There was a breathtaking rush here: The Prime Minister of Canada decided to send a major signal to small business that help was coming on Friday, because it could not wait till Monday.
The spiralling fears of Canada’s small-business owners couldn’t be left unaddressed any longer, so Justin Trudeau stepped out of Rideau Cottage armed with little more than a back-of-the-envelope policy decision to tell them help is on the way.
It is big. It can, potentially, keep many Canadians in jobs, and allow more of those small businesses to be ready to get back to normal business quickly.
The plan is to pay 75 per cent of the wages of small businesses whose revenues have been hit by the coronavirus crisis – a substantial subsidy.
Details still to come on Monday. They will matter a lot. The subsidies will be available to “qualifying businesses,” the PM said, without saying what that means. The Finance Department will hammer out the rules and get them down on paper over the weekend.
Just sending the signal that the subsidy is coming soon will prevent some layoffs, said Dan Kelly, the president of the Canadian Federation of Independent Business. “This will cool a lot of raw nerves right through the economy,” he said.
Things have moved fast. In this case, the government was always behind. Only the previous week, on March 18, Finance Minister Bill Morneau unveiled an economic response plan that included wage subsidies of 10 per cent. That was in a bill the Liberals tabled Tuesday.
But on Friday, Mr. Trudeau had to acknowledge it wasn’t enough. Not only that, he felt it was urgent to say so now – and that could not even wait till the details were ready on Monday.
This is the government of Canada catching up to the scale of the problem.
The first response was to put out a plan and wait to see if it needed adjustment. The government underestimated the scale of the problem. It was always growing, and the economic response didn’t get ahead of the curve.
It is admittedly a steep curve like none seen before, but the Canadian government’s economic response has been slower than the early movers like Australia and smaller in scale than many – including our U.S. neighbours, now passing a US$2-trillion relief bill.
The 10-per-cent wage subsidy Ottawa initially planned was criticized as ineffective from the get-go. If you are going to do a wage subsidy in these times, it should be large enough to provide real incentive to keep people if payrolls. This one was a day late and 6½ dimes short.
So, Mr. Trudeau had to reassure small business owners – before another day passed – that the subsidy would be increased many times over, to 75 per cent.
There was no website with details, no backgrounder, no details.
The government released information on other newly announced measures, such as the deferral of GST and customs duties collection that finance officials have been working on for weeks. There was a $25-billion program to provide $40,000 loans to small business, $10,000 of which will actually be forgiven – in effect, a major small-business grant program that might be a lifeline for very small operations. For larger companies, there were measures to make credit available.
But there wasn’t even basic info on the increased wage subsidy. Mr. Kelly’s members were calling for details.
Presumably, the government will cap the amount paid per employee. There will be criteria for the size of company that can apply. Mr. Morneau indicated the subsidy is for companies whose revenues have been hit by the coronavirus crisis – those that are battered but not broken – but there was no indication of the process or how bad the hit has to be. In New Zealand, for example, a company simply attests that its revenues have declined by 30 per cent.
Over the weekend, the Finance Department will rewrite the policy it wrote last week (March 18).
There are a lot of fast-moving implications of this crisis. The first priority was emergency aid to individuals, and the government revamped its plan dramatically in the week after its first proposal. Mr. Morneau signalled his next step is aid for airlines and the oil-and-gas sector.
In this kind of short, sharp shock to the economy, Mr. Trudeau’s government is finding it can’t measure the problem twice before setting the scale of its response. It has to get ahead of it.
Our Morning Update and Evening Update newsletters are written by Globe editors, giving you a concise summary of the day’s most important headlines. Sign up today.