Large employer emergency financing facility must be well defined
There’s no doubt there is an itch to get back to normal, but there are obstacles to that and, of course, questions about how much can and should be restored as we learn to work within the pandemic. The first order of our recovery will relate to the opening of workplaces which is not always as simple as unlocking the doors, especially for bigger employers. The government has been working with employers to preserve jobs, so we will be ready when emergency measures are relaxed. Programs like the wage subsidy and loan programs for small- and medium-sized businesses are a start, but there were questions about how the government will help larger employers and corporations. That changed recently with the introduction of the Large Employer Emergency Financing Facility (LEEFF).
The LEEFF will offer bridge financing to large employers in the form of loans that are tied to conditions such as climate plans and sustainability goals. The government also says the loans are not to be used for share buybacks, dividends or excessive executive pay. To give a sense of how big these employers are, the LEEFF will help companies with $300 million or more in annual revenues that are seeking financing of at least $60 million. All sectors, except for finance and banking, are eligible to apply.
New Democrats are asking the government to clarify the rules from the program to avoid the worst consequences such as funds used for bonuses and executive pay when stimulus funding was offered during the financial meltdown in 2008. We are demanding that strings be attached to ensure financial supports help workers, not executives. Also, it would be an insult to all Canadians who play by the rules if any federal funds were extended to corporations that use tax havens to avoid paying taxes.
There is no doubt the entire economy, across all sectors, is being hit hard by COVID-19, but these challenges are not an excuse for the government to repeat the mistakes of the past. When the government says “limits” on bonuses and share buybacks, that’s not the same as saying they will stop them. This is a critical detail that Canadians deserve clear answers on. Unlike when the government buys equity in a company, loans like these can get written off and we have no control to protect Canadian jobs or ensure a long-term investment in Canada. That’s not as safe as equity.
Despite these concerns, it’s good that the government has recognized the importance of having conditions, but this announcement is too vague and leaves too many doors open to abuse that would leave workers behind. Other countries have gone further and are much clearer about how their programs will work and who will be eligible. Germany has completely prohibited dividends and share buybacks while requiring senior executives to reduce their salaries and bonuses before getting aid.
One thing we feel should be highlighted is the notion that companies using tax shelters to avoid paying Canadian taxes shouldn’t get help paid for by Canadians through their own taxes. By only targeting those “convicted of tax evasion,” the government is setting the bar too low and still letting public money go to companies that use offshore tax havens and funnel resources to tax-sheltered jurisdictions.
Finally, before handing out any money, the government must make sure that companies will maintain their jobs and investments in Canada. To that end, they should be required to have a plan to keep workers safe with health and safety protections. This is an important piece of the pandemic puzzle.