Following massive deals the Trudeau government signed with large corporations, which have seen taxpayers foot billions of dollars, the Parliamentary Budget Officer (PBO) warns that such instances of corporate welfare set a dangerous precedent.
“It leads to all kinds of behaviours we’ve seen in the past, and while it can also lead to the development of a strong ecosystem, it comes at a significant cost, and the risk established in a precedent like with Volkswagen is other companies will expect certain treatment,” PBO Yves Giroux told True North.
“We see Stellantis is keen to renegotiate with the government of Canada to receive comparable to what Volkswagen is receiving, so there are risks to being that generous with corporations.”
Stellantis and LG Energy Solutions received government subsidies to begin construction on an EV battery plant in Windsor next year, but have since threatened to choose alternate sites if the government doesn’t sweeten the pot like it did for Volkswagen.
Moreover, the significant cost to which Giroux referred is the Liberals’ claim they’re subsidizing the Volkswagen plant to the tune of $13.2 billion, when the actual figure is closer to $16.3 billion because the government is providing tax compensation.
“The issue I have with the deal is the lack of full transparency,” Giroux said.
“The government indicated a number publicly, but based on documents we’ve seen and discussions with Department of Finance officials, as well as those at Innovation, Science and Economic Development Canada, the numbers at play are higher.”
Giroux noted the Volkswagen plant is six times Environment and Climate Change Canada’s annual budget.
“[The government is] certainly not demonstrating restraint in its spending,” he said. “To spend that much money on one plant is certainly something that’s unprecedented, in my opinion.”
In terms of the economic benefits for Canadians, Innovation, Science and Industry Minister François-Philippe Champagne claimed the Volkswagen plant will create roughly 3,000 jobs and $200 billion in economic activity, but Giroux is doubtful.
“Based on the usual multipliers, when you have significant projects like this one, that seems to be a very, very generous assessment of the economic impact of such a project,” he said. “We have not looked at specific numbers to arrive at our own estimate, but a first look suggests it’s very optimistic to anticipate economic impacts of that magnitude.”
Aaron Wudrick, director of the domestic policy program at the Macdonald-Laurier Institute in Ottawa, agrees, and says Champagne’s numbers were plucked out of thin air.
Wudrick slammed the government’s deal with Volkswagen, stating it’s problematic for government to pick winners and losers, and that there’s little prior evidence of successful outcomes.
He says companies that don’t receive generous grants can’t compete with ones that have, and are left with little choice but to strong-arm governments whenever possible, creating a cycle of dependency.
“The thing that makes this Volkswagen plant unique is it’s exponentially more money than has ever been spent before, so they’ve essentially taken an idea that’s expensive and has failed repeatedly and supersized it,” he said.
Wudrick recalls Bombardier subsisting off of government handouts for more than half a century before it finally sold itself and downsized.
“I think the auto industry writ large has a lot of this too,” he said. “There was a lot of trumpeting around the bailouts of Chrysler and General Motors during the financial crisis [of 2008], and once again it was framed as essential, but all the evidence and analysis shows taxpayers lost billions of dollars on that transaction. Eventually, plants like Oshawa, once the money runs out, either close or shrink.”
