5 Key Takeaways from the Federal Government’s Throne Speech that Impact your Business

| 10 minutes

On September 29, 2020, our Strategic Advisory Group hosted “The Speech from the Throne: The Impact on your Business”. Paul Zed (former Member of Parliament and Chair of several parliamentary committees, Counsel and Strategic Advisor, McCarthy Tétrault) moderated a panel discussion on the Speech from the Throne. Our panelists included:

  • The Honourable Jean Charest, former Deputy Prime Minister of Canada, former Premier of Quebec, Partner, McCarthy Tétrault;
  • The Honourable Wayne Wouters, former Clerk of the Privy Council and Secretary to Cabinet PC, OC, Strategic and Policy Advisor, McCarthy Tétrault;
  • Lara Nathans, Partner, Industry Strategy Leader and Retail and Consumer Markets Group Leader; and
  • Kim Brown, Partner and Vancouver Practice Lead, Tax. 

The following are key questions and takeaways from our panel. Please contact Lara Nathans or Kim Brown if you require additional information to determine the potential impact of the Speech from the Throne on your business.

  1. What is the purpose of the Speech from the Throne, and what makes this one special?
     

    The Speech from the Throne is delivered at the start of each parliamentary session and sets out the Government’s agenda. It remains a somewhat aspirational guide for the Government, as some Speech proposals require preceding developments before they can occur.

    This Speech from the Throne is special because it occurred during a minority Government in the midst of COVID-19. Both of these factors provide necessary context for the Speech’s content. A minority Government means that other parties have a greater say in Parliament’s agenda. The NDP-backed universal pharmacare program is the most notable example in this Speech.

    Significantly, this Speech resembles a “shopping list” as a result of COVID-19. It contains many ambitious proposals, some of which fall within provincial jurisdiction. These proposals will require negotiating and reaching agreements with provinces, which is not an easy task even under ordinary circumstances. Some Speech proposals will not become a reality for some time as a result of the provinces having a say. It will be important to see which proposals appear in the upcoming budget as a result.

    This Speech may also signal that the Government has its eye towards an upcoming election as it contains proposals that are likely to be popular. These proposals are a blend of short-term and long-term items, with the proposals falling within provincial jurisdiction stamped as the latter. However, the use of phrases such as “fiscal firepower” and declaring that “now is not the time for austerity” indicates that the Government will not shy away from using its powerful spending power. Ambitious proposals may become reality through this spending power if a second wave of COVID-19 does not force both federal and provincial governments to reprioritize their efforts.


     
  2. The Speech from the Throne states that the federal Government’s priority is protecting Canadians from COVID-19. Did the Speech signal whether new measures would be implemented, or will existing measures be continued or expanded instead?
     

    This Speech signalled a blended approach that will continue or expand existing measures, while also introducing proposals which reflect what we have learned through our response to the virus. For example, certain proposals focus on increasing testing capacity and suppressing localized outbreaks. Other proposals include targeted assistance for industries disproportionately affected by COVID-19, such as tourism and the performing arts. Improving the lives of specific societal groups including women and racialized Canadians is another focus of the proposals.

    The continuation of certain existing relief measures is headlined by the proposed extension of the Canada Emergency Wage Subsidy (CEWS) through to summer 2021. The CEWS has played an enormous role in sustaining Canadian businesses. The Speech also proposes to expand the Canada Emergency Business Account (CEBA) and the Employment Insurance program to businesses and individuals, respectively, that were not previously eligible for support. These measures must be closely monitored by Canadian businesses.


     
  3. Does the Speech from the Throne provide a plan to restart the economy, and if so, what are its key elements?
     

    Speeches from the Throne are challenging to assess, in terms of real economic impact, as they are light on details. The rhetoric in the Speech is a useful indicator of where the Government intends to go, however. This Speech clearly indicates continued deficit spending by the Government, completed by “tax the rich” language that targets certain employee stock options and non-Canadian “digital media giants”. Specific industries, such as hospitality, are referenced in the Speech; and proposals like retrofitting of buildings signal a desire for a “green” economic restart.

    The Speech recognizes that women have been disproportionately disadvantaged by COVID-19 from an economic perspective, and that their return to the workforce is vital for Canada’s economic strategy. Proposals to facilitate their return, such as a national childcare system, will take time to roll out, however. Similarly, establishing a task force to guide the Government’s plan to bring women back into the workforce indicates that there is strategic uncertainty on how to tackle the issue.

    The Government’s fall economic update will be an important supplement to the Speech from the Throne, as it will contain more detailed information about Speech proposals. New mandate letters to each cabinet minister will also provide important information. Businesses should review letters relevant to their industry.

    COVID-19 will remain a critical variable for an economic restart. Some of the issues targeted in Speech proposals may be exacerbated by a severe second wave, and a second wave may also lead to an earlier economic update in order to stimulate the economy.


     
  4. This Government has emphasized protecting the environment while growing the economy. What does the Speech from the Throne have to say about this, and what does this mean for Canadian businesses and their strategies?

    This Speech from the Throne prominently features clean technology and the environment. Projects such as investments in public transit and the ban of single-use plastics in 2021 will have a clear impact on the consumer goods sector. Notably, the Government’s clean technology emphasis is supported by proposals to launch a fund attracting investment in zero-emission products and cutting corporate taxes in half for certain corporations in this sector. The objective is to make Canada one of the world’s most competitive jurisdictions for clean technology businesses. Although some of the other Speech proposals concerning the economy and the environment are ambitious, public transit funding could readily find themselves in the fall budget. The Canada Infrastructure Bank could be leveraged for such projects.

    In contrast with the explicit recognition of clean technology in the Speech were the subtle nods towards the oil and gas (O&G) industry. The absence of specific O&G proposals may be a potential cause for concern for two reasons. First, the lack of clear references to and support for O&G could promote concerns of alienation in the western provinces. Second, several of the Speech’s ambitious projects will require provincial cooperation, and it is likely that certain provinces will demand O&G support from the Government in exchange for their cooperation on those proposals.
     

  5. What commitments are made in Speech from the Throne to pay for the proposals, and how does the Government plan to balance the budget?

    The Speech’s lack of budgetary details and early indications that tax revenues will not balance the projected $328.5 billion deficit in 2020 mean that this will be the big question for the Government. This Speech acknowledged this imbalance as it states that the Government will preserve Canada’s fiscal advantage but also indicates that the Government will continue its deficit spending and that the government is well-positioned to take advantage of low borrowing costs.

    It will be important however for the Government to set a “fiscal anchor” to prevent ballooning expenses. Canada’s credit rating has been downgraded by one agency and further downgrading will harm businesses across the country. An anchor will be a valuable disciplinary tool as the Government works towards a more prudent GDP/Debt ratio. Similarly, it will be important to align fiscal and monetary policy after the pandemic to mitigate inflationary pressures.

    The act of balancing the budget is also politically sensitive. None of the parties in Parliament will want to entertain a tax proposal before the next election. For example, something like a GST increase and debates over other taxes would likely occur following that election.
     

  6. Events across North America, including here in Canada, have centred equity and inclusion in the public conversation this year. We have also learned that COVID-19 disproportionately affects certain groups. How did the Government address these matters in the Speech from the Throne, and what is the plan moving forward?
     

    The Speech includes a number of proposals that target or acknowledge Canadians who are Black, Indigenous, or People of Colour. Reforms to the criminal justice system, systemic racism, and economic empowerment are some topics that the Speech expressly references in relation to these groups. The Black Entrepreneurship Program is one example of a targeted program referenced in the Speech. The Speech also mentions efforts to increase diversity in the federal procurement process. The Speech mentioned a commitment to work on a response by the Government to the National Inquiry into Missing and Murdered Indigenous Women and increasing Indigenous involvement in the economy.

    Despite these and other positive signals, the Speech is light on details about its proposals to further equity and inclusion, which are likely to follow in the coming months. These proposals may also start a dialogue on immigration, another topic that will increase in importance as Canada’s need for talent in the workforce grows over time.

    The Panelists’ Main Takeaways from the Speech from the Throne

    • Kim Brown: The Speech signals that federal spending will continue and the Government’s focus on supporting Canadian businesses and individuals will continue. It is also an excellent time to be in the clean technology sector. It remains to be seen how these proposals will be paid for - the fall fiscal update will be important on that front.
    • Wayne Wouters: The Speech from the Throne is ultimately a signal. Businesses should prepare for the upcoming budget and fiscal update as they will provide more valuable information.
    • Jean Charest: The fall fiscal update will be crucial to determine what will happen following this Speech from the Throne. The mandate letters will also be an important source of information for certain sectors. It appears that clean technology and infrastructure are good sectors to be in at this time. We should expect the Government to provide more supportive spending when the second wave of COVID-19 arrives. We should also expect to have an election campaign underway by June 2021.
    • Lara Nathans: The Speech is a signal. As the COVID-19 situation continues to rapidly evolve, it will be interesting to see which proposals are augmented or pivoted from in the fall fiscal update when the second wave of the pandemic arrives.

    We invite you to visit the McCarthy Tétrault COVID-19 Recovery Hub for strategic insights and key considerations to guide you through the complexities of law and business during the coronavirus pandemic. Our Daily Briefing email offers timely updates and perspectives through one convenient email a day. Our podcast may also be of interest to you: Law in the Time of COVID-19 cuts through the information overload to keep listeners prepared to address the global business implications of the virus.

    [1] On October 9, 2020 the Government announced its intention to introduce legislation providing businesses and other organizations with new forms of support. This announcement provides further details for proposals in the Speech, including:

    • The new Canada Emergency Rent Subsidy (CERS) will provide qualifying organizations with rent and mortgage support until June 2021. CERS subsidizes expenses on a sliding scale up to a maximum of 65% until December 19, 2020. The subsidy provides retroactive support for the period beginning September 27 and ending October 24, 2020;
    • A CERS top-up of 25% will be available for organizations temporarily shut down by a mandatory public health order. This top-up is in addition to the aforementioned 65% subsidy;
    • CEWS is extended at its current subsidy rate until June 2021;
    • CEBA is expanded to enable eligible businesses and not-for-profits to access interest-free loans up to $20,000. The CEBA application deadline has also been extended to December 31, 2020.
       

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