Business as usual at Industry Canada
By Adam Taylor
This past February, federal Industry Minister Jim Prentice announced a $19.6-million "repayable investment" in Diamond D-JET, a jet airplane company. It was notable for one main reason: it was the first government handout funded through Ottawa's new Strategic Aerospace Defence Initiative (SADI). The program replaced the discredited subsidy sinkhole Technology Partnerships Canada. Prior to TPC, Ottawa funneled money to businesses by way of the Defence Industry Productivity Program (DIPP).
These two earlier corporate welfare programs, DIPP and TPC, should have been enough to convince politicians that government funding schemes are rife with trouble. Recently released information from Industry Canada continues to drive this point home.
In March, 2006, then-Industry Minister Maxime Bernier announced plans to regularly post repayments to TPC online, with one caveat. Recipients had to agree to have their numbers made public. Since then, Industry Canada has quietly updated repayment information. But don't look for a government news release. Proactive disclosure has only drawn attention to what corporate welfare critics have said for years: repayments are as pathetic as ever.
The most recent update from Industry Canada posted January 3, 2008, lists TPC's total repayments at $295.3-million. This amounts to a paltry 8.4 per cent of the $3.5-billion handed out by TPC over its ten plus year history.
Industry Canada now says that TPC repayments are "in line with forecasts." Yet, that can be chalked up to quietly decreasing expectations. In September 2005, Industry Canada expected to recoup $4.4-billion by 2030; today that figure has been reduced to $2.4-billion. This is bureaucratic trickery at its worst and is designed to somehow make taxpayers believe repayments are doing just fine when nothing could be further from the truth. Next, they'll write-off all the outstanding billions and claim repayments have reached 100 per cent!
When Maxime Bernier released the first report of TPC repayments in March 2006, it contained a "name and shame" provision that was supposed to cajole recipients to take repayments more seriously. Yet, a comparison of the January 2008 and March 2006 lists reveals there may be no shame.
Of the 214 companies named on both lists, 93 had made repayments as of March 2006 but since then, of the 93, twenty-nine have made no repayments at all. Do you know any bank that accepts a two-year payment freeze on outstanding loans? Also, 53 companies have never made any repayments for a variety of reasons and 68 have not yet consented to the release of their numbers.
That Industry Canada now releases repayment records voluntarily (albeit quietly) is a positive step forward. When the Canadian Taxpayers Federation (CTF) asked for repayment records of loan recipients back in 1998 the requests were denied. Again in 2002, requests were denied, but official complaints filed with the Information Commissioner were successful and repayment records slowly came to light. The Access to Information Act's privacy regulations allow recipients to make their case as to why their repayment numbers should be withheld. Long ago, Ottawa should have made it mandatory to disclose repayment records.
It is maddening that taxpayers are not consulted on who gets billions of their dollars, yet companies who receive those dollars decide what information - if any - will be given to taxpayers. If a publicly-traded company treated its shareholders with such contempt its board would likely find itself behind bars.
But this has long been how Industry Canada operates its subsidy programs. The federal government's response is always the same. First, deny the difficulties and continue to peddle taxpayers a false bill of goods. Second, when denial becomes impossible, pledge to fix the problems. Third, ultimately replace troubled programs with brand new ones operating under a different name but similar rules. The result is predicable. Each new scheme soon becomes plagued by the same problems as the previous one and taxpayers continue to fork over billions to otherwise profitable companies.
It started over forty years ago with DIPP. A program that hasn't existed in over a decade still has a repayment record of less than 25 per cent yet the government doesn't bother to post which companies have repaid what or how much they got in the first place. Then it was TPC and with its less than 10 per cent repayment record it has done the unthinkable: made DIPP look good by comparison. Now TPC has been replaced by the new SADI program and the first "repayable investment" from it a month ago will no doubt be followed by many more.
Government officials insist they've finally got it right with this latest handout program but ten years ago they said the same thing when they introduced TPC. The only way to truly get it right is to recognize that failed 19th century industrial strategy is ill-suited to sound 21st public policy. Mr. Prentice, it is time to end corporate welfare.
Adam Taylor is national research director of the Canadian Taxpayers Federation.
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