We will restore a two-year budgeting framework to increase transparency and make steady, measurable progress in deficit reduction. That progress will be driven by rolling, near-term targets that are firm and achievable.

In addition, Liberals will restore prudent budget planning, starting with this platform. By its second year, our plan frees up $7 billion through better choices. We will put some of that money aside in a $3 billion Prudence Reserve, to manage any unforeseen events without missing our targets. If the reserve isn’t needed, it will go toward the deficit.

These unshakable commitments – rolling deficit reduction targets, a realistic budgeting timeframe, and a tangible commitment to prudence – worked the last time a Liberal government had to clean up a fiscal mess left by Conservatives.

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First, we will cancel the Harper government’s corporate income tax cuts of January 1, 2011 and January 1, 2012, restoring the 2010 level for Canada’s largest firms. That will still maintain a 25 percent advantage over the United States, and one of the lowest rates in the G-7. Given that Canada’s corporate tax rate is very competitive, using borrowed money to cut it further is not a prudent policy. Our action will ramp up to yield over $5 billion by the second year of our plan, rising to nearly $6 billion within four years.

Second, we will limit the lucrative tax break on stock options. In some companies, employees are offered the option of acquiring stocks at a set price, below market value if the stock has risen. The difference is treated as employment compensation, but the employee can claim a tax deduction for 50 percent of it. Currently, 8,000 Canadians who earn more than $500,000 a year deduct an average of $400,000 from their taxable income based on stock options. Many other taxpayers are claiming much more modest amounts. But those 8,000 high earners are receiving three-quarters of the total claimed under the stock option deduction.

At a time of high deficits and growing inequality between the richest Canadians and middle-class families, this is a disproportionate benefit for the very wealthy. A Liberal government will cap the amount that can be claimed through the stock option deduction at $50,000 annually.

Stock options are a legitimate method of compensation, and particularly useful for start-up companies. Employees with up to $100,000 in annual stock option gains will be unaffected by this change. Very wealthy taxpayers will also continue receiving the deduction, and pay the regular income tax rate above this cap. The change will achieve a fair balance, and return approximately $600 million to the public purse over two years.

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• Fund new directions laid out in the Canada in the World plan by re-allocating more than $1 billion, after the end of the combat mission in Afghanistan in 2011.
• Spread the anticipated revenue from the upcoming wireless spectrum auction over the 10-year life of the awarded contracts to support investments in a more creative and connected Canada.
• Cancel the Harper government’s Public Private Partnership Infrastructure Fund, which in its two years of operation has only delivered eight percent of the funds allocated to it. Instead, we will invest in affordable housing. A dedicated fund is not necessary for P-3s, and in fact this one accomplished virtually nothing.
• Cancel immediately the Accelerated Capital Cost Allowance for oil sands investment. We will invest the savings in measures that will help make oil sands development cleaner.
• Cancel the mismanaged, $30 billion deal for F-35 stealth fighter jets. When it is necessary to buy new fighters, we’ll spend billions less than the Harper government would have. But the higher priorities will be investments in middle-class families, and building a stronger economy for the future.

A Liberal government will review all federal program spending, and implement smart, sustainable savings. We will seek the best analysis and ideas from the professional public service, and provide direction based on a positive and realistic vision of modern government.

We will cut wasteful spending that has ballooned under the Harper government. This would include, but not be limited to taxpayer-funded promotional advertising, the over-sized Cabinet, PMO staff and skyrocketing spending on consultants.

We anticipate saving at least $500 million by the second year of our plan, consistent with the C.D. Howe Institute’s assessment of potential cost savings that should be achieved in the federal government.

Overall, these measures will define a fiscal policy that is balanced, progressive and responsible. We will restore prudence to management of the nation’s finances, and make steady, measured progress toward a balanced budget while investing in the priorities of Canadian families in a manner that strengthens the economy for the long-term.
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Unfortunately, Canadian productivity has been sluggish in recent years. According to Mark Carney, Governor of the Bank of Canada, “Canada under-invests in machinery and equipment, training, and innovation – in fact, all of the underlying drivers of productivity.” We are ranked 16th in the OECD in terms of business research and development. Venture capital in Canada is at a 14-year low.

A forward-looking government must foster an innovation-friendly environment. While reigning in unnecessary regulation, the federal government can do more to target public investments, and provide the right incentives for entrepreneurs and investors to take risks on new ideas, technologies, business models and other productivity improvements. The most crucial long-term task for the federal government is to make learning through all stages of life truly a Canadian priority.

The Harper government has presided passively over a string of foreign take-overs of major Canadian companies. Conservative ministers did nothing while Nortel, an icon of Canadian innovation, was sold off in pieces to foreign investors. Similarly, Inco, Alcan, and Stelco were bought out, with headquarters and management control removed from Canadian hands. Only intense pressure from Saskatchewan and across the country prevented the same result for Potash Corporation, a dominant player in a key, global commodity.

Foreign investment is good for Canada, and Canadians invest even more in other countries than foreigners do here. We should aim for still more success in global business. That will require the federal government to stop being a passive spectator. A Liberal government will strengthen the Investment Canada Act to make foreign investment reviews more transparent, clarify how “net benefit” is assessed, recognize the importance of Canadian headquarters and management control, and articulate when an asset can be considered of particular “strategic” value to Canada. Being pro-active is not the same as being protectionist. Rather, it’s part of a more effective approach to innovation and Canada’s place in the 21st century global economy.

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1) Clean resources

World markets are demanding more sustainable and environmentally responsible resource products and consumption. Environmental footprints of entire supply chains matter more than ever. Canada is well positioned to benefit commercially from its exports of responsibly harvested natural resource products, and the expertise and technologies needed for cleaner extraction, management and consumption of resources abroad.

This broadly-defined clean resources sector, including energy, will be a major driver of the global economy for decades to come, and Canada can lead the world in this area. A Liberal government will offer incentives for innovation and work with industry, experts and other governments to advance Canadian commercial success and job creation.

2) Health and biosciences

Canada has demonstrated longstanding leadership in health innovation from the invention of insulin in 1922, to the introduction of universal medicare in 1966, to today’s breakthroughs in stem cell research, genomics and neuroscience. This positions us well to capitalize on the expected surge in demand for health-related products and services from aging populations throughout the world.

A Liberal government will work with provinces, territories and the research community to bolster innovation in the health and bioscience field, improve the health of Canadians, and help bring Canadian products to global markets.

3) Digital Technologies

The information and communications technology sector has always played an important role in our economy and in Canadian society. Today, it generates over $155 billion in revenues annually, employs more than half a million Canadians and contributes almost 40 percent of total private sector research and development in Canada, a measure that must continue growing if we are to keep pace with competitors. We’re already home to world-leading companies such as Research in Motion, Open Text, Ubisoft and Electronic Arts.

A Liberal government will make digital technologies one of its Canadian Champion Sectors, boosting incentives for investment in innovators seeking to conquer world markets.

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• A new Innovation and Productivity Tax Credit (IPTC) that will grant Canadian investors a 15 percent tax credit for investments in small, early-stage start-ups that don’t yet have the track record to seek financing from more traditional sources such as banks and the stock market.
• An extension of the popular “Flow-Through Shares” tax model to start-ups in the three Canadian Champion Sectors. This tax incentive would allow venture companies with little or no revenue to pass on tax deductions to investors, creating a significant incentive to invest in Canadian entrepreneurs from promising sectors where Canada can become a world leader.

Small and medium businesses are the backbone of the Canadian economy. We need more of them to grow into large, innovative Canadian leaders that take on global markets. These measures to advance the Canadian Champion Sectors will target start-ups, and improve the incentives for the most innovative among them.

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A Liberal government will launch a new Innovation Gateway providing a “single window” approach that consolidates government support for innovation and entrepreneurship in emerging fields as well as long-standing areas of strength like aerospace, manufacturing and natural resources. The objective will be a simpler and more efficient emphasis on entrepreneurial, innovative companies. Consolidating all existing federal resources earmarked for innovation, the Innovation Gateway will focus on:

• Helping entrepreneurs access the business and managerial training they need;
• Advancing business incubators and innovation clusters in partnership with industry and Canadian colleges, polytechnics and universities; and
• Supporting growing Canadian companies just past the venture capital stage in bridging the difficult “valley of death” step between research and commercialization.

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As the country’s financial situation improves, we will increase investments in science, technology and basic research. In the near term, several commitments in this platform will advance science investment in cooperation with major national research bodies, including for brain research, oil sands environmental impacts, and the Canadian Freshwater Strategy.

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As an immediate step, we will put in place a Youth Hiring Incentive for small and medium-sized businesses – a 100 percent Employment Insurance holiday for every Canadian youth age 18 to 25 that they hire. This incentive will apply to all new youth hires by small and medium enterprises for three years, and be evaluated in the third year to verify results and administrative efficiency. The Youth Hiring Incentive will be particularly valuable given that existing payroll taxes pose a significant burden for smaller firms. It is expected to benefit up to 170,000 young Canadians each year, at an annual investment of $130 – $160 million.

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But in the last five years, Canada has fallen behind more ambitious competitors. The United Kingdom, France, Australia and the United States, for example, have developed far-reaching plans for the digital society of the future, and are introducing comprehensive policies and programs.

A Liberal government will develop and implement Digital Canada, focusing on the following objectives:

Access to Broadband for All Canadians. Liberals consider access to a high-speed broadband Internet connection essential infrastructure, just as the electricity grid and the telephone network were over a century ago. A Liberal government will publicly tender contracts for private companies to install broadband capacity for the hundreds of thousands of Canadians in rural, remote or northern areas who do not currently have access. To make those contracts economical for private investment, we will provide $500 million in support, allowing Canada to achieve basic high-speed Internet access for all Canadian households within three years. The source of that investment will be the next spectrum auction for wireless licensing rights.

Closing the Digital Divide.Research shows that Internet skills lead to real economic benefits, including lower prices for consumers and more competitive small business. A Liberal government will work with all partners to promote digital life skills and training, in particular for older Canadians and lower income families.

Fair balance Between Creators and Consumers. Digital technology offers many new opportunities, but enjoying content without compensating its creators shouldn’t be among them. At the same time, consumers should have freedom for personal use of digital content they rightfully possess. Liberals have worked to pass effective copyright legislation, including a private copying compensation fund instead of any new tax on consumers.

Flourishing Canadian Content, Culture and Identity in Digital Media. Canadians should continue to have access to ever more Canadian stories and Canadian content in the Digital Canada of the future. New media should provide vibrant and rewarding new avenues for expression by Canadian artists. The public broadcasters, Radio Canada and the CBC have crucial roles to play in achieving these objectives.

Competition in a Healthy Business Environment that Rewards Innovation. Consumers deserve choices and carriers that invest heavily in the advanced services and infrastructure of tomorrow deserve the chance to earn a fair return.

An Open Internet. The Internet is today’s principal conduit for the free flow of ideas. To ensure it fosters the uninhibited exchange that innovation requires, Canada’s Internet environment must remain open. Internet traffic management must remain neutral, and maintain the open sharing of legitimate technologies, ideas and applications. A fair, effective wholesale regime is also essential to allow smaller Internet service providers to lease broadband infrastructure at fair prices.

Open Government. Canada’s federal government must embrace information technology and open data in order to improve services to Canadians and make government more transparent and accountable for public spending. Putting Statistics Canada and other government data online wherever possible, after meeting all privacy and other legal requirements, will strengthen Canadian democracy, help create and disseminate knowledge and spur innovation.

Protection from Digital Threats. Just as openness and transparency are the sources of boundless innovation and creativity on the Internet, these same features are too often exploited for criminal purposes causing significant personal and economic disruption, harm to children, and even threats to national security. A Liberal government will make security a priority in Digital Canada, working to advance it with the private sector and other governments at home and abroad.

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