Ottawa doles out billions to Canadian businesses with the proviso that they eventually give it back, often with interest.
But a new report by economist Mark Milke of the Fraser Institute based on three decades of Industry Canada lending shows that Ottawa has a poor record of getting the money back.
Industry Canada has handed out $13.7-billion to businesses since 1982. Some of that money was non-repayable grants. But roughly half – $7.4-billion – was paid out on the condition that the money be repaid.
And yet less than 30 per cent of the loans – $2.1-billion – have been repaid, according to the report, which was compiled from an Access to Information request.
Ottawa’s record of collecting interest is also not good, according to Mr. Milke. In three decades of lending, Industry Canada has earned just $9-million in interest. Mr. Milke pointed out that Industry Canada did not provide a breakdown of which loans required payment of interest.
Many of the programs under which the loans were made have been dismantled, including Technology Partnerships Canada and Defense Industry Productivity Program. Industry Canada offers various subsidy programs targeted at aerospace, automotive, forestry, high tech, shipbuilding, tourism and other strategic industries.
“The snapshot of Industry Canada practices will help Canadian families, whose tax dollars are used to subsidize business, understand a little better how one department disburses money,” according to the study.
There’s a lively ongoing debate about the best way for government to spur lagging innovation in Canada. Last year’s Jenkins task-force report on R&D concluded that Ottawa should shift away from indirect tax breaks, such as the Scientific Research and Experimental Development credit, and spend more directly.
Mr. Milke, however, argues there’s little hard evidence that “corporate welfare” of any kind spurs economic growth or creates jobs.