Corporate welfare or Crown prosecutors? How corporate welfare undermines core services

For anyone unaware of how corporate welfare diverts money from useful government services, take a good look at Quebec. There, the Charest government just undermined a function governments should pay close attention to and fund: the prosecution of crime. Meanwhile, next door, Ontario taxpayers might soon receive a similarly negative lesson on top of previous poor policy. Both provinces are poster children for misguided priorities.

First, consider Quebec. There, the Charest government just ordered Quebec prosecutors back to work after a strike on the issue of pay and understaffing. Some have threatened to quit; it’s understandable as to why.

Quebec’s prosecutors earn about 40 per cent below the national average. They have demanded parity with other provinces, a cost of about $30-million to the Quebec treasury. The Charest government’s solution is a raise of six per cent over five years; the province’s justification is that six per cent is the same increase awarded to 475,000 other Quebec civil servants.

The one-size-fits-all approach to wage increases is problematic as it ignores supply and demand. (It also ignores those who might be overpaid, or how Quebec might shrink its overall bloated public sector.)

Still, on the flipside and on the 40 per cent demand, while Quebec prosecutors make significantly less than their counterparts in Ontario, B.C. or Alberta, those other provinces have a higher cost of living.

For example, according to Royal LePage, an average detached bungalow that costs between $235,000 and $340,000 in Montreal (depending on the neighbourhood), fetches between $330,000 to $770,000 in Toronto with a range of $299,000 to $552,000 in Calgary and between $440,000 and $1.2 million in greater Vancouver.  

Thus, while national parity for Quebec’s prosecutors may be unreasonable, one obvious indication of underpaid staff is an inability to retain experienced people. That seems to be the case in the Quebec face-off, and that brings up the question of a government’s priorities.

There are plenty of items and people governments should spend less on, but fighting crime and corruption—especially in Quebec which grapples with precisely that latter issue—are not likely two of them. Battling those twin evils will remain a core function of government until the human character is magically transformed, which is to say, never.

Given that reality, it’s useful to remember what the governments of Quebec and Quebec City just committed to up to $200-million each for a new hockey arena meant for a for-profit, professional hockey team.

The trade-off here is not difficult to understand: tax dollars spent on capital construction subsidies to business (AKA, money for a prospective NHL hockey arena) negates higher salaries for prosecutors, salaries that might make their compensation more competitive with similar private sector legal work in Quebec.

But Quebec is not alone in its fiscal foolishness. In a similar unwise diversion of taxpayer cash Ontario over the years, the provincial government has diverted billions to the automotive industry. Between just 2003 and 2005, Ontario gave $422 million to General Motors, Ford, Toyota and Chrysler in the form of grants or conditionally repayable contributions (which often amount to a grant by a different name).

And then in the spring of 2009, Ontario participated in the massive $15.3 billion federal-Ontario bailout of GM and Chrysler.  A small portion of that money has been “repaid” but the automotive industry already wants it back in new corporate welfare, so Ontarians might soon receive another example of errant government spending. (In mid-February, an auto industry collective asked Ottawa to extend its five-year $250-million Automotive Innovation Fund.)   

Here’s the big picture on misplaced priorities: In 2008, the last year for which comprehensive statistics are available, Ontario and Quebec spent $2.7 billion and $6-billion respectively on corporate welfare. Given how governments threw tax dollars at almost every supplicant during the last recession, such figures will only grow in the years yet to be reported.

In Ontario over the years, the government has merrily spent money on companies that continue to shrink. In Quebec, the province funds “circuses” instead of core services —prosecutors.

Both governments are involved in policy folly. In the medium- to long-term, the diversion of money to unproductive ends undermines a stronger economy through higher-than-necessary taxes. (Lower business and personal taxes for all would be preferable to corporate welfare payouts for the few.)

In the short-term, and as just made clear in Quebec, more corporate welfare misallocates the tax dollars governments should actually spend. In this case, it diverts such money from a function only a government can carry out: the prosecution of corruption and crime.