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Feds gave up to $15.5 billion in COVID aid to businesses who didn't need it
But mainstream media mostly focused on how to recoup ineligible payments to individuals.
On Tuesday, Canadian Auditor General Karen Hogan released her first report into the $210 billion in pandemic aid the federal government distributed over the past few years, as well as its vaccine procurement process.
The report found $4.6 billion in overpayments to individuals through the Canada Emergency Response Benefit (CERB), which provided individuals who lost their jobs $2,000 a month, and other targeted aid for individuals. (Disclosure: This author received CERB after getting laid off from the Medicine Hat News.)
Hogan’s report also found that 51,049 businesses that received the $100.7-billion Canada Emergency Wage Subsidy (CEWS), which paid up to 75% of employees’ wages to prevent layoffs, were potentially ineligible for the subsidy, totalling upwards of $15.5 billion in excessive payments, which warrants further investigation, alongside another $11.9 billion in individual payments.
You’ll never guess which overpayment received the bulk of media coverage, which hyper-focused on how the government was going to recoup the excess payments.
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In a story headlined, “$4.6B in COVID-19 financial aid went to ineligible recipients, audit finds,” CTV News dedicates two paragraphs of a 1,300-word story to the business side of the equation:
The auditor general found that, in addition to the billions of dollars in overpayments, another estimated $27.4 billion in payments to individuals and employers should be "investigated further" for potential ineligibility, including $15.5 billion that went out through the wage subsidy program.
Hogan said she was flagging this additional chunk of potentially problematic funding, because through her audit she was "pretty confident" there are indicators that certain individuals and businesses were not eligible for the amounts that they received, such as not meeting the income metrics or not showing sufficient revenue declines.
The CBC’s story, headlined, “Federal COVID-19 vaccine, benefits rollout swift but wasteful: AG,” mentioned the potential overpayments to businesses in a single bullet point.
A Toronto Star story doesn’t mention the possibility of ineligible CEWS payments until its penultimate paragraph, but to its credit does question whether the government should expect individuals to pay back benefits that were applied for in good faith.
The only news outlet to dedicate an entire story to the potential CEWS abuse was, of all places, the Financial Post, which has done great work on this file. A December 2020 investigation from the Post found that a minimum of 68 companies who received CEWS funds paid out dividends to shareholders, including Imperial Oil and long-term care company Extendicare.
Perhaps to compensate, National Post columnist John Ivison, who in the early days of the pandemic wrote a piece headlined, “Trudeau's lavish handouts risk turning workers into welfare slackers,” simply ignored the potentially ineligible CEWS payments altogether.
Instead, he focused on how, due to the ineligible CERB payments, the Liberal government cannot be trusted to give out its Canada Dental Benefit for under-12s and Canada Housing Benefit to people who are eligible.
Part of this lopsided coverage no doubt has to do with the fact that the CERB overpayments were confirmed by the AG, whereas the CEWS overpayments were flagged as potentially ineligible, but it still reflects a lack of curiosity about the process through which the AG was able to verify ineligible payments, or not.
The Canadian Press, for example, noted that the Canada Revenue Agency “collected limited data from businesses,” but didn’t inquire further into why that might be the case.
Katherine Scott, a senior researcher with the Canadian Centre for Policy Alternatives, told The Orchard it’s entirely unsurprising that businesses were able to game the system, as the feds were “racing to put together a rescue package in the face of the economic fallout of the pandemic.”
But even in 2020, it was clear that CEWS was excessively broad in scope, she added.
Scott, whom the Star spoke to for its story on the AG report, contrasted CEWS with the Netherlands’ Emergency Bridging Measure for Job Opportunities program, which expressly prohibited companies from paying out dividends or bonuses to shareholders, or buying back stocks.
Not having this level of oversight allowed profitable companies to take advantage of CEWS, Scott explained.
“They may have had one division that experienced an income drop and instead of cross subsidizing they applied for these monies. The federal government, even when they were told in September 2020, didn't choose to tighten the program,” she said.
In one particularly egregious case, Edmonton-based manufacturing company CESSCO Fabrication and Engineering used CEWS funds to hire scab labour after locking out its unionized workers, as I reported for Jacobin at the time.
As the AG noted, the government simply wasn’t collecting data to measure the business-side aid. There’s no information on how many jobs CEWS saved, let alone whether it was mainly low-income or medium-income workers whose jobs were retained.
Scott acknowledged the risk of small businesses going under was very real and that CEWS “helped to stabilize the Canadian economy and assisted with a fairly speedy employment recovery.”
But it’s important to “focus on who bore the brunt of the pandemic,” Scott said, adding that there is data on who those funds went towards.
CERB was “really transformational” in its targeting of “precarious workers [and] low wage workers who were the ones most hard hit in the pandemic,” she added, pointing to data showing that CERB recipients tended to be “highly-racialized,” female and workers in the “care economy.”
However, as others have noted, the lowest-income Canadians — those who made less than $5,000 in 2019 — weren’t eligible for CERB to begin with.
It was to be expected, given how rapidly the program was rolled out, that ineligible people would apply, but there’s nothing necessarily “incendiary” about doing so. It’s especially cruel to force “those same people who are being hammered by the cost of living crisis pay back the support that was critical,” Scott said.
She disputed Hogan’s characterization of CERB as a “labour disincentive,” which was uncritically repeated by the CBC. Scott argued there are many good reasons why people wouldn’t want to return to work in a pandemic, whether it’s poor pay or dangerous conditions.
“The focus on individual benefits as opposed to on the business side, where in fact, arguably there are larger numbers of businesses that took advantage speaks to a bias,” Scott said. “There’s a double standard being applied here.”
Edited by Scott Schmidt