Canada's Performance Report 2007-08: The Government of Canada's Contribution

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2 - Economic Affairs

Context

The Canadian economy has been in a period of expansion since 1992—a period that has only been exceeded by the 22-year expansion that began in 1958. Canada's economic fundamentals are strong, with an unemployment rate near a 33-year low; sound consumer, business, financial, and government sectors; and prudent monetary policy allowing for low, stable, and predictable core inflation rates. Employment growth exceeded levels in the U.S. and the rest of the G7 between 1998 and 2007, with the creation of nearly 800,000 jobs since 2006 alone.

In 2008, the pace of Canada's economic activity has been weaker than in previous years as a result of the U.S. slowdown, which, coupled with a higher Canadian dollar, has significantly reduced the demand for Canadian goods and services.³ Canadian consumers and businesses have, however, benefited from rising real incomes and profits due, in part, to rising commodity prices and their positive impact on Canada's terms of trade. As a result, growth of domestic demand remains solid. Employment growth has slowed since the first quarter of 2008, but the labour market has remained solid with 194,000 jobs created during the first three-quarters of the year.

In reaction to the slowdown in U.S. economic activity and developments in global financial and credit markets, the Bank of Canada has eased monetary policy and reduced its overnight target rate by 1.5 percentage points to 3 per cent since December 2007. This has helped to keep interest rates low in Canada and support the growth of domestic demand.

The 2007 Economic Statement also provided $60 billion in tax reductions for individuals, families, and businesses over 2007–08 and the next five fiscal years. Combined with previous tax relief introduced by the federal government, total tax relief over the same period approaches $200 billion.

The Government of Canada's expenditures for Economic Affairs

In 2007–08, a total of 54 federal organizations spent $107.1 billion on programs and services that contributed to Canada's economic affairs.

Total spending in this area included $25.7 billion in major transfers to other levels of government⁴ (including the Canada Social Transfer⁵ and other fiscal arrangements) and approximately $49.1 billion in transfers to persons, such as Employment Insurance⁶ benefits, elderly benefits, the Canada Child Tax Benefit, and the Universal Child Care Benefit.

Figure 2.1 — Breakdown of actual spending in Economic Affairs ($107.1 billion) by outcome area for fiscal year 2007–08

Figure 2.1 - Text version

In 2007–08, Human Resources and Social Development Canada spent $52.3 billion on policies and programs that reduce barriers to improving participation in the workforce; enhance income security; and ensure safe, stable, and productive workplaces.

Agriculture and Agri-Food Canada spent $3.4 billion on providing scientific knowledge and tools, policies, and programs that promote a competitive, innovative, and sustainable agriculture and food sector.

Indian and Northern Affairs Canada and the Canadian Polar Commission spent $3.1 billion on policies and programs that support economic development, infrastructure, and skills development for Aboriginal peoples.

Finally, in this spending area, Infrastructure Canada spent $2 billion in 2007–08 to provide Canadians with world-class infrastructure. Investment in infrastructure is a key determinant in maintaining Canada's economic competitive advantage in the global marketplace. Modern transportation infrastructure drives economic growth by curbing congestion and helping to move people and goods quickly and reliably.

Income Security and Employment for Canadians

Background

An important element of quality of life is the ability to adequately support oneself financially. For some, this is not always possible—even when the economy is performing well. The Government of Canada aims to make incomes secure for the most vulnerable members of Canadian society by reducing taxes, while improving the financial situation of seniors, students, families, and persons with disabilities. It also makes job training and skills development widely available so that Canadians can find jobs. This is done through strategic investments that build an educated and skilled labour force and through federal programs that give Canadians better economic development opportunities.

The Government of Canada's expenditures in the outcome area of income security and employment for Canadians

The nine federal organizations listed below spent $52.3 billion in the outcome area of income security and employment for Canadians in 2007–08 through their respective strategic outcomes and program activities:

• Canada Industrial Relations Board
• Canada Revenue Agency
• Canadian Artists and Producers Professional Relations Tribunal
• Correctional Service Canada
• Human Resources and Social Development Canada
• Office of the Superintendent of Financial Institutions Canada
• Royal Canadian Mounted Police
• Status of Women Canada
• Veterans Affairs Canada

Human Resources and Social Development Canada was the main federal department that provided programming in this outcome area, with expenditures of approximately $49.7 billion in 2007–08, including $14.3 billion for Employment Insurance.

Human Resources and Social Development Canada spent $32.3 billion, as well as funds from the Canada Pension Plan Account, to administer the Canada Pension Plan and Old Age Security and to implement other social investment policies and programs. In partnership with the Canada Revenue Agency, Human Resources and Social Development Canada also spent $2.5 billion on programs for children and families, including Canada's Universal Child Care Plan, Universal Child Care Benefit, Child Care Spaces Initiative, and Canada Child Tax Benefit/National Child Benefit Supplement.

Veterans Affairs Canada provides benefits and services to veterans, their families, and other eligible clients and its 2007–08 expenditures in the outcome area of income security and employment for Canadians were approximately $2.1 billion. This includes pensions or awards for disability, death, or detention; job placement assistance, rehabilitation, and vocational assistance; and health and financial benefits.

Figure 2.2—Distribution of actual spending by federal organization in income security and employment for Canadians, 2007–08

Figure 2.2 - Text version

The Government of Canada's contribution to income security and employment for Canadians

Reduction in the tax burden and helping Canadians save

In 2007–08, the federal government announced broad-based tax reductions for individuals, families, and businesses in its October 2007 Economic Statement. Measures administered by the Canada Revenue Agency that directly benefited individuals during the fiscal year included the following:

• cutting the rate of the goods and services tax (GST) by an additional percentage point as of January 1, 2008, fulfilling the federal government's commitment to reduce the GST to 5 per cent; and
• reducing the lowest personal income tax rate to 15 per cent from 15.5 per cent and increasing the basic amount that all individuals can earn tax-free.

Budget 2008 built on these broad-based tax reductions by introducing a new Tax-Free Savings Account (TFSA) to help Canadians save for the future. The TFSA will allow Canadians to contribute up to $5,000 a year. Investment income earned on the account will not be taxed and withdrawals will be tax-free.

Enhancing economic opportunities for seniors

In 2007–08, the federal government continued to address the needs of Canada's seniors through a series of important measures that included the following:

• funding projects in hundreds of communities across Canada under the New Horizons for Seniors Program, which provides opportunities for seniors to share their leadership, energy, and skills to the benefit of Canada's communities;
• enhancing incentives to save and invest for family retirement security through pension income splitting and increases to the age and pension income credits;
• enabling seniors to further build their retirement savings by increasing the age limit for converting Registered Pension Plans and Registered Retirement Savings Plans by an extra two years to age 71;
• introducing the Tax-Free Savings Account, which will provide seniors with a new vehicle for meeting any ongoing savings needs;
• implementing amendments (Bill C-36) to the Canada Pension Plan and the Old Age Security Act to ensure that programs meet the needs of today's and tomorrow's seniors and persons with disabilities;
• establishing the National Senior Council to advise the government on issues of national importance to seniors; and
• conducting research on the aging workforce disseminating information combatting age discrimination in the workplace, and recommending best practices for its prevention.

Investing in children and families

Canada's Universal Child Care Plan provides families with resources to help balance work and family as they see fit—regardless of where they live and whatever their circumstances or preferences. The Universal Child Care Benefit, which is part of Canada's Universal Child Care Plan, helps Canadians balance work and family by supporting their child care choices through financial assistance. This benefit of $100 a month—up to $1,200 a year per child—is paid to parents for each child under six years of age.

To further recognize the additional costs associated with raising children, a new Child Tax Credit was introduced in 2007. The credit will provide a maximum benefit of $306 per child in 2008. Furthermore, the spousal and other related income amounts were increased in 2007 to equal the basic personal amount so that single-income families, including single parents, will receive the same tax credits as those provided under the basic personal amount for two-income families.

To help Canadians manage child care and work responsibilities, Budget 2007 increased transfers to the provinces and territories by $250 million annually to support the creation of child care spaces. This transfer, which began in 2007, will ensure that the provinces and territories have the additional flexibility needed to support their families.

Performance context

To set its programs, expenditures, and performance in context, the Government of Canada is tracking key measures of long-term progress in the outcome area of income security and employment for Canadians.

Performance Context - in the outcome area of income security and employment for Canadians.

Trend	Indicator	Overview
▲	Unemployment*	Between 1976 and 2007, the unemployment rate reached its highest levels in 1983 (12%) and 1993 (11.4%), following two major recessions in Canada. In 2007, Canada recorded its lowest unemployment rate (6%) since the mid-1970s. Alberta had the lowest unemployment rate in 2007 at 3.5%, followed by Saskatchewan and British Columbia, both at 4.2%. Newfoundland and Labrador had the highest unemployment rate in the country at 13.6%, followed by Prince Edward Island at 10.3% and Nova Scotia at 8%.
▲	Low income incidence*	Recent strong economic growth has contributed to lowering the proportion of Canadians with low income. Between 1996 and 2005, the low income rate declined from 15.7% to 10.8%, a 31% decrease. In 2005, 10.8% of Canadians had low income. Single parents, persons who are single, recent immigrants, persons with disabilities, and Aboriginal people were more likely than other Canadians to have low income.

*Note: To be consistent with Human Resources and Social Development Canada indicators, previously used indicators were replaced with those available on the Department's website.

Strong Economic Growth

Background

Strong economic growth depends on economic development in all regions of the country and competitiveness in different sectors of the economy. A balanced approach that capitalizes on regional strengths and reduces regional disparities creates an attractive business environment that maximizes the contribution of all sectors to Canada's economy and supports its long-term growth.

The Government of Canada's expenditures in the outcome area of strong economic growth

The following 31 federal organizations spent $11.4 billion in the outcome area of strong economic growth in 2007–08 through their respective strategic outcomes and program activities:

• Agriculture and Agri-Food Canada
• Atlantic Canada Opportunities Agency
• Atomic Energy of Canada Limited
• Canadian Environmental Assessment Agency
• Canadian Food Inspection Agency
• Canadian Space Agency
• Canadian Tourism Commission
• Cape Breton Development Corporation
• Citizenship and Immigration Canada
• Department of Finance Canada
• Economic Development Agency of Canada for the Regions of Quebec
• Enterprise Cape Breton Corporation
• Environment Canada
• Federal Bridge Corporation Limited
• Fisheries and Oceans Canada
• Human Resources and Social Development Canada
• Indian and Northern Affairs Canada and Canadian Polar Commission
• Industry Canada
• Infrastructure Canada
• Marine Atlantic Inc.
• National Energy Board
• National Round Table on the Environment and the Economy
• Natural Resources Canada
• Northern Pipeline Agency Canada
• Office of the Superintendent of Financial Institutions Canada
• Parks Canada
• Standards Council of Canada
• The Jacques Cartier and Champlain Bridges Incorporated
• Transport Canada
• VIA Rail Canada Inc.
• Western Economic Diversification Canada

Indian and Northern Affairs Canada and the Canadian Polar Commission had significant expenditures in the area of strong economic growth, with $3 billion of investment in community infrastructure, in individual business development, and in community economies and the larger Northern economy.

Agriculture and Agri-Food Canada developed various tools to ensure the security and sustainability of the agriculture and agri-food sector. Expenditures of approximately $2.5 billion in 2007–08 allowed the Department to provide scientific knowledge and tools, policies, and programs that supported competitiveness and profitability in the agricultural and agrifood sector, minimized the impact of food-borne hazards on human health, and increased international opportunities for Canadian agriculture.

Infrastructure Canada's expenditures for programs to improve the state of Canada's public infrastructure were $1.9 billion.

Figure 2.3—Distribution of actual spending by federal organization in strong economic growth, 2007–08

Figure 2.3 - Text version

The government of Canada's contribution to strong economic growth

Investment in world-class infrastructure

Modern infrastructure is important to compete in a global economy. Innovative approaches have been developed to foster infrastructure renewal at the national, provincial and territorial, and municipal levels. The new Building Canada Fund, the cornerstone of the $33 billion Building Canada Plan, has been designed to support the federal objectives of economic growth, a clean environment, and stronger and safer communities. Eight Building Canada framework agreements have been signed with recipient provinces and territories and negotiations on the remaining five are well advanced. Funding under this initiative will address both large strategic infrastructure projects as well as smaller-scale municipal projects. The extension beyond 2013–14 of the Gas Tax Fund to become a permanent measure will allow cities to plan better for their future capital needs. In addition, the new Provincial-Territorial Base Funding provides each province and territory with $25 million per year in predictable infrastructure funding.

Development and maintenance of Aboriginal and Northern community infrastructure

Indian and Northern Affairs Canada and the Canadian Polar Commission have made significant advances in improving drinking water in First Nations communities. Since the start of the Plan of Action for Drinking Water in First Nations Communities in 2006, the number of water systems considered high risk has been reduced by over half. Of the 21 communities identified as priorities in March 2006, 15 have been removed from that category. In addition to the reduction in the number of high-risk drinking water systems, there has been an expansion in the network of trainers who provide support and training to water systems operators.

In addition, such initiatives create new opportunities for Northerners and First Nations, Métis, and Inuit peoples. In 2007–08, investments in infrastructure enabled the expansion or establishment of 622 Aboriginal firms and the securing of federal contracts worth over $337 million by 5,384 Aboriginal firms. In First Nations communities across Canada, 527 Community Economic Development Officers were funded to create business capacity at the local level and facilitate new economic opportunities. Investment of $18.9 million went to the network of Aboriginal Financial Institutions (AFI), which provides developmental lending and business services to Aboriginal small- and medium-sized businesses. At the same time, considerable progress has been made on infrastructure improvements, notably to drinking water, management of community capital facilities, and maintenance practices. In the North, investments for broadening the economic base of the territories were concentrated on tourism, cultural industries, and fisheries. Taken together, these measures contribute to sustainable business growth and significant Aboriginal participation in the regional and national economies.

Strengthening Canada's natural resources

Canada's forest industry—a traditional and recognized pillar of economic strength—is faced with many global, market, social, and environmental challenges that affect the industry's ability to compete internationally. To enhance the long-term competitiveness and sustainability of Canada's forest industry, Natural Resources Canada worked in collaboration with the Canadian Council of Forest Ministers and key stakeholders to help the sector transition in three target areas:

• development of a better integrated national forest innovation system needed to enable forest sector transformation;
• investment in innovative technologies to maximize the economic value of Canada's forests; and
• expansion of new and existing markets to achieve the full benefits of the increased global demand for forest products.

The Government of Canada supported the mining industry by maintaining a competitive investment climate for mineral exploration and mining with the aim that (i) Canada remains one of the world's foremost destinations for mineral exploration and (ii) Canada's base-metal mine production capacity is maintained in the long term. Because Canada is a destination for over 21 per cent of the global expenditure for mineral exploration and Canadian-based companies account for over 35 per cent of the total equity raised for mineral exploration and development in the world, Canada is a leader in the mining industry.

Improving the competitiveness of Canada's business income tax system

Canada needs a competitive business tax system to encourage investment, increase productivity, and create more and better jobs and higher living standards for Canadians. In the October 2007 Economic Statement, the federal government introduced timely broad-based tax reductions for Canadian businesses, which will bring the corporate income tax rate (including the corporate surtax) down to 15 per cent by 2012 from the 2007 rate of 22 per cent. These corporate income tax reductions build on tax relief measures introduced in 2006 and strengthen the tax advantage for Canadian businesses. Canada will have the lowest overall tax rate on new business investment in the G7 by 2010 and the lowest statutory tax rate in the G7 by 2012. In addition to these broad-based tax reductions, Budget 2008 provided further assistance to Canada's manufacturing and processing sector by extending to three years the treatment of accelerated capital cost allowance for investment in machinery and equipment.

Supporting small- and medium-sized businesses

To achieve strong economic growth, Canada needs a strong entrepreneurial base. The Government of Canada is creating a competitive business environment through the following series of measures that support innovation, reward success, and reduce unnecessary regulations:

• Canada's Scientific Research and Economic Development (SR&ED) tax incentive program provided over $4 billion in tax assistance in 2007 for business investment in research and development (R&D). An enhanced SR&ED investment tax credit is available to small Canadian-controlled private corporations. Budget 2008 improved the SR&ED program by extending the availability and accessibility of financial support for R&D to small- and medium-sized businesses.
• The Government of Canada is committed to reducing the paper burden on businesses by 20 per cent by November 2008, which will improve administrative efficiency and advance Canada's Entrepreneurial Advantage.
• The cultural sector plays an important multi-faceted role in creating cultural content, promoting social cohesion, and contributing to the Canadian economy. The cultural sector and its related industries contributed over $46 billion to the Canadian economy in 2007 (roughly 3.8 per cent of the total GDP) and employed more than 1.1 million Canadians.

Performance context

To set its programs, expenditures, and performance in context, the Government of Canada is tracking key measures of long-term progress in the outcome area of strong economic growth.

Performance Context - in the outcome area of strong economic growth.

Trend	Indicator	Overview
▼	Real gross domestic product (GDP)	Real GDP growth in 2007 was 2.7%, which is about the average over the past 17-year period of continuous economic expansion but slightly below the increases of 3.1% and 2.8% respectively experienced in 2005 and 2006.
▼	Cost competitiveness	In a study released by KPMG in 2008, Canada led the G7 in terms of low business costs, with a cost advantage of 0.6% over the U.S. This advantage has, however, declined from 9% in 2004 and 5.5% in 2006, primarily as a result of the strong appreciation in value of the Canadian dollar relative to the U.S. dollar over the last four years.
—	Natural resources sustainability	Among the 121 commercial fish stocks examined in 2007, 32 stocks were healthy, 29 were in a cautious state, 19 were in critical condition, and 41 were of unknown status. Of the stocks with a known status, the percentage of assessed stocks that are healthy as compared to those that are cautious or critical has declined approximately 9% since the last review period (2003–06).
▲	Green economic practices	ISO 14001 is an international environmental management standard. Canadian firms with ISO 14001 certification increased from 100 in 1999 to 1,636 in 2005 and 1,679 in 2006.

An Innovative and Knowledge-based Economy

Background

Innovation is a driving force in economic growth, environmental sustainability, and social development. Innovation helps us to deal with and prepare for challenges such as climate change. In today's knowledge-based economy, education plays a key role in providing individuals with the knowledge, skills, and competencies to participate effectively in society and the economy.

The Government of Canada's expenditures in the outcome area of an innovative and knowledge-based economy

The 14 federal organizations listed below spent $7.5 billion in the outcome area of an innovative and knowledge-based economy in 2007–08 through their respective strategic outcomes and program activities:

• Agriculture and Agri-Food Canada
• Atomic Energy of Canada Limited
• Canadian Grain Commission
• Canadian Institutes of Health Research
• Cape Breton Development Corporation
• Fisheries and Oceans Canada
• Human Resources and Social Development Canada
• Indian and Northern Affairs Canada and Canadian Polar Commission
• Industry Canada
• Infrastructure Canada
• National Research Council Canada
• Science and Engineering Research Canada
• Social Sciences and Humanities Research Council of Canada
• Western Economic Diversification Canada

Human Resources and Social Development Canada is the main federal department that provides programming in this area, with expenditures of approximately $2.4 billion in 2007–08, primarily for workplace skills and learning programs such as the Canada Student Loans Program, Canada Education Savings Program, and Adult Learning, Literacy and Essential Skills. Human Resources and Social Development Canada works in close partnership with the provinces and territories, service providers, and other stakeholders to deliver these programs.

A number of federal agencies, such as the granting councils (including Science and Engineering Research Canada, the Social Sciences and Humanities Research Council of Canada, and the Canadian Institutes of Health Research), also had significant expenditures in the area of an innovative and knowledge-based economy, aimed at funding research, supporting students, and attracting faculty.

Figure 2.4 — Distribution of actual spending by federal organization in an innovative and knowledge-based economy, 2007–08

Figure 2.4 - Text version

The Government of Canada's contribution to an innovative and knowledge-based economy

Investing in students

As stated in the federal government's Advantage Canada plan, high-quality education is critical for Canada's prosperity. In recognition of this declaration, the Government of Canada has undertaken numerous initiatives, such as the following:

• working with provinces and territories to improve resources for students to address financial and non-financial barriers to post-secondary education and lifelong learning;
• completing a review of student financial assistance, which included consultation about the future of the Canada Student Loans Program and modernizing how student financial assistance is delivered to Canadians, as announced in Advantage Canada;
• implementing the Adult Learning, Literacy and Essential Skills program and gauging whether its delivery inefficient and effective;
• enhancing the flexibility of Registered Education Savings Plans by increasing the time they may remain open from 25 years to 35 years and by extending the maximum contribution period by10 years; and
• providing $25 million over two years to establish a new Canada Graduate Scholarship award for top Canadian and international doctoral students.

Budget 2008 announced the launch of the Canada Student Grant Program with investments of $350 million in 2009–10, rising to $430 million by 2012–13. In addition, Budget 2008 announced $123 million in new investments over four years for the streamlining and modernization of the Canada Student Loans Program.

Mobilizing Science and Technology to Canada's Advantage

The Government of Canada's new science and technology (S&T) strategy, Mobilizing Science and Technology to Canada's Advantage, provides a multi-year framework to guide federal S&T policy and program decision making. The S&T strategy's goal is to strengthen and build upon the following long-term and sustainable competitive advantages for Canada through its S&T investments:

• an Entrepreneurial Advantage—to translate knowledge into commercial applications that generate wealth for Canadians;
• a Knowledge Advantage—to position Canada as a leader in generating new ideas and innovations; and
• a People Advantage—to make Canada a magnet for highly skilled people.

Investing in research

A number of initiatives are currently underway to help strengthen Canada's capacity to undertake world-leading research and build a more innovative, competitive, and prosperous economy:

• investing in knowledge by providing an additional $80 million per year to Canada's three university granting councils for research in support of industrial innovation, health priorities, and social and economic development in the North;
• providing $250 million over five years to support strategic, large-scale research projects in the automotive sector for the development of innovative, greener, and more fuel-efficient vehicles; and
• completing needs assessments that evaluated opportunities for Canadian involvement in clean energy technologies in the California market. The successful project, a partnership between Industry Canada and the Canadian Consulates General in Los Angeles and San Francisco, identified and assessed opportunities for Canadian firms in hydrogen and fuel cells, waste-to-energy, and solar power. Opportunities for follow-up activities in 2008–09 were also identified.

Performance context

To set its programs, expenditures, and performance in context, the Government of Canada is tracking key measures of long-term progress in the outcome area of an innovative and knowledge-based economy.

Performance Context - in the outcome area of an innovative and knowledge-based economy.

Trend	Indicator	Overview
▼	Innovation	Canada's investment in research as a share of the economy has declined slightly in recent years. Canada's gross domestic expenditure on research and development (GERD) as a percentage of the GDP has decreased progressively from 2.09% in 2001 to 1.89% in 2007. The largest share of this decline was in business-performed research. While overall business research has increased, it has not increased as fast as the economy overall. Over the same time period, the government increased its investments in research and development. In terms of other innovation measures, such as Canada's share of the world's triadic patent families and its publication of science and engineering articles, Canada is behind the U.S. and other G7 countries.
▲	Educational attainment	The proportion of persons 15 years of age and over without high school diplomas decreased from 37.9% in 1990 to 23.2% in 2006. Between 1990 and 2006, the proportion of individuals who had obtained college or trade certification increased 8 percentage points to 29.9%. Meanwhile, the percentage of individuals with university degrees rose from 10.9% in 1990 to 18.9% in 2006.
—	Literacy	The 2003 data from the Adult Literacy and Life Skills Survey indicate that the average literacy score for Canadians has not changed significantly since 1994.

A Clean and Healthy Environment

Background

Canada's lands, waters, and wildlife provide the foundation for Canada's health and economy and the well-being of Canada's environment is central to the well-being of Canada's communities, both in terms of quality of life and economic prosperity. Human health is dependent on a healthy environment, and a healthy workforce is an essential component of productivity and competitiveness.

The Government of Canada's expenditures in the outcome area of a clean and healthy environment

The eight federal organizations listed below spent $4.6 billion in the outcome area of a clean and healthy environment in 2007–08 through their respective strategic outcomes and program activities:

• Agriculture and Agri-Food Canada
• Atomic Energy of Canada Limited
• Canadian Space Agency
• Environment Canada
• Indian and Northern Affairs Canada and Canadian Polar Commission
• Natural Resources Canada
• Parks Canada
• Public Prosecution Service of Canada

Overall, Natural Resources Canada spent the largest amount in this area during the fiscal year. Expenditures totalling $2.8 billion went to energy programs aimed at the safe and reliable delivery of electricity, the regulation of oil, the development of natural gas and petroleum products, and the improvement of energy efficiency and energy science and technology.⁷

Environment Canada had the second largest expenditures in this area, spending approximately $952 million on programs directed at restoring Canada's natural capital, providing weather and environmental predictions, and restoring and conserving the natural environment.

Agriculture and Agri-Food Canada recognizes that the environment is inextricably linked to the social and economic well-being of Canadians. As such, the Department spent $444.5 million in 2007–08 on a suite of initiatives and programs aimed at enabling the agriculture and agri-food sector to maintain or increase its profitability while producing safe, high-quality food and using environmental resources in a manner that ensures their sustainability for present and future generations.

In 2007–08, Parks Canada invested $201 million on the conservation of heritage resources, including the maintenance or improvement of the ecological integrity of national parks, the sustainable use of national marine conservation areas, and the protection of unique marine ecosystems.

Figure 2.5 — Distribution of actual spending by federal organization in a clean and healthy environment, 2007–08

Figure 2.5 - Text version

The Government of Canada's contribution to a clean and healthy Environment

The Clean Air Agenda

The Government of Canada's Clean Air Agenda (CAA) represents a part of the Government's broader efforts to address the challenges of climate change and air pollution, with a view to building a clean and healthy environment for all Canadians.

In April 2007, the government announced the details of the regulatory component of the Clean Air Agenda in Turning the Corner: An Action Plan to Reduce Greenhouse Gases and Air Pollution. This plan set out the approach for reducing greenhouse gas and air pollution emissions from industry. It also described planned regulatory measures to reduce emissions from the transportation sector, actions on consumer and commercial products, and actions to improve indoor air quality.

Budgets 2006 and 2007 provided $1.9 billion⁸ in funding over four years (2007–08 to 2010–11) for the Clean Air Agenda, which incorporates the development of both regulations and programming to achieve measurable reductions in greenhouse gas emissions and air pollution.

The federal government recognizes the need for a holistic approach to delivering measurable results for the benefit of all Canadians; therefore, to measure investments against results, a horizontal framework known as the Clean Air Agenda Horizontal Management, Accountability and Reporting Framework (CAA HMARF) was developed. The CAA HMARF consolidates 44 programs that span 9 participating departments and agencies into 8 themes, each of which is championed by a lead department.

HMARF graphic - Text version

Environment Canada is the lead department for the CAA HMARF. With its shift toward shared management, accountability, and integration of the financial investments made for achieving results against defined targets, the CAA HMARF is the first of its kind.

The government recognizes the need for a comprehensive and integrated approach to achieving defined targets for Canadians. Within the CAA, certain themes are largely tailored toward reducing greenhouse gas emissions and air pollution through regulations or programming, while other themes play a complementary role by helping Canadians adapt to the effects of climate change.

Reduction of both greenhouse gas emissions and air pollutants may take some years to achieve and requires solid domestic and international foundations, such as regulations, programming, consultations, and strengthening partnerships.

In March 2008, the Government of Canada announced further details of its environmental commitment in Turning the Corner: Regulatory Framework for Industrial Greenhouse Gas Emissions, a comprehensive plan that describes the mandatory regulations and clearly sets out reduction targets for greenhouse gas emissions from key emitting sectors in one of the most stringent regulatory regimes in the world.

The regulatory framework requires industry to reduce its greenhouse gas emissions by 18 per cent by 2010 for every unit of production. After 2010, industry will have to reduce emissions by another 2 per cent for each unit of production every year. The framework also includes strong measures aimed specifically at the key emitting sectors of oil sands and coal-fired electricity.

Within the Clean Air Agenda, the government is promoting innovation by stimulating the development and deployment of clean energy and clean transportation technologies and initiatives.

Canada continues to work with its international partners to develop an effective long-term global framework to address climate change, which will result in reductions of global greenhouse gas emissions. In addition, Canada is fostering strategic partnerships and advancing its national objectives through discussions that contribute to global action on climate change and air pollution, particularly in the negotiations under the United Nations Framework Convention on Climate Change. Furthermore, Canada is working with the U.S. to reduce the transboundary flow of air pollution through the development of a Particulate Matter Annex to the Canada–United States Air Quality Agreement. Moreover, Canada's acceptance into the Asia-Pacific Partnership on Clean Development and Climate reinforces the Government of Canada's commitment to the development and deployment of clean technologies to address climate change.

The Air Quality Health Index (AQHI) entered into the implementation phase in Toronto and 14 communities in British Columbia, providing Canadians with daily local air quality forecasts and advice on health protection. Another integral contribution to achieving significant reductions in air pollution is the government's commitment to improving indoor air quality through guidelines, regulations, and various research and development initiatives, as well as a national radon program.

Together, these governmental initiatives and strategies not only support increased industry, but also assist Canadians in their capacity to adapt to climate change. Knowledge of effective means to reduce harmful exposure gives rise to informed decision making and thereby reduces health risks to Canadians.

In 2007–08, most of the effort on the Clean Air Agenda themes was geared toward establishing the implementation structure, building partnerships, acquiring expertise, and finalizing design and start-up of various programs. These are important steps in the Agenda's first year, and it is expected that this early work will lead to achievements in greenhouse gas reductions by 2010–11.

The chart provides a summary of the magnitude of the preliminary expected greenhouse gas (GHG) reductions by theme. These are based on the summation of individual program reductions. These are key contributors to achieving Canada's target of 2020. The Government of Canada has established the following national target: an absolute 20 per cent reduction in greenhouse gases, relative to 2006 levels, by 2020.

Summation* of preliminary expected GHG reductions in 2010–11

Summation graphic - Text version

Programs also provide additional benefits to Canadians, including encouraging new technologies and longer term emission reductions.

In 2007–08, departments and agencies participating in the CAA received their first funding allocations, much of which supported such start-up activities as consultations, infrastructure, and program development.

The following table illustrates the investments by theme.

Distribution of spending within the CAA by theme (2007–08), Planned and Actual

Distribution of spending graphic - Text version

The departments collectively spent $236.7 million on advancing and achieving results against the Agenda. This represents 80 per cent of the overall year's planned funding and 12.5 per cent of the Agenda's overall four-year funding. Actual spending was less than anticipated in 2007–08, as some of the Agenda's programs were rolled out partway through the year. Remaining funds will be available for use in future years.

Cross-departmental advancements toward meeting the collective goal of reducing greenhouse gas emissions and air pollution will be demonstrated through the CAA HMARF's public reporting principles.

Climate change remains an important issue for Canadians, so it is critical that the federal government demonstrate what actions are being taken and what results are being achieved on protecting the environment.

Investing in cleaner energy

In 2007–08, Natural Resources Canada worked to amend the Energy Efficiency Act to strengthen and broaden the Government of Canada's ability to improve the energy performance of equipment and appliances. To date, under the existing authority, pre-publication versions of future standards for ten products and labelling for incandescent and fluorescent lamps were released in 2007 as part of the regulatory consultation process.

Natural Resources Canada also delivered a series of ecoENERGY initiatives to help Canadians use energy more efficiently, boost renewable energy supplies, and develop new, cleaner technologies. The suite of ecoENERGY programs has been launched and it is fully operational. For example, under the ecoENERGY for Renewable Power program, 12 projects have been funded for the production of power from emerging renewable energy sources such as wind, biomass, hydro, geothermal, solar photovoltaic, and ocean energy (representing 950 megawatts of capacity). In 2007–08, under the ecoENERGY Retrofit Initiative, 17,000 homeowners received grants averaging approximately $1,000 each and 96 retrofit projects were funded in small-and medium-sized organizations with fewer than 500 employees or with buildings of less than 10,000 square metres.

Working collaboratively across government with key stakeholders to address the priorities of climate change and clean air, the Government of Canada implemented an ecoTRANSPORT Strategy last year. The Strategy, whose four pillars are ecoMOBILITY, ecoAUTO, ecoFREIGHT and ecoTECHNOLOGY, aims to reduce greenhouse gas and air pollutant emissions.

A cleaner, greener, and healthier Canada

Environment Canada focussed its efforts on ensuring real environmental outcomes that benefit Canadians and future generations. In 2007–08, Environment Canada's programs supported the protection and conservation of wildlife and aquatic ecosystems, the sustainable use and management of natural capital, the delivery of weather and environmental predictions and services, and the protection of Canadians and the environment from the effects of pollution and waste. To achieve these outcomes, among the programs undertaken were the following:

• the implementation of the Turning the Corner: An Action Plan to Reduce Greenhouse Gases and Air Pollution;
• the Chemical Management Plan, in partnership with Health Canada, aimed at improving protection from hazardous chemicals;
• the implementation of the Species at Risk Act to support a strong response to wildlife conservation concerns;
• the production and dissemination of weather forecasts for the health and safety of Canadians, 24 hours a day, every day;
• the implementation of an improved law enforcement regime for Canada's national parks; and
• the creation of new protected areas in the Northwest Territories.

Agriculture and agri-food sector and the environment

Agriculture and Agri-Food Canada provides farmers with access to science-based information, knowledge, and direct on-farm programming that enables them to use a more systematic management approach to address environmental risks and identify suitable corrective actions that will be economically viable, even profitable, over time. In 2007–08, initiatives related to a clean and healthy environment undertaken by Agriculture and Agri-Food Canada include the following:

• the development and implementation of innovative policy options, including a biofuels strategy;
• the conduct of sound scientific research to develop the relevant knowledge for improving the environmental performance of the Canadian agricultural system;
• the continued implementation of the National Land and Water Information Service;
• the promotion of minor use pesticides, risk-reduction products, and beneficial management practices to improve the health of the environment while contributing to the competitive position of Canadian farmers; and
• the continued support of Environmental Farm Plans and the development and adoption of beneficial on-farm management practices through financial and technical assistance.

Performance context

To set its programs, expenditures, and performance in context, the Government of Canada is tracking key measures of long-term progress in the outcome area of a clean and healthy environment.

Performance Context - in the outcome area of a clean and healthy environment.

Trend	Indicator	Overview
▼	Air quality	Nationally, ground-level ozone exposure increased approximately 11% from 1990 to 2006; however, the rate of increase has slowed over this period. Ground-level ozone is a key component of smog and one of the most harmful air pollutants to which people are exposed. Ozone is an important indicator of air quality because there are currently no established thresholds below which it does not pose a risk to human health.
—	Freshwater quality	The freshwater quality of Canada's surface waters has been evaluated with respect to its ability to support aquatic life—the most sensitive requirement of this resource. Of the 377 sites monitored across southern Canada from 2004 to 2006, water quality was rated as "excellent" at 6% of the sites, "good" at 42%, "fair" at 29%, "marginal" at 18%, and "poor" at 4%.
▼	Biodiversity	As of May 2008, the status of 205 species previously deemed to be at risk had been reassessed. Of these, the status of 58 species worsened (28.3%), whereas 30 species (14.6%) were deemed to be no longer at risk or placed in a lower risk category.
▼	Greenhouse gas emissions	Canadian greenhouse gas emissions decreased slightly from 2004 levels but overall emissions in 2006 were approximately 21.7% greater than the 1990 level.

A Fair and Secure Marketplace

Background

The marketplace is an essential foundation for investment, innovation, trade, sustainable development, job creation, consumer confidence, and economic growth. A secure, fair marketplace maintains and enhances consumer confidence and gives businesses the best environment possible for competitiveness. The Government of Canada is committed to providing a fair and secure marketplace by ensuring that:

• the Canadian financial system is stable and sound;
• Canadians comply with tax, trade, labour, and border legislation;
• the rights of both consumers and producers are protected; and
• high standards for a safe, fair, and secure trading system are in place.

The Government of Canada's expenditures in the outcome area of a fair and secure marketplace

The following 16 federal organizations spent $5.6 billion in the outcome area of a fair and secure marketplace in 2007–08 through their respective strategic outcomes and program activities:

• Agriculture and Agri-Food Canada
• Canada Mortgage and Housing Corporation
• Canadian Dairy Commission
• Canadian Food Inspection Agency
• Canadian Grain Commission
• Canadian International Trade Tribunal
• Canadian Radio-television and Telecommunications Commission
• Canadian Transportation Agency
• Competition Tribunal
• Copyright Board of Canada
• Department of Finance Canada
• Financial Consumer Agency of Canada
• Human Resources and Social Development Canada
• Industry Canada
• Standards Council of Canada
• Transport Canada

The Department of Finance Canada was the largest contributor to this outcome area, with $4.9 billion allocated to the area of financial sector policy. This largely entailed support for Crown corporation borrowing.

Industry Canada is also an important contributor to this outcome area, with expenditures of approximately $183 million in 2007–08. This funding was aimed at modernizing Canada's marketplace framework in support of a highly competitive and innovative economy, addressing unfair, illegal, and fraudulent marketplace behaviour, encouraging innovation, and minimizing unnecessary regulatory burden.

Transport Canada's contribution in this outcome area represents expenditures of approximately $124 million in 2007–08, directed toward ensuring the continued improvement of transportation services through policies, guidelines, regulations, and standards that allow transportation activities to adapt, innovate, remain competitive, and serve the public.

Figure 2.6 — Distribution of actual spending by federal organization in a fair and secure marketplace, 2007–08

Figure 2.6 - Text version

The government of Canada's contribution to a fair and secure marketplace

Modernizing Canada's telecommunications

As the backbone of Canada's economic activity, telecommunications services are key to Canada's economy and well-being. In recent years, the telecommunications landscape has changed dramatically, necessitating an evolution in policy and regulatory approaches. A number of telecommunications reform initiatives have been undertaken. For example:

• the issuance by the Governor in Council of a final Order changing the Canadian Radio-television and Telecommunications Commission's local telephone forbearance framework to accelerate deregulation in areas where there is competition for the benefit of Canadian businesses and consumers; and
• the creation of an independent telecommunications consumer agency called the Commissioner for Complaints for Telecommunications Services Inc., made up of ten telecommunications service providers.

In 2007–08, Industry Canada continued to advance the government's agenda for telecommunications policy reform, including the update of legislative and regulatory frameworks. The Department also continued to monitor and assess the effects of previously undertaken actions for their effectiveness in reducing the regulatory burden on businesses, promoting competition in the telecommunications industry, and making regulation more efficient.

Maintaining an effective regulatory framework for food, plant, and animal products

The Canadian Food Inspection Agency provides consumer protection and supports competitive domestic and international markets through its fair and effective regulatory regime for food, plants, and animals. In 2007–08, the Canadian Food Inspection Agency's main initiatives included the following:

• meat inspection reform;
• the Canada–Ontario integrated meat inspection system;
• the implementation of the Organic Regulations;
• the Smart Regulation initiative;
• the development and implementation of the Electronic Export Certificate; and
• the improvement of inspection guidelines for the trade of wood products.

Enablers of a strong transportation system

Transport Canada has been working on several fronts to support a strong and vigorous marketplace framework for the nation's transportation system. Transport Canada's initiatives in 2007–08 included the following:

• modernization of the legislative framework that governs major components of Canada's national transportation system;
• Bill C-3, the International Bridges and Tunnels Act;
• amendments to the Canada Transportation Act and the Railway Safety Act; and
• Bill C-8, the third and final component of the federal government's legislative strategy for amending the Canada Transportation Act.

A leading-edge financial system

The Department of Finance Canada, along with the Bank of Canada, the Office of the Superintendent of Financial Institutions, and other government agencies, is responsible for ensuring the soundness, efficiency, and competitiveness of Canada's financial sector. In 2007–08, the Department's initiatives included the following:

• responding, in conjunction with domestic and international partners, to the global credit turmoil of 2007;
• performing follow-up on the publication of the Capital Markets Plan in Budget 2007 by:
  • appointing the third-party Expert Panel on Securities Regulation to advise on the content and structure of capital markets regulation;
  • consolidating the borrowings of major government-backed entities with the Government of Canada borrowing program; and
  • appointing a senior expert to the Royal Canadian Mounted Police to improve the effectiveness of the Integrated Market Enforcement Team;
• consulting with stakeholders and regulators on the mortgage insurance framework;
• developing and beginning implementation of Bill C-37, the goal of which is enhancing the interests of consumers and increasing legislative and regulatory efficiency; and
• completing the implementation of governance-related regulations under Bill C-57.

Performance context

To set its programs, expenditures, and performance in context, the Government of Canada is tracking key measures of long-term progress in the outcome area of a fair and secure marketplace.

Performance Context - in the outcome area of a fair and secure marketplace.

Trend	Indicator	Overview
▲	Barriers to entrepreneurship	In 2003, Canada had the lowest level of regulatory barriers to entrepreneurship among G7 countries, up from the second lowest in 2002. Canada shared its top position with the United Kingdom.

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