A Business Focused Government

Last week’s budget had considerable substance and was surprisingly decisive. One of the key themes is reflected in the mandate and scope of the new Department of Business.

It is smaller than the predecessor Department of Economic and Rural Development and Tourism (ERDT), in part because of activities being transferred elsewhere but also because its function has changed. Much of the previous effort was focused on transactions, which are now entirely delegated out to NSBI, Innovacorp and, someday, the new Invest Nova Scotia Board.

Rather the new department will focus on strategic measurement and guidance across government. Programs in support of economic development happen in many departments, including Agriculture (herd health, crop insurance, farm loans), Fisheries and Aquaculture (site mapping, veterinarians, loans), and Energy (subsidies for renewables, offshore mapping). Of course the big money has been in ERDT and the related agencies.

What has not happened until now, but is promised in the new department, is examination, with a consistent lens, of the spending in different departments, so that the costs and benefits of each investment are evaluated on a similar basis. Likewise the regulatory activities of different departments (for example Labour and Advanced Education, Environment, Natural Resources) will be examined for their compatibility and impact on business potential.

The Department will also incorporate the new Office of Regulatory and Service Effectiveness, mandated to implement the sixteen point regulatory reform agenda recommended by Laurel Broten.

Minister Furey tells us that, “All government departments and agencies will follow its leadership.” This substantial agenda is to be accomplished by a lean department with only 36 staff. Catherine Woodman, CEO for almost a decade at the Halifax United Way, and a key executive at Maritime Life for a decade before that, has been recruited as Deputy Minister.

The Department sets a standard for others to consider. For example, all operational matters for hospitals having been downloaded to the two health authorities, one might wonder why there is an ongoing need for 430 staff in policy and administration roles at the Department of Health.

The Department of Business mandate is largely aligned with the recommendations of the Ivany report. It will track progress toward the Ivany economic development goals.

Some key matters are yet to be resolved. It is not yet clear which functions will be discontinued to enable the slimming down and consequent $40 million of ongoing savings. The mandate of Invest Nova Scotia and its funding requirements are not yet determined.

That said, this is bracing stuff and every bit as ambitious as the Action Plan for Education, released in late January. As with that worthy agenda what ultimately matters is not the ambition but the achievement. Current events can have a way of intervening.

This week it is the film tax credit. The industry has produced and directed a well-crafted campaign against the announced changes, with a strong supporting cast of workers and interested citizens. In 2013-2014 the industry paid $40 million in qualifying wages to Nova Scotians, for which the province paid incentives of $26.4 million (about two and a half times the grants to all other artists and arts organizations).  Over a decade that would be $400 million in wages and $264 million in subsidy, about the same as the hugely unpopular handout to Irving for the shipbuilding contract. Under the present regime these subsidies never end.

By way of comparison the oft-cited Royal Bank deal will cost $22 million over ten years for $200 million in wages. And at the end of ten years there would be a reasonable prospect, though not a certainty, of the 500 jobs continuing without further subsidy. If a twin deal was done with another bank the two would match the $400 million of wages by the film industry, for $220 million less in subsidy.

A good argument can be made that the film industry adds to the cultural vibrancy of the province and for that reason it makes sense to provide greater financial support. It is perhaps in this spirit that the government has proposed $6 million extra annually for film and other creative industries. But no credible argument has been made that an extra $220 million (over ten years) is justified on economic or cultural grounds.

The problem is the availability in other provinces of equally uneconomic programs, against which Nova Scotia will become uncompetitive. Perhaps the industry can find a way to pay more of its income taxes in Nova Scotia, thereby earning more credits. Perhaps the government’s proposal can be reworked to provide greater leverage on the money being spent. Maybe a little more can be squeezed out of government. It will be great if a way can be found to keep all or most of the industry here.

But to continue with the existing program or anything close to it would make a mockery of the Liberal claim to be doing things differently. The new Department of Business is intended to be the focal point for disciplined thinking on economic development spending. Don’t disable it at birth.

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