Federal Government Unveils Economic and Fiscal Statement
 

Finance Minister Jim Flaherty unveiled the Economic and Fiscal Statement today in the House of Commons, outlining the federal government's strategy to address the current state of Canada's economy within the context of the current global economic upheaval. 

The Statement set forth a plan of fiscal austerity and public sector restraint, aimed at delivering a budget surplus of $800 million in 2008-09 and $100 million each year from 2009 through 2011, with little in the way of fiscal stimulus programs. While the Statement did not include any expansionary sector-specific plans, it did announce several measures that will impact significantly on Canada's tourism industry. These include:

A $350 million injection in new equity for the Business Development Bank of Canada (BDC) to assist small and medium-sized companies. This new injection will increase BDC's lending ability by an estimated $1.5 billion. These new funds for the BDC will enable more SMEs to qualify for loans and consultation services - good news for our industry, given that 79% of tourism-related businesses are SMEs. Currently, 12% of the BDC's lending portfolio is accounted for by loans to tourism businesses.

A commitment to expediting the government's previously-announced $33-billion Building Canada infrastructure plan. Expediting infrastructure spending here in Canada has the potential to help our tourism industry in so far as such spending is allocated towards border and/or transportation projects. In addition to the short term job creation stimulus that such spending would create, it would also have the affect of improving Canada's attractiveness and competitiveness as a destination to both foreign visitors and residents alike.

New fiscal austerity measures within the federal government. All departments are being instructed to manage spending carefully, including limiting spending in areas such as hospitality, travel, conferences and professional services. While we understand that these difficult economic times call for spending restraint, we are disheartened by the directive that calls specifically to reduce spending on travel, hospitality and conferences, areas that are essential to the well-being of the tourism sector. This policy will unquestionably have a negative impact our industry, especially in view of the restraints and cutbacks introduced in business travel by the private sector in recent months.

While it is conjectural to speculate at this point as to the fate of the ways and means motion that would give affect to these measures, early indications are that the opposition parties are likely to vote against it. If they follow through on this threat, it is conceivable that the federal government will be plunged into political stalemate or, at worst, a new election.

There is also a very remote possibility that the Governor-General would be asked to intervene in this matter with a view to asking the opposition parties to form a new government.

TIAC will continue to monitor these events closely, and will communicate any relevant developments to the membership.

To view the full text of the Economic and Fiscal Statement, or to view the Minister's speech, visit http://ec.fin.gc.ca/ec-eng.html

For more information on the Economic and Fiscal Statement, or any of TIAC's advocacy and public affairs files, please contact:

Chris Jones

Vice-President, Public Affairs

Tourism Industry Association of Canada