BUSINESS GROUPS ARE CALLING FOR THE SPEEDY PASSAGE OF OTTAWA’S WAGE SUBSIDY BILL AMID COMPLAINTS THAT CHANGES TO THE CANADA EMERGENCY WAGE SUBSIDY ARE A ‘COBWEB OF COMPLEXITY.’
Opposition, business groups rail against changes
OTTAWA • The Liberal government’s new wage subsidy program was denounced as a “cobweb of complexity” by Conservative finance critic Pierre Poilievre Monday, echoing concerns voiced by business representatives about the $82-billion program.
Finance Minister Bill Morneau last week announced significant adjustments to the Canada Emergency Wage Subsidy (CEWS), which currently covers 75 per cent of wages for businesses hammered by the COVID-19 pandemic. Industry groups were broadly supportive of the changes, saying they will allow a larger number of companies to access financial supports as the economy gradually reopens.
But Poilievre, among others, said the changes could also prove needlessly complicated for companies that do not fit neatly within the new eligibility requirements.
“This complexity will no doubt impose massive new costs, unpredictability and uncertainty on the very people who are struggling to open their doors,” he said.
The current structure of the CEWS program covers 75 per cent of wages for any business that can prove its revenues have dropped by 30 per cent or more in the last year. The proposed new model, which was debated in the House of Commons on Monday, would instead introduce a “scaling” system in which applications are open to firms with revenue losses of any size, providing subsidies that are more commensurate to those losses.
The updated CEWS program, expected to cost $82 billion, will play a central role in the effort by Prime Minister Justin Trudeau to get Canadians back into the workforce following the pandemic. But striking a balance between accessibility and fiscal cost could prove difficult, observers say.
Dan Kelly, head of the Canadian Federation of Independent Business, called the program changes “massively complicated,” and said his organization has been “flooded with calls from business owners” about eligibility requirements.
He said firms will have to estimate their revenue losses over several periods, then compare those losses under both the current and newer version of the CEWS in order to apply. Companies with a mixture of furloughed, part-time, and work-from-home employees might not fit squarely within the structure of the updated program.
“There are multiple calculations that every business owner is going to need to make,” Kelly said.
He also stressed that the CFIB, which represents 110,000 small businesses, was largely supportive of the new wage subsidy model, saying it would provide “confidence” to smaller firms through to the end of 2020.
A government source said Bill C-20, which would enact the wage subsidy changes, is likely to be passed on Tuesday afternoon as part of an agreement among parties.
The Canadian Chamber of Commerce on Monday urged swift passage of the legislation, warning that the restaurant industry in particular was at risk of “becoming permanently untenable” if partial economic lockdowns continue. Restaurants, which contribute just over $30 billion to Canadian GDP every year, will be “among the last to resume normal operations” as restrictions remain in place, the organization said.
Smaller businesses like restaurants, tourism providers and mom-and-pop retailers have taken the brunt of the downturn, and are likely to be the focal point of the wage subsidy program in coming months, experts say. Larger sectors like manufacturing, construction and financial services have meanwhile remained comparably unscathed.
“All businesses are suffering during the crisis,” said Trevin Stratton, chief economist at the Canadian Chamber of Commerce. “But there are some sectors that were harder hit than others. The food services industry has definitely been one of them. Tourism is another.”
Stratton also suggested that companies with revenue losses of around 30 to 40 per cent might prefer the current wage subsidy model, as the new version could might actually pay out less. All companies will be forced into the new program at the beginning of September, when the so-called “safe harbour” provision is removed.
The Liberal government last week announced that it would extend the CEWS until the end of December.
It has also signalled no intention to extend the Canada Emergency Response Benefit (CERB), which provides $2,000 per month to the unemployed, beyond August. NDP leader Jagmeet Singh criticized plans to phase out the CERB, and worried that many workers could be left unemployed but without government assistance as the economy returns to health.
“This is a scary situation,” he said.
The combined cost of the CERB and CEWS programs is now estimated to be $160 billion, as Ottawa looks to aid businesses and people amid the pandemic. Morneau earlier this month posted his fiscal update in which the federal deficit is projected to reach $343 billion in 2021, or roughly 16 per cent of GDP.
THIS COMPLEXITY WILL NO DOUBT IMPOSE MASSIVE NEW COSTS.