Can the federal budget really spur $500-billion in private-sector business investment?

Business and investment leaders said the federal budget’s focus on spurring $500-billion of private-sector investment by 2030 sets the right tone, but reaching that target will hinge on whether Ottawa creates the right conditions to see projects through.

A day after Finance Minister François-Philippe Champagne called Ottawa’s 400-plus-page fiscal plan “an investment budget,” senior executives across Canada’s business community voiced a common refrain: “It comes down to execution.”

Some said there is no clear reason to doubt the government’s projections, and that a friendlier tax regime for investments and a sharp focus on fast-tracking major projects can only help.

But success will depend on Ottawa’s promises to strip away regulatory barriers, and on specific details that can make or break projects: How long will they take? Who holds the risk and makes the key decisions? And how much skin in the game will governments have?

The investment goal is a good one, and the budget’s focus on building infrastructure and boosting tax competitiveness is a step in the right direction, said Goldy Hyder, chief executive officer of the Business Council of Canada.

“Call me in three years and I’ll tell you whether it works or not,” he said. “I think their orientation is right. You got a lot of Goldman Sachs guys there. They get the economy. They get the math. It just didn’t go far enough.”

The government said it expects $1-trillion of total investment from the public and private sectors to flow from its budget plans to boost infrastructure projects, invest in research and development, and cut regulatory barriers. That will be driven by $500-billion in new private investment over five years.

Prime Minister Mark Carney said that target “underweights the actual economic impact,” speaking to reporters on Wednesday.

The budget promised nearly $19-billion of tax incentives billed as a “productivity super-deduction” to let companies claim writeoffs on equipment, buildings and other priority spending faster, or even immediately. It also estimates that large projects steered by a new Major Projects Office will trigger at least $150-billion in total capital investment.

Ottawa looks to spur private investment with tax breaks, infrastructure spending

One important factor for infrastructure projects will be how much private-sector money each dollar of public investment draws in. The Conference Board of Canada’s early estimates suggest that the government is banking on spurring about two private-sector dollars for each one Ottawa spends.

“That strikes me as a little bit on the high side,” executive director of economic research Tony Bonen said. “It depends on the particular project details.”

Getting companies to deploy capital at scale is going to require more regulatory changes, Mr. Hyder said.

“The issue for our members, and I survey them quite regularly, it’s never really been about taxes as much as it has been about regulations,” Mr. Hyder said, pointing to the oil and gas emissions cap and the ban on oil tankers off the West Coast.

Jim Balsillie, chair of the Council of Canadian Innovators and the former co-CEO of BlackBerry Ltd., said the government missed an opportunity to ensure that the intellectual property developed in Canada stays here to the benefit of Canadian companies. Without correcting this, he said, Canada will not see a significant jump in private-sector investment in the technology sector.

“You have to own the IP for the money you’re spending,” Mr. Balsillie said. “I wanted to see a reorientation to the 21st century, and this is just a lot of money into 1970s thinking.”

Rodrigue Gilbert, president of the Canadian Construction Association, said the government’s emphasis on infrastructure – in particular the $51-billion allocated to a new “Build Communities Strong Fund” for municipal and provincial infrastructure – is a boon for his industry.

But there could be constraints when it comes to actually getting projects built, especially in the supply of skilled labour. Here, Mr. Gilbert said, Ottawa needs to do more to reform its immigration system to prioritize skilled trades. It also needs to make sure that the timelines for various projects are clear “so our companies can plan for it, have the people ready for it.”

In the lead-up to the budget, senior government officials had extensive discussions with top executives at large Canadian pension funds that collectively manage $2.5-trillion about how to make projects more attractive to them.

“It’s all moving in the right direction, but each opportunity will carry with it a unique set of risk and returns,” said Michael Wissell, chief investment officer at Healthcare of Ontario Pension Plan. “We stand ready, willing and able to look at all Canadian opportunities. It is clear the momentum is building.”

Building major infrastructure and resource projects also requires support from First Nations, who have a constitutional right to be consulted. The government has taken steps to boost Indigenous participation in large projects by doubling the size of a loan-guarantee program, to $10-billion.

Mark Podlasly, CEO of the First Nations Major Projects Coalition, said that the loan-guarantee program is important in enabling First Nations buy-in.

“But you cannot loan-guarantee an entire economy,” he said. “There’s going to be a need for private capital to step in and also work with First Nations or co-invest with First Nations. That will go beyond the loan-guarantee program. So that’s the next step.”

A lot will also come down to whether provinces can work together on large interprovincial projects such as pipelines. And here, fault lines are clear: for example, Alberta Premier Danielle Smith and B.C. Premier David Eby are at odds over pushing a new pipeline to the coast.

And it will be up to the government to prove that its plans go far enough to spark the generational wave of business investment it has predicted.

“It’s critical that we all understand that in this moment incrementalism is fatal,” said Candace Laing, CEO of the Canadian Chamber of Commerce.

“This is key especially on the regulatory landscape in our country. We can’t expect to transform our economy with one hand tied behind our back. We need to shift our mindset and regulate for growth.”