The Fraser Institute

The Fraser Institute

September 10, 2012 06:32 ET

The Fraser Institute: Industry Canada Provides $13.7 Billion in Corporate Welfare-and Expects Barely Half Back

CALGARY, ALBERTA--(Marketwire - Sept. 10, 2012) - Industry Canada spent $13.7 billion on business subsidies since 1982 with almost half of that - $6.3 billion - given away with no expectation of repayment.

The rest, $7.4 billion, or 54 per cent, was distributed under contracts requiring repayment, according to an Access to Information request received by the Fraser Institute, Canada's leading public policy think-tank.

Mark Milke, Fraser Institute senior fellow and author of Corporate Welfare Bargains at Industry Canada, found that interest payments of just $9 million have been made to Industry Canada on billions of dollars of outstanding loans since 1982.

On loans expected to be repaid, just $2.1 billion (of $7.4 billion) has come back to the department, or 28.8 per cent of expenditures in that category. A further $236 million was spent after government-guaranteed loans went sour.

Over the years, Industry Canada has asserted that taxpayers should be patient because "repayments are in line with forecasts." However, a 2005 analysis prepared for the department about one Industry program, Technology Partnerships Canada (TPC), said "for a variety of reasons, repayments are typically less than originally forecast." That internal report pointed out that original estimates of repayments were later written down by $1.9 billion after the TPC contracts were signed.

Industry Canada has long overseen federally funded subsidy programs for the aerospace, automotive, forestry, high-tech, shipbuilding, and tourism sectors, as well as sectors designated "strategic." Over the years, Aboriginal businesses have also been the subject of multiple Industry Canada business subsidy programs, as are some regionally based corporations in Ontario, Quebec, and Atlantic Canada.

"Peer-reviewed research on business subsidies does not support the oft-heard claims that corporate welfare is responsible for widespread economic growth or job creation," Milke said.

"Just as bad, in contrast to the interest rates paid on loans obtained by consumers and businesses in the private sector, little interest has been paid on Industry Canada's taxpayer-financed loans to corporate Canada."

Milke noted that while Industry Canada did not provide a breakdown of which loans and which programs charged interest, only $9 million in interest has been paid to Industry Canada over the 30-year period.

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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 85 think-tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.

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