According to a Canada Revenue Agency document, the federal government paid $37.7 billion in wage subsidies to businesses with tax debts and $1 billion to insolvent companies, in the latest example of Ottawa’s poorly targeted spending programs and poor fiscal management during the pandemic.
Temporary federal government programs implemented during COVID such as the Canada Emergency Wage Subsidy (CEWS) and Canada Emergency Response Benefit (CERB) cost hundreds of billions of dollars. And a recent study published by the Fraser Institute found that of 33 industrialized countries, Canadian governments—including federal, provincial and local—borrowed more money than any other country (except Japan) during the pandemic.
Unfortunately, all that borrowing didn’t translate into stronger economic performance compared to our peers. Despite accumulating more debt than nearly every other industrialized country, Canada underperformed on key economic growth metrics in 2020 and 2021.
For instance, Canada generally had higher unemployment rates and relatively low economic growth rates compared to peer countries. Put simply, it looks like we didn’t get much bang for our taxpayer bucks.
This is perhaps unsurprising, given all the issues with the federal government’s COVID response. Indeed, a 2020 study examined nearly $82 billion of COVID spending and estimated that 27 per cent—more than one in four dollars—was poorly targeted, representing $22 billion in wasted taxpayer money.
This included up to $11.8 billion in CERB payments, which went to eligible dependent young people (ages 15 to 24) living with parents in households with at least $100,000 in household income, and up to $7.0 billion in additional CERB payments went to eligible spouses in families with at least $100,000 in household income.
Moreover, a recent report by Canada’s auditor general (AG) found $4.6 billion in ineligible CERB payments and other benefits paid to individuals, and recommended that the government investigate the nature of another $27.4 billion in COVID-related spending. Overpayment recipients included 1,522 prisoners, 391 dead people and 434 children too young to be eligible. In addition, the report identified 51,049 employers that received $9.9 billion in CEWS payments who did not demonstrate a sufficient revenue drop to be eligible for the subsidy.
The AG also criticized Ottawa for failing to require social insurance numbers for workers in firms that applied for CEWS, which means proper verification and tracking cannot be completed. (It was this report that prompted the further investigation into subsidies to insolvent businesses and those with tax debts.)
Put simply, Ottawa wasted billions of dollars in taxpayer money and accumulated far more debt than was necessary to stabilize the economy and help those in genuine need during the pandemic. This should prompt a closer review of all government programs and transfers to ensure that spending is effective, targeted and well-managed in the future.
Tegan Hill and Jake Fuss are economists at the Fraser Institute.
