Liberals face heat over wage-subsidy program rollout
OTTAWA • The Liberal government is again recalling Parliament after it neglected to equip itself with the legislative tools needed to provide a key subsidy to small-business owners hit by COVID-19.
Despite passing a bill last week that gave Finance Minister Bill Morneau sweeping powers to spend and loan money with minimal oversight, Ottawa will require new legislation before it can enact the massive $71-billion wage-subsidy program detailed on Wednesday. The program brings the total cost of COVID-19 spending, loans and tax deferrals to more than $200 billion, part of a wide-reaching effort to protect families and businesses against the economic fallout of the pandemic.
The requirement to write new legislation further complicates the Liberal’s massive wage-subsidy program, which has already been criticized for its tardy rollout. Morneau on Wednesday confirmed that an online portal through which businesses can apply for the wage subsidy will not be completed for another three to six weeks, potentially adding more delays as millions of Canadian workers face layoffs.
The Liberals on Mar. 18 announced a 10-per-cent wage subsidy for small businesses, which remained unchanged for nearly two weeks despite calls for a significant expansion from business groups and economists. Last Friday payroll coverage was then boosted to 75 per cent.
But the emergency legislation passed in the House of Commons last week only allowed for a much narrower version of the wage subsidy, which would have applied only to private companies making annual revenues of $15 million or less. The Friday announcement, by comparison, extended the program to larger companies and publicly traded firms. It also introduced a requirement that companies must prove they have lost 30 per cent of revenues in the last year to apply — a threshold not specified in the emergency Bill C-13.
Opposition members slammed the federal government for failing to carve out space for the wider wage subsidy in the legislation, suggesting it is proof that Ottawa is announcing programs on the fly, without firm underlying policies.
“It’s ready, fire, aim,” Pierre Poilievre, Conservative finance critic, said in an interview. Poilievre was the first to flag the legislative shortcomings in Bill C-13 on Twitter Tuesday, saying the new wage-subsidy announcements were “not legal under the law his government wrote last week.”
In Senate testimony on Wednesday last week, Morneau remained uncommitted to boosting wage subsidies closer to 80 per cent. Two days later Prime Minister Justin Trudeau announced the expanded program, as pressure mounted for broader business supports.
“In a 48-hour period, after the legislation was passed, they rewrote the entire policy in their heads,” Poilievre said. “I think it was sloppy.” Trudeau urged opposition members to support the coming bill, which would trigger what he called “the biggest economic measures of our lifetimes.”
Business groups have warned that delays to the program will bring about ever more layoffs, as businesses in the tourism, services and other industries are forced to close their doors. The federal government recently received a record-high two million applications for employment insurance in a matter of days.
“There have already been millions of Canadian let go, and in most cases they are not going to be brought back on,” said Dan Kelly, head of the Canadian Federation of Independent Business, which represents 110,000 small firms.
Morneau on Wednesday provided new details on the wage-subsidy program. In order to be eligible for the subsidy, companies will need to prove their businesses have lost at least 30 per cent of revenue compared to one year earlier. Government will cover up to 75 per cent of wages to a maximum of $58,700, or $847 per week.
Kelly said he was concerned that the 30-per-cent wage subsidy trigger would create another hurdle for small companies applying for the payroll coverage, which could cause some firms to simply avoid the application process altogether.
“If there’s any risk at all to the company in not getting the wage subsidy, they’re just going to go with layoffs,” he said.
Others criticized the acknowledgment on Wednesday that applications for the program would not be open for anywhere from three weeks to six weeks.
“Asking businesses to wait an additional six weeks is completely unacceptable,” said Rocco Rossi, president of the Ontario Chamber of Commerce.
The $58,700 cap also provides inadequate coverage for companies employing higher-skilled workers making, for example, $100,000 or more.
Morneau on Wednesday declined to project how much the federal deficit is expected to swell.
Ottawa was projected to run a roughly $28-billion deficit before the COVID-19 outbreak. It has since announced $105 billion in direct spending measures, $25 billion in loans for small businesses, and is projecting a sharp drop in revenues as the wider economy grinds to a halt.
“We recognize that as a result of this, the deficit will go up,” Morneau said.
Economists and business groups have said that wage subsidies are among the best tools to address the COVID-19 crisis, as it will keep more people employed and allow for a sharper economic rebound once social distancing measures are rolled back.