Fresh Takes

Enough with the Multi-Billion-Dollar Subsidies

For several days now, Canadians—and especially Ontarians—have been witness to a veritable ping pong match between the federal government and its Ontario counterpart. The reason for the match: Stellantis, an automotive sector giant that had begun construction on a battery plant in Ontario, wants billions of dollars from the public purse.

Initially, the two levels of government were each to contribute around $500 million, but the agreement reached between the federal government and Volkswagen, for $13 billion, has thrown a wrench in the works. Stellantis has since paused construction of its plant and now wants a similar deal.

First of all, the agreement with Volkswagen is completely unjustified. It amounts to a subsidy of some $4.3 million per job created, for a total of 3,000 direct jobs. What’s more, with our current labour shortage—over 323,000 positions are unfilled in the province of Ontario—it is absolutely unjustifiable to pay so much for what could end up being a mere displacement of workers rather than real job creation.

The government of Canada should never have agreed to finance Volkswagen to the tune of $13 billion, nor should the request from Stellantis for a similar handout be granted by either level of government.

Of course, it’s understandable for Stellantis to want a deal as attractive as its competitor’s, but it is unacceptable for the government to conclude such agreements.

The deployment of this kind of economic policy is counter-productive, especially in terms of public finances. Moreover, by doling our subsidies like this, the government takes on the role of choosing winners and losers, a role that should be played instead by consumers making decisions in the marketplace.

Finally, if the federal government really wants to attract foreign investment to Canada and thus contribute to economic development in this country, it needs to establish a competitive fiscal framework in order to do so without draining public funds.

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