As part of our 2008 federal election coverage, Investment Executive explores the positions of the major federal political parties on the top issues affecting the financial services industry.

Here we look at where the parties stand on boosting Canada’s productivity.

With labour productivity in decline in Canada, every party has their take on how to bring it back up again.

Having fallen 0.2% this past last quarter, business labour productivity in Canada has now been on a down turn for three consecutive quarters, according to Statistics Canada, making this the longest series of declines since the 1990s.

Falling exports and labour hours edging up are the major reasons for output falling, according to the report. To combat these market conditions, the Conservative Party of Canada government proposes removing barriers for Canadian companies to invest abroad, as well as opening offices around the world in emerging markets, such as China and Mongolia. Plus, by allowing companies to expand pipeline networks into the Northern territories, the Conservatives believe Canada can grow its oil and gas exports within the country and throughout the world.

Other Conservative tactics for growing gross domestic product are helping Canadian technology companies go from the late-research stage to production, with a new $75 million venture capital fund, administered by the Business Development Bank of Canada.

The Liberals Party of Canada, however, believes infrastructure is the solution to creating more output and jobs. They plan to invest $70 billion in the country’s infrastructure over 10 years, as well as $1 billion into the Advanced Manufacturing Prosperity Fund.

Like the Liberals, the Green Party of Canada will also focus on job creation through infrastructure. By re-investing in the national rail system to make it more eco-friendly, the Green Party feels both output and jobs will rise.

More relaxed work conditions also play a central role in the Green Party’s productivity platform. Shortening the work-week to 35 hours from 40 hours, as well as extending paid vacation time to three weeks instead of two, will be the major adjustments to the Canada Labour Code the Green Party pushes for. They also plan on raising the minimum wage across Canada to $10 an hour.

While infrastructure will be growing with a Green Party government, genetic engineering in food production won’t be. They plan to ban all experimentation with planting and producing generically engineered crops. On the flipside, they will put more funding into researching organic farming and production techniques. Supporting local eco-friendly start-ups will be another Green Party objective, with the creation of a Small Cities Green Venture Capital Fund.

The $3-billion Green-Collar Jobs Fund is the highlight of the New Democratic Party of Canada plan. By investing $750 million into the fund every year, employees will get the training needed for installing and operating renewable energy technology and equipment. Also, the NDP propose to revive the dying auto sector in Canada with an investment in the Canadian production of low-emission cars. To ensure the private sector welcomes the policiy, the NDP will provide aggressive tax incentives for manufacturers, who develop cars with low to no greenhouse gas emissions.

During a financial crisis, in theory, the government issuing tax breaks on capital expenditures is a good idea, according to Beata Caranci, director of economic forecasting at TD Financial Group, in Toronto.

“If (companies) are unsure about the economic environment, it can cause them to shy away from investing,” says Caranci. “Since (governments) are not a shareholder in a company, what they can do to try to boost investment is to lower taxes or provide credits…to create the incentive.”

Unlike the Conservatives and Liberals, whom are both aiming to lower corporate tax rates; the NDP plans to hoist the general corporation tax rate up to 22.5% from 15%. The Green Party is also suggesting a hike in GST to 6% from 5%, to fund the infrastructure developments they are proposing.

Besides lowering the tax rate, productivity can be boosted with a more educated workforce. To achieve this, the Conservatives will improve on the existing Apprenticeship Incentive Grant, by giving registered apprentices in a recognized Red Seal Trade an extra $2,000 for completing their training.

In contrast, the Liberals will focus on improving access for students to post-secondary education, by creating a 20-year education endowment fund. By investing an initial nest egg of $25 billion once they come into office, the Liberals calculate in four years they will have a fund large enough to provide 200,000 students with needs-based bursaries of up to $3,500 per year, as well as 100,000 more access bursaries of up to $4,000 a year. Also, students will no longer need to qualify for loans, but will be automatically eligible for $5000 regardless of their parents’ income and an annual Education Grant of $1,000 per year.

@page_break@Called the “access to education plan”, the Green Party government will directly help students pay for their education with a needs-based Canadian National Student Loan and Bursary Program — a replacement for the Millennium Scholarship Fund. Also, when completing a degree or certificate, students won’t have to repay their loans in full, since a Green Party government will forgive half of the amount.

Similar to the Liberals, the NDP will issue undergraduate students, who qualify for student loans, a $1,000 grant payable at the beginning of each school year. Post-secondary students in Quebec and the Northern territories will also get extra education financing, equivalent to their government’s student access programs.

As for investing in R&D, the Conservatives and Liberals are almost neck and neck. The Conservatives plan to increase the budget for science and technology initiatives by $850 million in 2009. Meanwhile, the Liberals will split an investment of $345 million between the Canadian Institute of Health Research and the Natural Sciences and Engineering Research Council. Also, they plan to create a Scientific Research and Experimental Development Tax Program, where 25% of a company’s SR&ED tax credits are made refundable, so that innovation can be outright rewarded.

IE