo ops to Instagram and Periscope!  So what is a government, under political pressure to spend but also under pressure to not be seen to be spending, to do?

Cutting taxes one shiny credit at time

Boutique tax credits start to look pretty attractive, especially the non-refundable ones (the ones that don’t result in a cash payment back for lower income taxpayers). These are credits that can be announced, often in a budget, and re-cycled again, and again. They can be targeted to certain taxpayers based on behavior—for example taking public transit, enrolling in higher education or paying for organized sports for a child.
Administratively, it’s possible to make these credits conditional on some taxpayer characteristics, but not usually income. Instead, boutique tax credits have a veneer of universality–as long as we all fill out the same tax form, we all have equal opportunity to use them, no matter what we earn, right? So when government announces these credits, it’s easy to imagine that many Canadians could benefit.
Better still, if you’re inclined to spend without being seen to do so, after they are announced, these credits just kind of fade into the wallpaper. Remember the Children’s Arts Credit from Budget 2011?  How much will it cost (in foregone income taxes) for the coming fiscal year? You probably won’t find that number in the 2015 Budget. Like so many individual tax credits from budgets past, the Children’s Arts Credit is now just part of the fiscal backdrop.
The 2015 Budget documents and communications materials give the current federal government’s retrospective on its own tax cuts, pausing to illustrate how much less folks like “Henry and Cathy” (at $120,000 in family income) pay in taxes since 2006.
Let’s set aside the fact that the budget document claimed that the reduction from 16% to 15% of the lowest personal income tax rate took place in 2006 (and not in fact 2005), and instead let’s look at the other personal income tax reductions listed: the Children’s Fitness Tax Credit, the Children’s Arts Credit, the Public Transit Tax Credit and the Canada Employment Credit to name a few. There’s no special credit for “Matthew’s” yellow lunch box, not yet anyway.
The list is long enough to sound quite impressive. But do these credits represent good tax policy?
Do they use public funds prudently? Reductions in federal revenues have to be made up elsewhere or else they ultimately result in spending cuts, or deficits, or even both.
Do these credits have the desired policy impacts­–for example encouraging more physical activity among children?  The available research seems to suggest they do not.
Who benefits most from these boutique credits?  Well, not every family with one or more children.  Using the government’s own numbers, only up to a third of families are expected to get anything at all from many of these targeted tax cuts:1
Robson Chart 1
The same is true of the much-discussed Family Tax Cut that will only reach, at most, 12.9% of all Canadian households and a maximum of one third of families with children.  Bear in mind the above estimates are optimistic and include any family that gets even $1 of federal tax reduction.
So, while the rules for each of the boutique credits are silent on how much money a taxpayer has to have to benefit, it so happens that wealthier tax payers are more likely to claim these credits.  Using the most recent published data on tax returns, here’s what we know about the likelihood of getting some of these boutique credits:2
Robson Chart 2-01

How much more (or less) likely is a taxpayer to get a tax credit, compared to the average?  It depends on their income.
Taxpayers with $100-150K (darker bars) are much more likely to get all the credits, but taxpayers with $20-25K (lighter bars) are less likely to get any.
*Cancelled for the 2015 year onwards.

The dollar value to an individual taxpayer of many of these credits is often very small–just $75 for the Children’s Arts Credit, for example.  But, when stacked on top of each other (which is more likely for upper-income taxpayers), they seem to add up. Is this making a difference in what taxpayers are paying and, if so, who’s getting what?
Let’s compare the taxes paid in 2005 and the most recent year available–2011 for modest and upper-income taxpayers.3 Remember, the federal personal income tax rates and brackets haven’t changed.  The main personal income changes have been through boutique credits.
Robson Chart 3 v2-01
In 2011, the average taxpayer with an income between $100,000 and $150,000 paid $3,633 less in taxes.  The average taxpayer with a very modest income of between $20,000 and $25,000 saw only $475 back in the same period.  These numbers are before the impact of the new Family Tax Cut and the doubling of the Child Fitness Tax Credit – both of which are likely to accelerate the same trend.

Final Thoughts

In some cases, there can be good policy reasons to try to reward taxpayers with credits for doing certain things. But those choices need to be transparent about who wins and how the fiscal room will be adapted.
When public commitments to show balanced books are given precedent over promoting economic growth, boutique credits may become nearly irresistible. These trinkets are easy to make but then become hard to see.
During the 1960s and 70s, personal income taxes only brought in 30-40% of all federal revenues.  Today we’re trending closer to 50%. If a government is going to bind itself with public commitments to balance spending with revenues, it had better make sure that its main revenue stream is sustainable.
Sneaking around to hide an addiction to shiny but regressive credits is just a spending habit by another name.

Jennifer Robson is an Assistant Professor at Kroeger College, Carleton University where she teaches courses in pubic policy and political management.

If you give First Nations students the tools they need, they will succeed

The youngest and fastest growing segment of the Canadian population is underperforming academically to a dramatic degree. Nearly 40 per cent of indigenous Canadians do not graduate from high school, and the figure is nearly 60 per cent for First Nations people on reserves, rates that far exceed the Canadian average. What these statistics show is that the majority of First Nations students are not reaching their full potential and the question is why not?
The answer can be found in many areas, from extraordinarily high poverty levels to the underfunding of both healthcare and primary and secondary school education by the federal government. It was in this latter context that some of us enacted the Model School pilot project in September 2009.
Based on the very successful Turnaround Schools program developed by the Ontario government over a decade ago, the Model School project, known as Wiiji Kakendaasodaa: (Let’s All Learn Together) was a partnership between the Martin Aboriginal Education Initiative (MAEI), the Ontario Institute for Studies in Education (OISE) at  the University of Toronto, the leadership of Kettle and Stony Point First Nation and Walpole Island First Nation, students, teachers and parents at the two host schools: Hillside School and Walpole Island Elementary School.
The project taught teachers new teaching methods, raised expectations for students and introduced a mandatory 90 minutes of daily reading and writing instruction. The results, announced in Toronto a few weeks ago were nothing short of outstanding.
Before the program began, 13 per cent of First Nations students at the two participating schools reached the provincial standard on Grade 3 reading tests, and 33 per cent met the provincial standard in writing. In Grade 6, 17% of students met the provincial reading standard and 39% of Grade 6 students met the provincial writing standard.
After implementing new teaching methods in the Model School Project, almost 70 per cent of Grade 3 students achieved the reading provincial standard and more than 90 per cent hit Ontario’s writing provincial standard, which surpassed the provincial average. In Grade 6, 72% of students met both the reading and writing provincial standard.
Also of particular note was the fact that the percentage of students identified as having special needs greatly decreased. During Wiiji Kakendaasodaa, the percentage of students identified for special education services decreased from 45% to 19% in Senior Kindergarten to Grade 3; the percentage decreased from 24% to 4% in Grades 4 to 6.
These results provide irrefutable evidence that First Nations students can and will succeed if given the opportunity. For this reason the project should be replicated in every First Nations community where it is needed across this country.
Teaching literacy is a moral obligation. It is also essential to harnessing the economic potential of Canada for Indigenous children, who represent the youngest and fastest growing segment of our population.
What should be done? The Government of Canada should act. Proper funding will make the difference. The proof is here.
To see the full report: