Government Spending on Corporate Subsidies Has Tripled Since 2015: Report

Cars pass along the assembly line at the Stellantis plant in Brampton, Ont., on July 21, 2023. The Canadian Press/Chris Young

Federal and provincial government spending on corporate subsidies reached record levels in 2024, more than tripling from 2015 and marking the highest amount recorded outside the COVID-19 pandemic, according to a new study.

In a report released this week, the Fraser Institute found there was a substantial uptick in what the authors refer to as “corporate welfare” spending starting in 2015, culminating in a 142 percent surge between 2019 and 2024.

Corporate welfare is an umbrella term that includes government subsidies, tax breaks, or other forms of financial assistance given to corporations and businesses. The Fraser Institute said these payments have an economic objective, such as job growth or to boost a particular industry.

Subsidy expenditures rose from $22.2 billion to $25.1 billion between 2007 and 2015, an increase of 12.8 percent when inflation is taken into account. In the subsequent period from 2015 to 2019, the growth rate of spending surged to 44.2 percent.

Post-pandemic corporate subsidy spending rose annually from 2022 to 2024, reaching an inflation-adjusted total of $87.7 billion in 2024, which is more than three times the amount recorded in 2015.

The analysis revealed that, when factoring in inflation and population growth, subsidy spending has grown across all provinces and at the federal level between 2015 and 2024.

The authors argue the spending was a “wasteful use of taxpayer dollars,” in that it failed to boost economic growth.

A post by the Canadian Federation of Independent Business noted that proponents of corporate subsidies argue the money drives economic growth by lowering business costs, which encourages companies to hire more workers, invest in new technologies, and compete effectively against foreign rivals in global markets.

Study co-author and Fraser Institute director of Atlantic Canada prosperity Alex Whalen said the evidence challenges the theory that these policies drive economic growth.

“Despite their current prevalence in Canada, research has consistently shown that corporate welfare is largely wasteful and generally fails to achieve its stated goals,” Whalen said in a press release.

The research cited by the report’s authors examines various ways in which corporate subsidies may not achieve their intended goals. These include the tendency for companies to lobby the government instead of improving services, the disruption of private market decision-making, the potential for job creation in one region to lead to job losses in another, and the chance that subsidies support businesses in activities they would have undertaken regardless.

One of the largest corporate incentive packages in Canadian history was the $15.5 billion in combined federal and provincial support announced in 2023 for Stellantis-LG Energy Solution.

The funding was structured to convince the two companies to build Canada’s first large-scale electric vehicle (EV) battery manufacturing plant—operated under the joint venture name NextStar Energy—in Windsor, Ont. Stellantis has since exited the joint venture, leaving LG as the sole owner of the plant and the primary recipient of the ongoing government support.