At the end of last week, the Prime Minister announced the creation of a new strategic industry council, designed to “serve as an advisory board to assess the scope and depth of the impact of COVID-19 on industries and inform the government about specific sector pressures ”.
We have been hearing about sector pressures for some time now. It is clear that the whole economy has been hit and hit hard. Employment figures made it really clear on Friday: 5.5 million Canadians have lost their jobs or at least half their working hours since February.
Particular sectors – tourism, airlines and the oil sector – were particularly affected. No one can travel and – depending on when a vaccine arrives – they will not be able to do so for a long time. Air Canada estimated this week that its operations would be affected for three years.
WATCH: Flair Airlines CEO Jim Scott explains how COVID-19 has affected the airline industry
Oil prices have fallen to historically low levels not only because of the pandemic, but also following a price war between Russia and Saudi Arabia. Demand is expected to remain depressed to varying degrees during the pandemic, as is price. Initial estimates indicate that producers have so far deferred at least $ 7 billion in capital spending.
Both sectors are asking Ottawa for help; “Liquidity supported by the federal government. It means money – in the form of a loan – but it always means money. And not a little – a lot. Initial estimates of what oil companies will need start at $ 20 billion.
The Prime Minister was frequently asked during his daily briefings about the possibility of a bailout. On Friday, he admitted that aid to large companies was being considered, but added a warning.
“Even then, we will focus on the workers, on the supply chains that involve very many small businesses across the country for many of these industries, and not on the well-being of companies in one industry. or a sector. “
This statement recognizes some of the political considerations that underlie this government in helping oil companies (and, to a lesser extent, airlines). Being a beacon for corporate well-being makes the erosion of NDP support a little more difficult; that said, in a pandemic, all bets are cut.
An announcement on aid to struggling sectors could take place tomorrow. Cabinet spent the second half of last week discussing it.
It would not be the first time that Ottawa has had to bail out companies in financial difficulty. During the 2008-2009 financial crisis, the government intervened here and south of the border to help battered car manufacturers.
This crisis is different; a collapse of financial systems did not stimulate it, a pandemic did. The government has closed almost everything, which is understandable. But – at least for those asking for help – it means the government has an increased responsibility to help businesses affected by the closure.
So? And if Ottawa helps airlines or oil companies, will there be conditions?
WATCH: Alberta Premier Jason Kenney Responds To Federal Leaders Opposed To Oil Rescue
As Paul Boothe, who led the federal team negotiating the restructuring of GM and Chrysler in 2008-2009 described in this piece, there were ropes tied at the time. According to Boothe, the federal government has reviewed restructuring plans, put representatives on the boards of the companies involved and limited things like executive compensation and benefits.
Resoundingly, at least in my experience, when the problem arises, Canadians want strings. They tell me that there are far too many examples of large companies that received help from Ottawa and ended up shutting down a factory or laying off Canadian workers years after getting that help.
They may have fulfilled the terms of their loans, technically, but Canadians are not focusing on technical arguments. If taxpayers’ money is to be used to help a once profitable business, Canadians want a positive rate of return beyond the terms of the loan. They want the business to stay in Canada and keep Canadians.
I realize there are a myriad of things that affect this outcome. And by no means do I want to portray companies as big and bad predators. They employ millions of Canadians, I understand. But I am inundated with mail and messages from viewers who do not want their investment to be for nothing.
All of this will weigh on the government’s decision: bail out or not bail out. With tens of thousands of jobs at stake, I guess they will decide to help. The key question for Canadians will be what businesses will have to do in return.
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