- KPB & Co Research
- Federal Government is seeking to reduce reliance of the Canada Emergency Response Benefit
- Government desires to shift the burden on firms to sustain recovery efforts, and minimize damage to budget.
- The criteria for companies to get access to the Canada Emergency Wage Subsidy (CEWS) has been lowered.
- CEWS has been extended to December - 2020.
Shifting The Burden To Firms
There is an unprecedented level of uncertainty about how the next few quarters will unfold in Canada and around much of the world. The fact is that, though there have been progress, a long-term solution to the problem of COVID-19 has not been found yet. In fact, there is evidence that suggests that a vaccine is still a year way. In this regard, the federal government is unsure about of the level of support that will be required, but are cautiously moving towards providing less support to individuals. In the fiscal snapshot, Bill Morneau gave clues about his unease by conservatively forecasting up until the end of the fiscal as opposed to the 3 to 5 years that is typically done. He also gave clues about the future of the various programs slated to help the economy, where he expressed that the budget for the Canada Emergency Response Benefit (CERB) will be kept at C$80Bn after paying out C$54.8Bn thus far, while that the budget for the Canada Emergency Wage Subsidy will be expanded several fold. With the debt growing at a very rapid pace, a credit rating downgrade, and concerns about debt sustainability from political constituents, the government is eager to reduce the haemorrhage resulting from COVID-19 related spending.
Amendment to the Canada Emergency Wage Subsidy
The Trudeau led government is seeking to boost the amount available for firms to access as an incentive to get people back to work, with the ultimate goal of making the economy fend for itself. According to data from Statistics Canada, about 3 million Canadians are still out of work, and with firms continuing to cut staff that number is likely to grow. The federal government is seeking to make the following changes:
- Extension of the CEWS until December 19, 2020.
- Opening up the program to employers with a revenue decline of less than 30 per cent.
- Providing a gradually decreasing base subsidy to all qualifying employers even those that have taken money under the prior arrangement that required a decline in revenue of 30% or more.
- Introduce a top-up subsidy of up to an additional 25 per cent for employers that have seen revenues drop by 50%.
- Provide a minimum guarantee subsidy rate to employers that have already made business decisions for July and August.
About the CEWS
The CEWS provides a 75-per-cent wage subsidy to qualified employers who applied for the program anytime up until the 29th of August 2020. The program was initially schedule to cost about C$45Bn but since been increased to C$82.3Bn after only C$18Bn was used.