Ontario slashes spending for small business programs

The bad news continues to flow for entrepreneurs across Ontario.

The Doug Ford government has lowered the axe once again on programs that support the growth of small and medium-sized businesses across the province, this time targeting Ontario’s Small Business Enterprise Centres (SBECs). Several programs served up by the centres, including Starter Company Plus and the Summer Company program, which provide grants of up to $5,000 and $3,000, respectively, to help SMEs in the start-up phase, are reportedly on the chopping block. The latter program provides funding for secondary and post-secondary students between the ages of 15 and 29 years old to start and run their own summer business by providing funding, advice and services.

The impact of the funding cuts will vary across the SBEC network, but will inevitably have a disproportionate effect on SBECs that support smaller centres across the province. According to government officials, base operational funding will not be affected, but the SBECs won’t receive funding increases necessary to support new programs, or growth in existing ones as demand continues to surge. The service cuts will mean fewer entrepreneurs—particularly those navigating the start-up phase of their businesses—will be able to turn to the government for a much-needed boost in those critical early days.

This latest tide of negative news comes in the wake of the Progressive Conservatives’ promise to launch a sweeping review of Ontario’s innovation tax credits and “other R&D tax incentives,” along with budget cuts of nearly 50 per cent to the Ontario Centres of Excellence, an organization that supports innovators such as technology companies. As part of those changes, innovation incubators such as Toronto’s MaRS Discovery District and Communitech in Kitchener, Ont., have seen their budgets cut by as much as 30 per cent, forcing the latter to lay off nearly 15 per cent of its workforce.

As I’ve noted in previous blogs, the 2019 Ontario budget promised to eliminate the deficit in five years with a prudent approach to achieving fiscal balance. As the budget stated: “The government is reviewing business support programs to identify opportunities for better value for money. The aim is to ensure these programs are coordinated and integrated across government, and that they can demonstrate benefits for the people and businesses of Ontario.”

The budget further goes on to state that “the government is making Ontario open for business and open for jobs by reducing red tape, lowering business costs and connecting more workers to local jobs.”

How can this be the case when the government proposes to slash the support programs necessary to connect workers to local jobs?

Some might argue that large-scale corporate tax cuts are more effective than supporting an innovation network or funding the work of local SBECs.  They’re at least partially correct. Lower corporate taxes due tend to help spur competition and innovation. Lower taxes are, therefore, friendly to entrepreneurs. But programs that drive growth, provide mentorship and instruction, and deliver much-needed funding for capital or human resources investments, are also worthwhile. Surely there’s room in the budget to balance these interests more effectively, spreading the wealth to maintain some funding for business-backing initiatives?

But again, the greatest impact of some of these latest cuts will be in smaller centres where budgets reduced by even a seemingly paltry sum—$100,000 or less—could represent half of a SBECs funding for the year. That’s a major reduction! More so when you consider that opportunities for growth tend to be limited in rural communities as compared to the near-limitless potential facing a company operating in a major urban metropolis such as Toronto. While cities also typically inject their own funds into supporting these services, smaller municipalities simply can’t compete. Unfortunately, when an entrepreneur or business faces diminished prospects in a small town, an entire community can be affected.

For fear of sounding like a broken record, it’s worth stating again that the Ford team’s approach to slashing the budget is beyond curious at this point. One would think that a government so fixated on promoting business interests, that constantly pledges its support for fostering a more welcoming business environment and, generally, is dedicated to making it easier for organizations in Ontario to succeed, would take a far more measured approach to cutbacks that directly impact entrepreneurs.

There’s no doubt we need to get our books in order. But while our deficit is high, the province’s debt-to-GDP ratio is relatively modest by Canadian standards. In other words, the degree and severity of the Fordian austerity is likely overkill at this point.

I sincerely hope that this third article on budget cutbacks relating to small business support programs is the last that I write for a long while. But that may not be the case. The Ford government is trickling out bad news for entrepreneurs, and the risk is that this controlled drip proves to be the start of a deluge of cuts that could impair the province’s long-term economic prospects. Perhaps the government does have a coherent strategy to turn Ontario into a prime business destination. So far, we’ve yet to see a clear plan to bring that vision to life.

Hartley Cohen, Partner

Hartley Cohen

905-946-1300, x. 223