Federal budget to extend pandemic lifelines
In the face of a catastrophic third wave of COVID-19, the federal budget will move to extend all the main pandemic support programs until the coming fall, and also create a completely new benefit that subsidizes employers for hiring more people or increasing the hours their employees work, the Star has learned.
As the pandemic escalates and prompts more constraints in Canada’s most populous provinces and cities, Finance Minister Chrystia Freeland will roll out a $12-billion extension to two key programs that have been a lifeline for many businesses hit by the pandemic: the emergency wage subsidy and the emergency rent subsidy and lockdown support.
And she is also setting up an exit strategy designed to wean companies off the supports and quickly into hiring mode once the pandemic restrictions ease.
Starting in June, the Canada Recovery Hiring Program will be made available to recipients of the wage subsidy in the hopes of shifting them off the payroll support and into hiring new employees or increasing the hours of existing employees.
It’s a strategic move that comes with a six-month timeline and pushes struggling companies and their employees to use that time to figure out how they’ll position themselves for a post-pandemic world.
The program would replace the wage subsidy that companies are receiving and instead offer them up to $1,100 per new employee for every four-week period.
While the program is designed to be available for any company already involved in the wage-subsidy system, it will probably be of most benefit to those sectors that have been hit the hardest and are struggling to make a comeback from the frequent closures: accommodation, tourism, retail and other high-contact enterprises. And especially small businesses.
“We’re looking to create a little bit of a pivot here,” one government source with knowledge of the program said on condition they not be named.
In the fiscal update of December, Freeland earmarked $100 billion in stimulus funding to help the economy get back on its feet in the immediate aftermath of the pandemic closures. The new hiring subsidy will come from that fund and is expected to cost about $600 million, insiders say.
But it won’t last forever. The budget foresees an end to the program in November 2021, by which time the pandemic will be presumed to have been pushed aside enough for the hardest hit companies to get back to a more regular existence.
Still, government insiders point to frequent changes to the pandemic supports over the past year as proof that they’re willing to extend, redesign and enrich programs as the pandemic economy demands.
“We’re willing to adapt,” said a second government source.
For now, though, given the pace of contagion but also the pace of vaccination, they see a need to take the key programs that were set to expire in June and extend them for a few more months. The budget would have the wage subsidy and the rent subsidy expire at the end of September, with an option to extend the rent subsidy to the end of November if need be.
“At some point, there will be a tapering,” said the second government source.
But not until the pandemic abates.
The decision to extend the government supports and add a new one was the last piece of the budget puzzle for Freeland, since so much of the calibration of those programs depends on the ever-changing projections of where the pandemic is heading.
In her first budget as finance minister, and after two years of not having a new fiscal plan despite all the hundreds of billions in pandemic spending, Freeland has devoted much of her attention to plotting a long-term recovery strategy for the country, with child-care funding, inclusivity and environmentally sustainable growth at the centre.
But faced with brutal evidence that the pandemic is not done with us yet, and under pressure from small businesses that say they are about to collapse, Freeland is also highlighting the emergency aid that will be available.
“These programs are a major investment. They come at a significant cost. But they are worth it. They are preventing scarring,” said one of the government sources, referring to the permanent damage many analysts fear will result from the on-again, off-again restrictions that have gutted some sectors of the economy and sidelined hundreds of thousands of workers.
The wage subsidy has already cost more than $73 billion and the rent subsidy has cost $2.6 billion, but there’s not much controversy around whether that magnitude of support was needed.
Rather, any criticism of the programs has been about their design and whether they are generous enough.
The new subsidy and the extension of the existing subsidies certainly won’t give the private sector everything it needs to get back on its feet for the long term.
But for the short term, they are a necessary tool just to get through this thing.