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Economy Ontario not tracking economic impact of corporate welfare: Auditor-General

Bonnie Lysyk, Ontario's auditor general, tables her 2015 annual report during a press conference at Queen's Park in Toronto on Dec. 2, 2015.

Darren Calabrese/THE CANADIAN PRESS

Ontario's Liberal government has doled out $1.45-billion in corporate welfare to big business but has no idea whether those payments are actually creating long-term jobs or helping the economy.

What's more, the province spent 80 per cent of that money with no public application process or criteria, and instead picked the companies that would receive the payouts behind closed doors.

Auditor-General Bonnie Lysyk delivered this searing indictment of the province's corporate welfare program in her annual report Wednesday, taking aim at a key part of the government's plan for revving up the province's sluggish economy.

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"The Ministry of Economic Development, Employment and Infrastructure has not attempted to measure whether the $1.45-billion in grants and interest-free loans it has provided to businesses since 2004 has actually strengthened the economy or made recipients more competitive," Ms. Lysyk told reporters at Queen's Park. "About 80 per cent of the ministry's approved funding to support businesses was made through unadvertised and non-transparent processes in which only selected businesses were invited to apply."

Corporate welfare is a controversial subject: While the Liberals maintain it is necessary to encourage companies to create new jobs or retain old ones, some economists argue many of those jobs would be created anyway and the payments are made largely so the government can claim credit for creating them.

Ms. Lysyk found the province does not measure whether the money it gives to companies boosts GDP or reduces unemployment. She said the government gave most of the money to companies it had chosen with no public competition, and had no criteria on how it picked them.

Only four per cent of the money went to small and medium-sized businesses, with the rest flowing to large corporations, Ms. Lysyk said.

Ontario's business subsidies have included everything from a $220-million payment to Cisco in December of 2013, after the tech giant pledged to hire up to 1,700 more people in the province, to an $85.7-million grant to Honda to help the auto maker retain 4,000 jobs at its plant north of Toronto.

Economic Development Minister Brad Duguid said the effect of corporate subsidies on the economy is too small to be worth measuring.

"When it comes to the macroeconomic issues, put it into perspective: All government spending, everything this government spends in the economy, is only 0.7 per cent of GDP. Take all of our business programs, it's about 0.03 per cent of GDP," he said. "So to suggest that we should be looking at macroeconomic impacts of the investments that we make is probably not realistic or helpful."

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Mr. Duguid said the province does not have a public application process for many of the subsidies because that money is reserved for specific situations where the government is competing with other provinces or countries for a particular business investment and has to offer an incentive to tip the scales in its favour. He held up, as an example, $120-million the province gave to software giant Open Text in April of 2014 to hire 1,200 more people in Ontario. If the province had not given the company that money, it would have taken those jobs elsewhere.

"That funding is used strategically to attract investments where we're in competition with other jurisdictions," he said. "We don't apply [the money] across the board, we apply it only when we need to, when we're in competition."

NDP Leader Andrea Horwath said it is "absolutely inappropriate" that there is so little transparency around how the money is handed out. "Cronyism is a good word for it," she said. "The Liberals think it's okay to have programs where they just give away free money without any oversight … They simply invited friends to get up to the trough and accept government money. In this day and age, it's really unbelievable."

PC MPP Lisa MacLeod, whose party promised to scrap all corporate welfare in the past election campaign, said the handouts to companies are all about government trying to take credit for creating jobs rather than actually helping the economy.

"It's become politics by press release: this is more about reannouncing things and making sure people are happy with the Liberals than it is with good governance."

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