Revamped corporate welfare is still pork

Industry

Minister David Emerson has

finally come clean, sort of, confessing to taxpayers that his department’s old money-losing corporate welfare programs are, well, money-losing corporate welfare programs. Those are not his words, exactly. The nine-year-old Technology Partnerships Canada ( TPC) has been replaced with the “Transformative Technologies Program,” noted the Ministry of Pork in its Tuesday news release.

Industry Canada’s past strategy of loaning taxpayer cash to companies, then requiring them to repay the amounts over time was bad enough. But if, as the department notes about the new program, “its measure of success will not be cost recovery but sharing the risks of innovation,” the new, lower expectation means taxpayers should assume a recoup of their “investment” will indeed lag in Ottawa’s priorities.

How much taxpayers will hand over to poverty-stricken corporations is unclear. But past help might provide a clue. In the past 18 months, Industry Canada cut TPC cheques to the Canadian divisions of Rolls-Royce ($30-million), Raytheon ($4-million) and Pratt & Whitney ($207-million), to give just three examples.

After years of secrecy, Industry Canada at least now informs taxpayers about some items. Technology Partnerships Canada has lent $2.1-billion since its 1996 inception and has recouped $115million, or 5.5%. The excuse given is that such loans have long repayment periods. Indeed, except that long-term results for past similar programs are not a cause for optimism.

As of 2001, one previous government “risk-sharing” venture (the Defence Industry Productivity Program) received back just 18% of an almost $2.2-billion loan portfolio. That was five years after it was killed and 19 years after it first started to loan out taxpayer cash. It’s also clear from other federal corporate welfare ventures that plenty of losers are picked.

According to past studies from the Canadian Taxpayers Federation based on the government’s own data, between 1989 and 1999 the Atlantic Canada Opportunities Agency wrote off $591-million or 34% of its loans. Canada Economic Development in Quebec wrote off $118-million or 33%. Between 1987 and 2000, Western Economic Diversification kissed goodbye to $65.9-million or 8.8% of its loan portfolio. In addition, in straight grants, the above agencies gave away $1.85-billion, $1.4-billion, and $1.25-billion respectively over the same periods.

The record of Technology Partnerships Canada is better so far; as of Thursday, Industry Canada reports that loans to only three companies worth $904,000 are write-offs and no grants are handed out (though that ignores the opportunity cost of lost interest, or a reduction in the federal debt and missed savings on interest payments there). However, given the government’s longterm record on every other corporate welfare file, I wouldn’t bet the mortgage that the write-off ratio will remain low.

Also, if Industry Canada needs to rejig corporate welfare yet again, and with an explicit downgrade of cost recovery, but claims the old program was so successful, it begs this question: If Technology Partnerships was on track to be different from past boondoggles, why the change? Are more write-offs in the pipeline? And then there’s the little issue of TPC’s almost $17-million annual administrative budget, which will no doubt be transferred to the new-and-improved agency.

The government response is most often that such “leveraged investments” create jobs. But that errant belief comes from faulty assumptions, including that tax dollars risked wouldn’t be better leveraged by a private sector company paying less business or payroll tax and creating more jobs on its own. The government assumption also misses another critical point: If a taxpayer-financed company creates new jobs, but at the expense of another company in the same sector, it’s a wash.

Corporate welfare as a policy is unfair to other competitors and workers in Canada or elsewhere, a misallocation of taxpayer dollars and costly. In short, it’s still a porker. Mark Milke is the author of Tax Me I’m

Canadian. mmilke@ telus. net