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Government subsidies for business are ‘wrong,’ Hudak says

Ontario Progressive Conservative leader Tim Hudak speaks to the London Chamber of Commerce at a lunchtime meeting in London, Ontario, Friday, May 23, 2014.


Progressive Conservative Leader Tim Hudak is attacking a Liberal plan to set aside $2.5-billion in subsidies to attract businesses to Ontario, saying that subsidizing corporate investment is "wrong, and it's bad economics."

He gave the remarks in a campaign speech to the chamber of commerce in London – a region hit hard by the loss of manufacturing jobs – on Friday. A dispute over the most effective means of job creation is becoming a major theme on the campaign trail ahead of the June 12 election.

Mr. Hudak equated the Liberal plan to a "slush fund" that encourages corruption. In front of an audience of nearly 150 people, he repeated his argument that reducing taxes and energy costs would be a more effective way to encourage corporations to invest in the province.

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As an example, Mr. Hudak referred to the high-stakes negotiations with Chrysler Group LLC to build its line of minivans in Windsor, Ont. In March, Chrysler withdrew a request for $700-million in government subsidies and went ahead with that investment anyway.

"It makes you wonder how many other companies would have created jobs without the cash," Mr. Hudak said in comments to reporters after the speech.

Liberal Leader Kathleen Wynne, however, has said she supports subsidies for auto makers, and that Mr. Hudak's plan would "destroy" Ontario's auto sector.

Mr. Hudak also referred to support the government gave to the Kellogg Co. – a $9.7-million loan in 2008 and $4.5-million in funding in 2011 – to build a new plant in Belleville, Ont., that would make the company's Mini-Wheats cereal. The plant employs more than 100 people. But the investment did not stop Kellogg from pulling out of the province elsewhere; late last year, it announced it would close its factory in London, which employed more than 500 people.

"The best economic analysis has shown again and again that there is no better job-creation bang for the buck than fair, lower taxes on employers," he said.

In addition to the economic criticism, Mr. Hudak denounced subsidies as an opportunity for corruption, with companies lobbying government for grants and little transparency.

"We've seen this pattern. From the sponsorship scandal to the Quebec construction scandal, the original sin was letting politicians decide which company got the cheque," he said.

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He pointed to a 2011 analysis in which the Ottawa Citizen found that, under Dalton McGuinty's government, 78.4 per cent of Eastern Ontario Development Fund grants had gone to Liberal ridings since 2008.

Responding to questions from reporters after the speech, Mr. Hudak called the Liberals' plan for a $2.5-billion grants fund "an irresistible invitation to corruption."

Arthur Sweetman, a professor at McMaster University, says most economists would agree that more transparency is needed on corporate grants.

"There's an opaqueness to this," he said. "A lot of people are saying, you need to have a transparent public system for allocating these funds to get it out of the back rooms."

But he questioned whether it would even be possible for a province to withdraw from corporate subsidies altogether.

"Hudak is saying let's stop it altogether. [Prime Minister Stephen] Harper also said they would stop it and they haven't been able to do it," he said.

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On Thursday, Mr. Hudak said that lower taxes, cheaper energy and fewer regulations would on their own be enough to have corporations "knocking down the doors" to set up shop in the province.

"Nobody has ever pulled out of the subsidy game for us to know what it would look like," Prof. Sweetman said. "In Europe, the U.S., Canada, nobody's ever got out of this game."

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