Notes for Remarks by The Honourable Scott Brison, P.C., M.P. (Kings-Hants)
to the Construction Association of Nova Scotia

October 2, 2010

I am delighted to be here with you. The construction association is important not just in Halifax or Sydney, but in little places like Cheverie.

I frequently take 6:30 or 7:00am flights out of Halifax which means leaving the house around 4:30am.  As I am driving along that shore road, sometimes a little faster than I should be, I am sharing that road with hard working construction workers on their one hour drive into Halifax where they will put in a hard days work before driving back to god’s country at night.

They are paying their mortgages and helping their children pay for their college educations with the blood and sweat they put in every day building Nova Scotia.

Today I’m not going tell you what you already know about the Canadian economy.

The numbers tell us where we are now, but they do little to tell the story of where we are really going.

Focusing only on today’s numbers and ignoring important global trends, is like driving down the road and only looking in the rearview mirror.

I’m going to start with a very brief look at the state of the Canadian economy today.

Secondly, I want to move the discussion to some of the larger social and economic issues on the horizon that I feel we have a responsibility to prepare for.

Third, I want to propose some ideas on how to prepare the Canadian economy for the future …..and finally….. I want to talk to you about Nova Scotia.
Current Economic Situation

As you are well aware, the Canadian economy is not out of the woods yet.

In July the economy shrank, and even more troubling the numbers were off in the manufacturing and construction industries.

Unemployment figures are still quite high at 8.1% nationally, with youth unemployment numbers higher still at 16.8%.

And a lot of full-time jobs have been replaced with part-time work.

So what we are seeing in Canada is a statistical recovery, with a continued human recession.

Since Canada’s recovery continues to be driven by the global demand for commodities, our dollar will continue to rise, crowding out manufacturing, tourism and other jobs in traditional industries which have depended on a lower dollar.

Last year, Canada saw its first trade deficit in over 30 years.

In July 2010 – the most recent numbers available – Canada posted a trade deficit of 2.7 billion dollars. That’s our largest trade deficit yet.

This is an ominous sign for a small, open economy like ours that depends on international trade for our jobs and prosperity.

Consumer confidence has dropped in each of the last four months.  This reflects the fact that private and household debt in Canada is at a record high, reaching 1.4 trillion dollars at the end of last year.

This means the average Canadian owes nearly $42,000 each.

In fact, when it comes to household debt, Canada has the worst record among 20 advanced countries in the OECD.

Interest rates have been nudging higher and Canadians are worried about how they’re going to pay the mortgage and make ends meet.

And now we’re seeing some of these concerns reflected in recent housing forecasts.

As you know, the Government of Canada responded to the recession with a stimulus program that is set to expire on March 31st.

The government must be flexible about the March 31st deadline. It is estimated that between 25% and 50% of the projects won’t be completed by that date.

I am not talking about a new a new stimulus program or new money.  I am talking about the federal government honourinig the commitments it has already made to provincial, municipal, and community partners.

You cannot swim in an 80% completed pool.

You cannot cross a 75% completed bridge.

And you ought not flush your toilet into a 90% completed sewer system, even if you live in Halifax.

So we’re asking the Government of Canada for some flexibility to ensure that local governments and community groups aren’t left on the hook for incomplete projects.

Beyond the issue of short-term economic stimulus, there are some very real challenges facing our society in the coming years.

If you look a little deeper, you’ll see that this hasn’t been an ordinary recession – what we’re seeing is a global, economic restructuring.

To quote that great Canadian economist, Wayne Gretzky, we need to skate to where the puck is going to be, not where it has been.

So here are five big issues on the horizon that I believe we must prepare for… or, put another way, here’s where I think the puck is going.

1. Firstly, there’s a technological shift to which we must adapt. We can all see this in every facet of life. The adoption of new technologies and the rapidity of change are increasing, which is dramatically changing the nature of our work.

As society struggles to adapt, we are going to see more and more jobs without workers and more workers without jobs.

Our governments must work closely with employers to identify human resource needs and help train our labour force so that our workers can meet those needs.

From a public policy perspective, it’s clear the need for training, retraining and skills development will only grow in the future.

2. Secondly, there’s the very serious issue of rising public debt.

The global economic expansion of the last 15 years was based on cheap credit, cheap money, and excessive capital availability.

For a prolonged period of time, both the private sector and the public sector availed themselves of too much cheap credit.

Here in Canada, the federal Conservative government increased program spending in its first 3 years by 18 percent.

After 13 years of surpluses, the Conservatives quickly put Canada in a deficit position – and that’s even before the recession hit and the stimulus taps were turned on.

Canada’s federal debt levels are usually compared to unitary states – countries without provincial governments, and countries which, in some cases, have laws stipulating that only the national government, and not local governments, can assume debt.

So when you compare Canada’s federal debt-to-GDP numbers with these other countries, it doesn’t look as bad. But this doesn’t reflect the full picture.

When you add in our provincial and municipal debt levels, Canada’s debt-to-GDP numbers are actually a serious cause for concern.

Canada’s gross debt as a percentage of our economy is at 81.6 percent. The United States is at 82.3 percent.

So while we like to boast about our relative strength to the U.S., we’re actually not that far ahead.

And when you compare Canada’s total debt with unitary states, we actually fare worse than Germany and the U.K.

The outlook for our Atlantic provinces and Quebec is even more bleak.

In fact, Quebec has the fifth-worst debt level in the western industrialized world – only Italy, Japan, Belgium and Greece have more total public debt as a percentage of their economy.

Governments around the world are reacting to this precarious situation by slashing their spending, while central banks move interest rates higher.

For example, Ireland recently cut its public service pay by 15 percent. Greece is also trying to move forward with spending reforms.

In short, the world is moving from an expansionary economic policy to a contractionary one.

As more and more governments approach these unsustainable levels of debt, their ability to invest in the types of social and economic infrastructure that we need to address the challenges before us, is being severely constrained.

3. The third issue we need to address is the global shift of economic and political power that’s taking place toward large, emerging economics like China, India and Brazil.

We’ve seen the G20 replace the G8 as a forum for global decision-making.

And more and more, there’s talk of the G2, as China prepares, in a generation, to overtake the United States as the world’s largest economy.

But Canada’s trading patterns aren’t reflecting this shift. This year, almost 75 percent of our exports are going to the United States, which leaves us especially vulnerable to downturns in the U.S. market and growing U.S. protectionism.

At the same time, we need to do even more to seize trade opportunities in emerging markets like the BIC nations of Brazil, India and China and even the CIVETS nations of Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa.

Here, the federal government should play a leadership role in helping Canadian businesses identify opportunities overseas, build key relationships and diversify their markets.

In countries like China and India, in particular, political leadership can play a deciding role in opening up business opportunities for Canadian companies.

4. The fourth big issue on the horizon is the demographic shift. Our population is aging. As we move forward, fewer people will be working and paying taxes while a growing number of people leave the workforce and draw on benefits.

And, last year at the World Economic Forum Davos Conference there were two sessions filled to capacity on the economic and social cost of Alzheimers.  There are 500,000 people with Alzheimers in Canada today and in 20 years it is expected to be more than double that number.

5. Lastly, there’s a global shift taking place that is linking the economy with energy needs and the environment. This is also known as the 3 E’s.

We’re entering in a global, carbon-constrained economy, and whether we like it or not, the world is moving to put a price on carbon.

The world’s environmental laggards are becoming economic laggards.

We need public policies that will help businesses, governments and households cut their energy consumption and carbon footprints, and, ultimately, become more environmentally – and economically – efficient.

To begin,  Canada needs a long-term industrial strategy.

What should our focus be? Obviously Canada is a global energy leader, but how are we going to go from being an energy leader to a clean energy leader?

I believe we have one of the best potential national advantages in clean conventional energy.

20 years from now, 80 percent of the world’s energy will still come from hydrocarbons. So Canada needs to invest more in technologies like CO2 sequestration where we already have a head start.

40 percent of all of the CO2 stored anywhere in the world is sequestered in Weyburn, Saskatchewan.

That is because the previous Liberal government invested alongside the private sector to help develop the technology.

And this investment put Weyburn on the map as a global centre of excellence for CO2 sequestration.

Even James Cameron recognized this week that it makes more sense to seize the opportunity to develop technology to green the oilsands than to shut them down.

There’s a tremendous opportunity for Canada to strengthen our energy relationship with the United States while positioning ourselves to meet China’s growing demand for clean energy.

But it will require political leadership.

In pursuing these opportunities, our political leaders should focus on three objectives: coordinated carbon pricing mechanisms; integrated smart energy grid corridors; and green technology research and development partnerships.

This brings me to a second overarching goal of good public policy: we need to be more strategic with our future investments in infrastructure.

As I said before, we didn’t experience an ordinary global recession. This was – and is – a global economic restructuring.

So for a country like Canada to pursue infrastructure projects that simply allow us to recover to where we were before the recession – that’s simply not good enough. Especially if the global economy has, in the process, shifted somewhere else.

Many other countries used their stimulus packages to reposition their economies and make themselves more competitive in the new, carbon-constrained economy.

In fact, the Globe and Mail had a few things to say about this last week.

They called Canada’s stimulus package “a squandered opportunity.”

They said, “to throw billions into a hodge-podge of boondoggles and call it world-beating economic policy is a bit of a stretch.”

They continued, saying “too much of the stimulus appears to have wound up feeding local egos, and wallets, without leaving an enduring economic mark.”

And finally, they concluded that the stimulus packages’ “legacy may be a swelling deficit that crowds out spending on the kind of infrastructure the country really needs.”

A squandered opportunity, indeed.

In Mandarin, the word “crisis” is the same as the word “opportunity.”

And other countries – our competitors – were careful not to waste a good crisis.

For example, South Korea invested 79 percent of its stimulus package in green technologies, creating 1.8 million green jobs in this growing sector.

China dedicated 218 billion dollars of its stimulus funds toward clean environmental technologies.

And on a per capita basis, the United States put six times more money into green and clean energy investments than Canada.

The Canadian stimulus package undoubtedly created economic activity and jobs.  But, a more strategic approach could have helped build Canadian competitiveness in the new restructured global economy.

What would this have meant in your industry?

In terms of business, in terms of jobs, today and tomorrow, it could have meant greening all the government buildings in Canada.  If the Government of Canada were a private commercial office space company it would be the largest in the country.

The stimulus package could have been used to make the entire Canadian economy more energy efficient.  Properly targeted we could have greened the Government of Canada office buildings.

Through the tax system we could have used a green home renovation tax credit to encourage Canadians to green their homes.

And accelerated capital cost allowances could have been used to encourage businesses to green their operations.

This type of stimulus package would have done more than just help people survive through the recession, it would have helped them thrive after the recession.

Every government that cuts its energy consumption uses less tax dollars to operate its facilities.

Every family that greens its home will use less of their hard earned money every month to pay their heating and electric bill.

And every business that cuts its energy consumption would have a better bottom line after this recession.

And what this could mean for your industry is you would be at the forefront of one of the fastest growing areas of the global green economy.

I’ve identified some of the big global trends and the challenges and opportunities they represent for Canada and I’ve presented some ideas to help prepare Canada for the future.

Now I would like to talk to you about Nova Scotia which, in particular, is facing some even greater challenges.

Nova Scotia’s tax base and population is shrinking.

We have the second oldest population in Canada, next to Newfoundland and Labrador. At present, we have five citizens of working age for every senior citizen. But in the future this ratio is set to fall by half, with only 2.5 citizens of working age for every senior citizen.

Nova Scotia’s productivity rates are quite startling as well. Of the 60 U.S. States and Canadian provinces, Nova Scotia’s general productivity rate comes in at 39th, but our labour productivity comes in at 59th out of 60.

One of the principal reasons our labour productivity is so low is that our levels of business investment are comparatively low.  Investments in technology and equipment strengthen productivity.  High taxes on investment are high taxes on productivity.

Nova Scotia also has the highest corporate tax rates in the country, including the highest marginal effective tax rate on new business investment at 11.2 percent.

Our provincial corporate tax rates are 6 percent higher than New Brunswick.

And corporate income tax rates on holding companies are also higher in Nova Scotia than in any other province.

Another reason for sagging productivity is that the government sector, as a percentage of the Nova Scotia economy, is too high.

In 2006, federal spending alone accounted for 34.5 percent of Nova Scotia’s economy.

Only PEI has lower productivity rates and a higher dependence on government spending.

Nova Scotia’s debt levels are even more ominous. Among the provinces, our combined debt-to-GDP is second only to Quebec.

Last year we saw a deficit of almost 500 million dollars, and this year we’re expecting to add another 220 million dollars to the debt.

Last year we also received 400 million dollars in offshore royalties, however the royalties are set to decline every year over the next 10 years until this revenue stream is completely gone.

We simply do not have enough public awareness in Nova Scotia of how dire our fiscal situation is, and there’s very little honest public dialogue taking place about what we have to do next.

The reality is, our situation is unsustainable and Nova Scotia must take immediate action before our debt levels spiral out of control.

We must, over the next few years, be prepared to significantly reduce our debt of 13 billion dollars.

So now that I have painted a picture of some of the very serious challenges facing Canada in general, and Nova Scotia in particular… Where do we go from here?

What can we do to get ourselves out of this?

I have a few ideas of the types of polices we need to pursue in order to regain our footing and build a stronger economy in Atlantic Canada – and indeed across Canada – that can compete with the best in the world.

We need to work with the four Atlantic provinces and Quebec to modernize energy production and transmission, and to lower our collective carbon footprint.

However, no deal will be achieved without leadership from the federal government and a partnership to build key infrastructure.

And an ideal opportunity for our region to make a change is through a green energy corridor that spans across Atlantic Canada.

This new corridor could help Newfoundland export its clean, renewable electricity through New Brunswick to the lucrative New England market.

And it would help Nova Scotia and PEI develop a market for various green power projects, including wind farms and tidal power from the Bay of Fundy.

By working together, the region could achieve greater efficiencies through economies of scale, leading to lower energy costs for businesses and families. Lower costs that would, in turn, increase the economic competitiveness of the region.

Another important area of cooperation for Atlantic Canada is the issue of regulatory reform and interprovincial trade barriers.

It is simply nonsensical for four small provinces to continue segregating their economies through separate bureaucracies and artificial regulatory barriers.

The Macdonald-Laurier institute estimates that interprovincial trade barriers cost the Canadian economy up to 8 billion dollars every year. Put another way, getting rid of these barriers would be the equivalent of putting nearly 1,000 dollars into the pockets of each and every family of four.

Finally, and these measures are directed specifically toward Nova Scotia, we need to get our fiscal house in order.

This means cutting debt in real terms, cutting the cost of government operations, selling-off assets that are not core to the operations of government, and replacing revenue streams in a manner that is sensitive to the need to increase business investments and grow the economy.

Efficiencies in the area of government operations can be achieved through merging operations with other governments in the region, as well as outsourcing more services – everything from IT services to procurement.

When I was the federal Minister of Public Works, we streamlined and centralized the procurement process for over a hundred departments and agencies. We took our inspiration from the private sector. And in doing so, we saved a billion dollars a year.

We also examined our assets, and determined which assets were core to the functions of government and which were not.

In times of fiscal austerity, it’s difficult to justify ongoing operation and maintenance costs of non-core assets. It’s now time for the Government of Nova Scotia to do the same.

It’s time for us as Nova Scotian taxpayers to ask ourselves the tough questions and help determine which assets can be privatized at a good value and applied to the provincial debt.

What’s clear to us today, is that as Nova Scotians, we must be prepared to do what’s required to get our fiscal house in order.

And we must face this reality sooner rather than later, so that we can better invest in the social and economic infrastructure that our province needs to take care of its citizens and improve our competitiveness.

I appreciate my time with you today.

My intention has been to share with you so of the challenges and opportunities facing both Nova Scotia and Canada.

I am convinced that after more than 13 years in public life if you are open and direct with citizens about the problems, citizens are more likely to engage and help you build the solutions.

What I fear in both Canada and Nova Scotia is a political climate where increasingly politicians focus more or re-election than on the real issues.

There is a reason for this.  The real issues are not easy.  They involve hard choices, difficult, and sometimes unpopular decisions.

You are businesspeople in a tough industry.  You know what it means to make tough decisions everyday.

I have to tell you as a citizen of Nova Scotia, it is increasingly difficult for me to understand the complacency of our citizens and business community.

If you were shareholders in a company where you knew things were going wrong and urgent issues had to be addressed, and important decisions were being avoided, and disaster loomed, would you sit back and do nothing?

You would either act at a shareholders meeting or you might divest and get out.  That is what we do not want you do in Nova Scotia.  But, increasingly young Nova Scotians are divesting.  They are giving up on Nova Scotia Inc. and are going down the road.

I remember a few years ago how angry I felt as a citizen when a premier of NS put expensive billboards up in Calgary telling people to come home to Nova Scotia.  The Nova Scotia CEO was only focussing on marketing, when the real need was on market development.

For far too long we have rested on our laurels.

We have repeated to ourselves that our quality of life is so great so many times, that we have ignored the reality that both our quality of life and standard of living are being eroded by economic irresponsibility, incompetence, and political cowardice.

As citizens of Nova Scotia each one of us in this room has a responsibility to do more.

Nova Scotia is a place of great beauty, that has thoughout its history produced exceptional people.

We can do better and we must do better.

It is our responsibility to future generations.

Thank you.