Bombardier and its subsidiaries have received $772-million in federal government handouts since 1982, making the company the largest beneficiary of Ottawa's corporate welfare program. This week, the aerospace manufacturer is expected to confirm whether or not it will build a new regional jet.

The project will cost more than $2.5-billion and the company wants governments to pony up a third of the cost. Because Ottawa remains committed to providing business subsidies, Canadian taxpayers should brace themselves for another fleecing as Bombardier returns to the public trough.

Federal ministers will likely describe this giveaway as necessary, important, and a winner for Canada. They might even tell taxpayers the contributions will be repaid one day. But a quick review of Ottawa's collection record will put the lie to such propaganda - since 1996 less than 5 per cent of the tax money "invested" in business projects has been recouped. So in advance of the Bombardier subsidy announcement it is worth re-stating the case against corporate welfare:*

i) Market decisions should be made by investors, not by politicians and bureaucrats. The proper function of the private capital market is to direct investment to projects, industries or firms that offer investors the best and/or most secure rate of return. The difference between a sound and poor investment for an individual can have profound implications yet there is no similar discipline for government officials when using other people's money.

ii) Corporate welfare is not driven by market imperatives. Investment decisions should be based on financial reward versus risk. Government investment decisions are driven by political imperatives. The top concern when offering subsidies is a preoccupation with the number of jobs created with little concern for profitability or sustainability.

iii) Picking market winners and losers is not a job suited for government officials. Corporate welfare decisions are most often made by individuals with little experience in private investing; moreover, decisions are often made in a politically charged environment. As a result, ensuring that taxpayer-financed projects meet geographical, industrial equity, and politically saleable criteria often become an end in itself. Governments have an abysmal record of picking winners, whereas corporate losers - like Bombardier - have a stellar record of finding government handout programs.

iv) Corporate welfare is unfair. Business subsidies create an uneven playing field as money is diverted away from successful companies to less successful, but politically connected ones. Worse still is those firms and their workers which do not receive government grants end up subsidizing their government-supported competitors through their taxes.

v) Corporate welfare undermines public confidence in our decision-makers. Despite assurances from politicians that subsidies serve an overall industrial policy, there is a growing sense among Canadians that government aid to business is about divvying up pork to favoured and politically connected constituencies.

vi) Corporate welfare runs contrary to free and open markets. Business owners lose sight of their competencies, namely to provide customers with a good or service and earn a profit. They become better lobbyists than businesspeople and morph from entrepreneurs into grantrepreneurs.

vii) Corporate welfare creates a culture of dependency. Business owners become so reliant on government assistance they build expectations of handouts into financial plans. This has the perverse effect of directing resources to less productive investment projects, which slows economic growth rather than enhancing it.

viii) Corporate welfare is not a public good. Tax money ought to be spent on projects that provide the largest societal benefits or on social programs that are a priority to citizens. For example, infrastructure such as roads and water treatment; services such as national defence, policing, border control and immigration; and social services like health care, assistance for the disabled and pensions. Business subsidies do not fit these criteria and most taxpayers realize subsidies routinely fail to achieve their public policy objectives.

ix) Corporate welfare leads to higher taxes. All taxpayers end up footing the bill for Canada's $4-billion business subsidy programs.

Taxpayers deserve better than to subsidize well-connected corporations and their shareholders. Ottawa should end corporate and create a business climate that rewards success, not sycophants.



*The nine points were adapted from the CTF report A Taxpayers Audit of Technology Partnerships Canada (Feb. 2002).