Honda deal runs over taxpayers

Last Thursday, the federal and Ontario governments announced they will be doling out an estimated $5 billion in corporate welfare to Honda, so the auto giant can build an electric-vehicle battery plant and manufacture EVS in Ontario.

This is the third such deal in Ontario after similar corporate handouts to Volkswagen ($13 billion) and Stellantis ($15 billion). Like the previous two deals, the Honda deal comes at a significant cost to taxpayers and will almost certainly fail to create widespread economic benefits for Ontarians.

The Trudeau and Ford governments both promised direct incentives and tax credits. Of course, this isn’t free money. Taxpayers in Ontario and the rest of Canada will pay for this corporate welfare through their taxes.

Unfortunately, corporate handouts are nothing new. Governments in Canada have a long history of picking their favoured firms and industries, and using a wide range of subsidies and other incentives to benefit them.

According to a recent study we wrote for the Fraser Institute, the federal government spent $84.6 billion (adjusted for inflation) on business subsidies from 2007 to 2019 (the last pre-pandemic year). Over the same period, provincial and municipal governments spent another $302.9 billion on business subsidies for their favoured firms and industries.

(Notably, the study excludes other forms of government support, such as loan guarantees, direct investments and regulatory privileges, so the total cost of corporate welfare during this period is actually much higher.)

Of course, when announcing the Honda deal, the Trudeau and Ford governments attempted to sell this latest example of corporate welfare as a way to create jobs. In reality, however, there’s little to no empirical evidence that corporate handouts create jobs (on net), or produce widespread economic benefits.

Instead, these governments are simply picking winners and losers, shifting jobs and investment away from other firms and industries and circumventing the preferences of consumers and investors. If Honda,

Volkswagen and Stellantis are unwilling to build their EV battery plants in Ontario without corporate welfare, that sends a strong signal that those projects make little economic sense.

Unfortunately, the Trudeau and Ford governments seem to believe they know better than investors and entrepreneurs, so they’re using taxpayer money to allocate scarce resources — including labour — to their favoured projects and industries.

Again, corporate welfare hinders economic growth, which Ontario and Canada desperately need, and often fails to produce jobs that would not otherwise have been created, while also requiring financial support from taxpayers.

It’s only a matter of time before other automakers ask for similar handouts from the Ontario and federal governments. Indeed, after Volkswagen secured billions in federal subsidies, Stellantis stopped construction of its EV battery plant in Windsor, Ont., until it received similar subsidies from the Trudeau government. Call it copycat corporate welfare.

Government handouts to corporations do not pave the path to economic success in Canada. To help foster widespread prosperity, governments should help create an environment where all businesses can succeed, rather than picking winners and losers on the backs of taxpayers.

CORPORATE WELFARE HINDERS ECONOMIC GROWTH.