CTF: Ottawa's Volkswagen subsidy already over budget by $2.4 billion

According to a PBO report, the $13.9 billion tab is now $16.3 billion, amounting to a whopping $5.4 million per job.

  • Rebel News
  • June 19, 2023
  • News
CTF: Ottawa's Volkswagen subsidy already over budget by $2.4 billion
THE CANADIAN PRESS/Spencer Colby
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The Canadian Taxpayers Federation (CTF) wants Ottawa to revoke its Volkswagen (VW) subsidy after learning the costs skyrocketed by billions of dollars. 

On March 13, Industry Minister François-Philippe Champagne announced a battery factory for St. Thomas, Ontario, calling it "amazing news" without initially revealing the cost of subsidies.

VW announced the plant would create nearly 8,000 jobs — employing upwards of 3,000 when it opens in 2027. PowerCo SE, the company's battery division, is expected to start battery production at the 1,500-acre "gigafactory" when it opens.

"There will be two to three million people coming to Ontario during the next ten years, and we will get our fair share of them," said St. Thomas Mayor Joe Preston, generating $200 billion in economic activity.

However, according to a PBO report, the $13.9 billion tab is now $16.3 billion, amounting to a whopping $5.4 million per job.

"Shovels haven't even hit the dirt, and the Volkswagen handout will cost taxpayers billions more than the government let on," CTF Federal Director Franco Terrazzano told Rebel News. 

"Taxpayers don't have $16.3 billion to give to a multinational corporation, and we certainly don't have billions more to give to other companies demanding their handouts."

Giroux noted the VW plant is six times Environment and Climate Change Canada's annual budget. "[The government is] not demonstrating restraint in its spending," he said. "To spend that much money on one plant is certainly unprecedented, in my opinion."

The total figure for Canada's largest plant is now quadruple all annual federal aid to corporations in Canada, reported Blacklock's Reporter. The Department of Industry, in 2018 testimony at the Commons industry committee, said federal assistance to corporations nationwide averaged $5.5 billion a year.

From 2007 to 2019, the feds spent $76.7 billion on business subsidies, according to the Fraser Institute.

"The issue I have with the deal is the lack of full transparency," Giroux told True North.

"The government indicated a number publicly, but based on documents we've seen and discussions with Department of Finance officials, as well as those at Innovation, Science and Economic Development Canada, the numbers at play are higher."

Finance Minister Christian Freeland told reporters Cabinet had no choice but to spend billions more on a Volkswagen battery plant in Ontario.

"We knew Canada had to be at the table," she said. "We were just not, as a government, going to tolerate a situation in which investment was sucked out of Canada."

"I don't think Canadian workers should tolerate that situation."

Giroux contends significant projects like this seem to receive “very generous assessments” on its economic impacts.

Blacklock's Reporter revealed that Champagne first disclosed a $13.7 million figure to Bloomberg News after ignoring a March 30 order from the Commons industry committee for details on the subsidy. 

On April 17, the industry minister disregarded a request from MPs for details of new federal subsidies for Volkswagen. The Commons industry committee gave him until April 24 to disclose the VW contract.

On April 20, Cabinet approved subsidies to VW to build a battery plant at an estimated $13.7 billion. Taxpayers ultimately incurred additional costs following "a preliminary cost estimate of the entirety of the Government of Canada's funding commitments to Volkswagen."

"The Budget Office estimates the government's financial commitment to Volkswagen will total around $16.3 billion [throughout] the agreement," said the report Fiscal Analysis Of Canada's Support For Volkswagen's Electric Vehicle Battery Manufacturing Plant. "This includes an estimated $12.8 billion in production support."

Deputy Industry Minister, Simon Kennedy, told the Senate banking committee in May 5 testimony that the VW subsidies were the start of Ottawa's transition to a green economy. "The entire automotive supply chain and industry are rapidly moving to battery electric vehicles," he said.

"If Canada [cannot] successfully make that transition, not just the handful of companies that make the cars will arguably disappear, but the entire cluster will disappear, which is hundreds of thousands of jobs." 

"The argument is not just you're going to put this plant here, and it's going to create 'x' jobs," continued Kennedy. "The argument is this is an entire industry."

In a 2022 report, department auditors admitted they could not verify job claims then and occasionally inflated their estimates. "The document review could not validate the number of jobs created or maintained to date," said the Evaluation Of The Innovation Superclusters Initiative report.

According to an access to information request obtained in 2020, the industry ministry said they "guessed" their job creation claims.

"Canadians are worried about their mortgage payments and putting food on the table, and the government is deciding to help a huge multinational corporation," said Terrazzano. "Canadian families need $16.3 billion, Volkswagen does not."

Aaron Wudrick, director of Macdonald-Laurier Institute's domestic policy program, said Champagne's numbers were 'plucked out of thin air.'

Wudrick condemned the subsidy, stating it's problematic for the government to pick winners and losers. He added there's little evidence pointing towards a successful outcome for 'strong-arm governments' who create a cycle of dependency.

"The thing that makes this Volkswagen plant unique is it's exponentially more money than has ever been spent before, so they've essentially taken an idea that's expensive and has failed repeatedly and supersized it," he told True North.

"There was a lot of trumpeting around the bailouts of Chrysler and General Motors during the financial crisis [of 2008]," said Wudrick. "Once again, it was framed as essential, but all the evidence and analysis shows taxpayers lost billions of dollars on that transaction."

"Eventually, plants like Oshawa either close or shrink [once the money runs out]."

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