Morneau admits the obvious—COVID policies were seriously flawed

Former finance minister Bill Morneau recently admitted that the federal government “lost the agenda” during the pandemic and “probably” overspent on stimulus. While it’s a surprising admission from Morneau, a quick review of the evidence confirms there were major issues with Ottawa’s COVID spending response, including poorly targeted programs with questionable economic impact and overall poor fiscal management.

Programs such as the Canada Emergency Wage Subsidy (CEWS) and Canada Emergency Response Benefit (CERB) cost hundreds of billions of dollars. And a recent study found that of 33 industrialized countries, Canadian governments—including federal, provincial and local—borrowed more money than any other country (except Japan) during the pandemic.

Unfortunately, all that borrowing didn’t translate into stronger economic performance compared to our peers. Despite accumulating more debt than nearly every other industrialized country, Canada underperformed on key economic growth metrics in 2020 and 2021. In other words, we didn’t get much bang for our taxpayer bucks.

Why?

For starters, Canada’s programs were poorly targeted. A 2020 study examined nearly $82 billion of COVID spending and estimated that 27 per cent—more than one in four dollars—was poorly targeted, representing $22 billion in wasted taxpayer money including up to $11.8 billion in CERB payments, which went to eligible dependent young people (ages 15 to 24) living with parents in households with at least $100,000 in household income. And up to $7.0 billion in additional CERB payments went to eligible spouses in families with at least $100,000 in household income. The targeting of CERB was suspect, to say the least.

Moreover, a recent report by Canada’s auditor general (AG) found $4.6 billion in ineligible CERB payments and other benefits paid to individuals and recommended that the government investigate the nature of another $27.4 billion in COVID-related spending. Overpayment recipients included 1,522 prisoners, 391 dead people and 434 children too young to be eligible—in addition to 51,049 identified employers that received $9.9 billion in CEWS payments who did not demonstrate a sufficient revenue drop to be eligible for the subsidy. The AG also criticized Ottawa for failing to require social insurance numbers for workers in firms that applied for CEWS, which means proper verification and tracking cannot be completed.

Due to widespread mismanagement, with poorly-targeted spending that had questionable benefit for Canada’s economy, Ottawa wasted billions of dollars in taxpayer money and accumulated far more debt than was necessary to stabilize the economy and help those in genuine need.

Morneau’s comments are just the tip of the iceberg. Clearly, the AG should to do a more thorough independent review of all spending and transfers based on full access to government documents. And in the future, the federal government must ensure that that spending is effective, targeted and carefully managed.