This article was originally published in the Financial Post on October 22nd, 2020. 

Politicians love to talk about how much they love taxpayers and the middle class, but Prime Minister Justin Trudeau and Ontario Premier Doug Ford have forsaken both by giving over half a billion dollars of taxpayer money to Ford Motor Company, one of the largest corporations on the planet.

Let’s call this what it is: corporate welfare.

Governments usually make the excuse that it’s for job creation. In reality, they’re taking money away from actual job creators and redistributing it wastefully. (That’s quite different from COVID-19 relief programs for businesses, which try to offset the losses from government-mandated lockdowns.)

Let’s consider this latest example. The Ontario and federal governments each took $295 million from struggling taxpayers and business – for a combined total of $590 million – and gave it to the Ford Motor Company to retool its Oakville plant for electric vehicle manufacturing. This is a company that ranks 12th on the Fortune 500 and posted revenues of US$156 billion last year. The annual salary of Ford’s CEO, Jim Hackett, was US$17.4 million last year, which is over 370 times the average Canadian household income of C$61,400.

Beyond the blatant unfairness, these governments are playing at investment banker when it’s taxpayers’ skin in the game. In its 2019 annual report Ford acknowledges that electric vehicles may not take off as quickly as hoped. So far in Canada, sales are far below the government’s target, meaning taxpayers will likely also be on the hook for even more expensive subsidies down the line. 

Corporate welfare apologists claim such largesse eventually pays for itself by spurring economic activity. Tony Faria, a professor at the University of Windsor, argues Canadians should view corporate handouts “as investments in the future because that money is going to come back.” But we’ll never actually know if it does since governments almost never measure whether these “investments” are working. The Financial Accountability Office of Ontario analyzed $1.3 billion in business support programs from 2016 and 2017 and found no evidence to prove whether or not spending had achieved its declared purposes.

What makes the Ford handout even more dubious is that retooling the Oakville plant to produce electric vehicles will mean 400 fewer jobs. At the moment, 3,400 Unifor members work at the Oakville plant. Once it’s retooled, only 3,000 will. Supporters of subsidies will argue that without the handout the remaining 3,000 jobs could be lost. But $590 million for 3,000 jobs works out to $197,000 per job. That’s money that could have been used instead to reduce the tax burden on every business in Ontario.  

When the Ontario government reduced the small business tax rate from 3.5 per cent to 3.2 per cent in its 2019 budget, that returned $185 million a year to over 275,000 businesses. Which is why it’s so astonishing that together the Ontario and federal governments are spending more than three times that amount on a single corporation.

In its recent throne speech, even the federal government acknowledged that lowering taxes on businesses creates jobs, which is why it pledged to “cut the corporate tax rate in half for companies [making zero-emissions products] to create jobs.” In the same way, lowering energy costs would give a much-needed boost to all Ontario businesses right now. A 2019 report from the Fraser Institute found that “large-power industrial consumers in Ontario are paying almost 65 per cent more than the cost to the same type of consumers in the rest of Canada.”

Even though the Ontario government promised to end corporate welfare in its 2018 election platform, it is now making up excuses for this latest handout. “Since 2004, Mexico has attracted over $15 billion in greenfield auto investment while Canada has only managed $1 billion,” it wrote in an email statement to the Canadian Taxpayers Federation when asked about the deal.

Given the sector’s contribution to the economy, the trend of auto manufacturing jobs leaving Canada is certainly troubling. But corporate welfare clearly isn’t stopping it. From 2008 to 2017, the federal government spent $570 million on corporate welfare handouts to auto manufacturers in Canada through the Automotive Innovation Fund. In the same period, Canada’s automotive trade deficit with Mexico tripled, reaching $12 billion.

Anyone who concludes that the answer to this problem is more corporate welfare is forgetting that taxpayers got stuck paying for $3.7 billion in bad loans our governments gave to General Motors and Chrysler back in 2009.

The current economic situation doesn’t excuse governments’ reversion to failed policies.  Canadian politicians must end their addiction to corporate welfare and adopt healthier policies for economic growth such as lower taxes for all.