- PM Trudeau announced a slew of new measures this morning intended to help the Canadian economy weather the impact of the COVID-19 pandemic. Finance Minister Morneau followed on early this afternoon with more details.
- Front and center was an increase in the wage subsidy offered to small and medium-sized businesses, to 75%, up from 10% previously announced. The change will be back-dated to March 15th. More details, such as the conditions for a firm to qualify, are to come on Monday. Costing was not available at the time of writing – by comparison, the government had estimated that the prior 10% subsidy would carry a cost of $3.8 billion.
- Also introduced are new Canada Emergency Business Accounts aimed at small businesses, non-profits, and the self-employed. Delivered via banks, these will be $40k loans, government-backed, interest-free for the first year, and with the first $10k forgivable if repaid on schedule. FM Morneau estimated that the total cost of this support will up to $25 billion.
- The $10bn in business supports being delivered by BDC and EDC will be more than doubled, to a new total of $22.5bn. Both organizations will also partner with banks in providing loans of up to $6.25 million to help SMEs continue to function.
- HST, GST, and other tax payments will be deferred to June, estimated to free up $30 billion in near-term liquidity for businesses.
- FM Morneau estimated that, excluding the wage subsidy, the measures announced today represent roughly $95 billion in support, including the $30 billion in liquidity from tax deferrals.
- With all of the announcements to date, it can be hard to keep track of how much support is now in play. Including the measures, today that had cost estimates, roughly $202bn of support is now on the table. $85bn of this is in the form of tax deferrals, roughly $52bn in direct support measures, and the remaining $65bn in lending operations. A rough calculation based on earlier estimates suggests that the 75% wage subsidy will add an additional $25 billion to this total.
- Key Implications
- Today will be another one for the record books. Not long after the Bank of Canada cut its policy rate back to the crisis low and expanded asset purchases (see commentary), the Federal Government again stepped up its coronavirus response. The big announcement today, a 75% wage subsidy for small and medium-sized firms, appears to have largely met calls for greater support to help prevent layoffs.
- Between today's measures and the Canada Emergency Response Benefit (CERB) announced earlier this week, there is now a decent level of support both for firms to keep employees on and for those employees who are let go should the math still not make sense for their employers. Today's subsidy should help mitigate some of the upside risks on the unemployment rate, and the CERB will help blunt the income shock for those who are laid off.
- It was also encouraging to see an expansion of BDC and EDC support measures, including a broadening of the channels by which firms can access the funds. Wrapping up the self-employed in what appears to be a fairly generous program of short-term support loans is also helpful.
- The Canadian COVID-19 response is being fleshed out day by day, and to date, the measures have been largely (much needed) stop-gaps. We continue to look for further announcements aimed at sectors such as travel/tourism and energy that are likely to face longer-term challenges even after economic life returns to 'normal'.
- Government introduces Canada Emergency Response Benefit to help workers and businesses
March 25, 2020 - Ottawa, Ontario - Department of Finance Canada
The Government of Canada is taking strong, immediate and effective action to protect Canadians and the economy from the impacts of the global COVID-19 pandemic. No Canadian should have to choose between protecting their health, putting food on the table, paying for their medication or caring for a family member.
To support workers and help businesses keep their employees, the government has proposed legislation to establish the Canada Emergency Response Benefit (CERB). This taxable benefit would provide $2,000 a month for up to four months for workers who lose their income as a result of the COVID-19 pandemic. The CERB would be a simpler and more accessible combination of the previously announced Emergency Care Benefit and Emergency Support Benefit.
The CERB would cover Canadians who have lost their job, are sick, quarantined, or taking care of someone who is sick with COVID-19, as well as working parents who must stay home without pay to care for children who are sick or at home because of school and daycare closures. The CERB would apply to wage earners, as well as contract workers and self-employed individuals who would not otherwise be eligible for Employment Insurance (EI).
Additionally, workers who are still employed, but are not receiving income because of disruptions to their work situation due to COVID-19, would also qualify for the CERB. This would help businesses keep their employees as they navigate these difficult times, while ensuring they preserve the ability to quickly resume operations as soon as it becomes possible.
The EI system was not designed to process the unprecedented high volume of applications received in the past week. Given this situation, all Canadians who have ceased working due to COVID-19, whether they are EI-eligible or not, would be able to receive the CERB to ensure they have timely access to the income support they need.
Canadians who are already receiving EI regular and sickness benefits as of today would continue to receive their benefits and should not apply to the CERB. If their EI benefits end before October 3, 2020, they could apply for the CERB once their EI benefits cease, if they are unable to return to work due to COVID-19. Canadians who have already applied for EI and whose application has not yet been processed would not need to reapply. Canadians who are eligible for EI regular and sickness benefits would still be able to access their normal EI benefits, if still unemployed, after the 16-week period covered by the CERB.
The government is working to get money into the pockets of Canadians as quickly as possible. The portal for accessing the CERB would be available in early April. EI eligible Canadians who have lost their job can continue to apply for EI here, as can Canadians applying for other EI benefits.
Canadians would begin to receive their CERB payments within 10 days of application. The CERB would be paid every four weeks and be available from March 15, 2020 until October 3, 2020.
This benefit would be one part of the government’s COVID-19 Economic Response Plan, to support Canadian workers and businesses and help stabilize the economy by helping Canadians pay for essentials like housing and groceries, and helping businesses pay their employees and bills during this unprecedented time of global uncertainty.