Follow up on the gravy train

For those of you who may have read my column this morning and be all out of joint or have read about Atcon with great indignance, I thought I might give you just a little bit of ‘education’ this mornin’.

New Brunswick companies receive among the lowest amoun of government subsidies of any province in Canada.  I don’t have the provincial breakdown (didn’t want to pay the $30) but I did pay the $6 to get you a comparison of NB versus Canada since 1981.  The most current year data is available is for 2006.

You will see from the chart that government subsidies (cash paid out to businesses from all levels of government) in New Brunswick have been below the province’s national share since 1982.

So for those of you who love to oink a lot – time to sniffle elsewhere.  By the way, Fraser prepared  a report a couple of years ago confirming that New Brunswick was among the lowest users of subsidies and Alberta (shock!) was among the highest (mainly because of the huge transfers to agriculture).  I said then and I’ll say now, New Brunswick manufacturers have less control over the price of the Canadian dollar than farmers have over the weather.  A subsidy is a subsidy.

So before you are too critical – I thought you might like a few facts.

 

 

Government subsidies and capital transfers, provincial economic accounts, annual (dollars  x 1,000,000)(3)

Year

NB

CAN

NB as a % of CAN

1981

922

9,934

9.3%

1982

563

9,635

5.8%

1983

215

10,487

2.1%

1984

240

12,295

2.0%

1985

196

12,129

1.6%

1986

128

11,174

1.1%

1987

132

11,028

1.2%

1988

129

10,611

1.2%

1989

134

9,818

1.4%

1990

169

10,052

1.7%

1991

216

12,854

1.7%

1992

223

12,323

1.8%

1993

178

10,382

1.7%

1994

170

9,608

1.8%

1995

159

8,746

1.8%

1996

160

8,710

1.8%

1997

179

9,361

1.9%

1998

172

9,900

1.7%

1999

185

9,853

1.9%

2000

166

10,658

1.6%

2001

141

15,130

0.9%

2002

120

13,371

0.9%

2003

134

17,641

0.8%

2004

209

16,662

1.3%

2005

225

17,144

1.3%

2006

216

15,863

1.4%

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10 Responses to Follow up on the gravy train

  1. Aaron says:

    I think some definitions would have to be clarified for this to mean anything. I doubt loan guarantees are included here and especially for this government, they seem to be the weapon of choice due to the fact they are not direct cash payments. Without proper management of the loan portfolio however, they become cash payments and based on the quality of the companies that have been receiving them of late, these guarantees are more likely than not going to have to be covered by the government. It would be interesting to see the same comparison including indirect assistance.

    After all, when a loan guarantee is used to refinance an existing loan, chances are you’re going to be talking to the creditor sooner or later.

  2. If a loan guarantee is eventually called, that money would show up in these figures.

  3. Samonymous says:

    The agriculture industry has always been a highly subsidized industry in Ontario and in the prairie provinces, mostly federal dollars but some follow up provincially as well. Not to mention, the auto and aerospace sectors through TPC loans (and formally DIPP before that), and most notably the defense contracts — which have been used to a greater degree under Harper.

    But there have been some beacons of hope to the contrary of this incurable disease at the provincial front. Mike Harris’ government in Ontario cut program spending and curb loans for business, Ralph Klein issued a ban on corporate welfare (over $1 million) and even Gordon Campbell has tried to tilt the government’s ability away from direct subsidizing and more to “tax cuts” as a even (and fair) economic stimulator.

    Like you say, you can’t end this practice completely (as the feds have a huge stake in this electorally), but a premier can decide to take his foot off the gas (in regards to corporate welfare) and look for alternative ways to create a more open and fair economic system. One where winners and losers aren’t picked because of a “particular member on their board” or for “the amount of money they agree to kickback”. It’s high time government got out of the business of business and just focus on dismantling the red tape, barriers and poor environment that could be detrimental to overall economic growth.

  4. mikel says:

    You had a poster a while back that summed it up well, when workers don’t face starvation then we’ll see the end of subsidies. Until then, there is just too much riding on business interests. There is very little ‘red tape’ and barriers unless you are talking about subsidies. You can set up shop virtually anywhere in New Brunswick and if you don’t want government money, all you have to do is register. The main barriers there are with small businesses, if you recall there was the immigrant family who had to get health inspection done on their goat cheese and met with resistance from a racist government employee and a safety inspection team who ignored all other inspections. However, when it comes to corporate interests, there usually isn’t even that barrier. There is this ‘myth’ that government is sitting on its throne and whenever a new business comes to town the either seek to muscle it out of money, or determine its success or failure. In Canada we have the most lax regulations in the entire G20, which is why we have among the worst injury and occupational disease rates in the industrial world.

    But almost EVERY company is opposed to subsidies-until they want one. That, again, has more to do with the economic environment of the day than the government. Under Mike Harris there was little need for direct subsidies. My favourite example of this comes from the Royal Underground Commission. In that series, the meat processing industry crowed back in late nineties about how they had built a successful industry with little need of government interference. Then along came mad cow and all bets were off, all these right wing, keep out of our way business types were suddenly at Ottawa demanding a bailout. They get them for the simple reason that they were allowed to get so huge that the repercussions are worse than the bailout-and thats from the LACK of regulation. The MORE government is involved in regulating, the better the ‘market’ operates.

  5. Samonymous says:

    Don’t kid yourself mikel, governments play an huge roles in determining whether or not we have a strong economy to support essential public services, like healthcare and education. But it’s not accomplished the way you’re thinking, through corporate welfare, increased spending and high personal income taxes. It’s just reality that investors and businesses look at tax rates and regulatory burdens of competing provinces and states before they decide to set up shop and hire employees. Remember Peter Mesheau’s comments regarding RIM? I didn’t like it, but that was the political reality that ruled the day regarding our competitiveness (via our weak private sector/unskilled/uneducated workforce).

    Haven’t seen a change from this government either.

    Plus, as we learned in the 1990s, if taxes are uncompetitive and government makes it difficult to do business, jobs and families will leave our province in droves for greener pastures, mostly in search of something better than the call centre industry which ppl (to this day) still brag about. And I don’t know why?

  6. Anonymous says:

    Atcon sounds like another ‘yarn’ story; they are on the gravy train.

    I support business and I support the idea of government helping business succeed but we need to be smart about it. Consider the magnitude of the Atcon support. $50M is just shy of the $80M Ontario gave Toyota to set up its billion dollar Woodstock plant creating thousands of well paying jobs and spinning off many more through their supply chain. I know economic circumstances are different, but what are we getting for the Atcon deal? According to news reports:

    – The hope that current jobs can be maintained
    – One seat on an advisory board that will be “consulted” on ‘significant’ decisions
    – The hope that Atcon succeeds and the loans are not called
    – The hope they add the 75 additional jobs they need to meet their original commitment

    Has the government investigated why banks declined Atcon? Do they understand why Atcon failed to meet their previous commitments? What changes are being made to avoid future failures? Is access to credit the only problem their big project is experiencing, and if so,when the money flows how soon will Atcon be healthy? Are Atcon’s competitors getting or asking for similar support? They better understand these things now because an arm’s length advisory committee will not know until it is too late.

    The government has inappropriately comparred this to loans made to Irving companies, McCains and Ganongs. These companies are in a completely different league than Atcon who have yet to prove themselves, yet to show they can successfully manage projects, and yet to live up to previous agreements already made with the government. This is much higher risk.

    I hope I am wrong, but the conditions appear to be very similar to other mega failures: after missing milestones and receiving government help year after year, they finally fail claiming they had the right business, they had customers and contracts, they just ‘ran out of money’. The taxpayers will be the ones who run out of money if we have more $50,$60 and $80 million payouts for failures.

  7. richard says:

    “as we learned in the 1990s, if taxes are uncompetitive and government makes it difficult to do business”

    Data, please. Lets see the data to support that assertion. Surely you must have some.

  8. Anonymous says:

    @ David:
    “So before you are too critical – I thought you might like a few facts.”
    I would be interested in seeing these numbers relative to GDP. They would give a better idea of how much of each economy is subsidized (subsidies per capita wouldn’t do it – they would miss too much of the full picture)

  9. Samonymous says:

    The economic activism of the 90s proved, if, but one thing, that to its core it did not change the basic structure and performance of NB industry in the long run. If anything, there was depressing evidence of just how difficult it is for government’s to pick winners and how easy it is for losers to find government. We’re still reeling from the poor performances of that government and it’s lack of strong policy development. With no opposition, they had a clear path to move forward, and they didn’t.

  10. richard says:

    “The economic activism of the 90s proved”

    What are you talking about? Data please. You don’t seem to have any.

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