The Decibel - The billions of dollars in ineligible COVID benefits

Episode Date: December 8, 2022

The federal government paid $4.6-billion in COVID-19 benefits to ineligible recipients, and another $27.4-billion of payouts should be investigated to see if they met the program’s eligibility. That’s according to an Auditor-General report released on Tuesday. It says that while Ottawa did a good job quickly delivering money to Canadians, they’re doing a poor job identifying who needs to pay the money back.The Globe’s deputy Ottawa bureau chief Bill Curry explains what we know about where the money went, and why billions of dollars are at risk of going uncollected.Questions? Comments? Ideas? Email us at [e-mail]

Remember those pandemic benefits? The federal government spent $210 billion in total. And now, we're finding out that there's a chance around $30 billion of that shouldn't have been given to people and businesses in the first place, because they were ineligible. That's according to a new report from the Auditor General. It also says that the government is doing a poor job of getting that money back. Today, the Globe's Deputy Ottawa Bureau Chief, Bill Curry, tells us what we know about where the money went and why billions of dollars are at risk of going uncollected.

I'm Maina Karaman-Wellms, and you're listening to The Decibel from The Globe and Mail. Bill, it's great to see you again. Thank you so much for being here. Thanks, Mainika. So before we get into these billions of dollars, I think it's just worth reminding people what this money was a part of. What were the benefit programs that we're talking about here? Yeah, definitely. So this is the Auditor General looking at a really unprecedented time where the Canadian economy was largely frozen and the government stepped in to protect people from, if you're a business, protect you from going bankrupt or if you're an individual from going deep into poverty. So it went through a lot of different names. So people might know

some of the names and not others. CERB was the one that right off the bat, the Canada Emergency Response Benefit. People pretty much know what that one was. That went to individuals who, if you've lost your income from COVID or because you had to take care of somebody due to COVID, that was available.

And then there was also programs for businesses, and that was called the Canada Emergency Wage Subsidy, and that went directly to employers. And that premise of that program was to help people, help business owners keep their staff on payroll. You know, there's a lot of different offshoots of these programs, but essentially it was 200 billion, a little over 200 billion in programs, of which about half went directly to employers. And then the other half went to various programs directed at individuals like CERB and others. Okay, so over $200 billion then. We're talking about a significant amount of money. It's a huge amount, yeah.

How long did these programs run for? So it was early 2020 is when they started. And they weren't really phased out until about the middle of 2022. So let's talk about this report here. So on Tuesday, the Auditor General, Karen Hogan, released this report. And I want to get into the promises that the Liberal government made in the early days, which was, look, this is a big problem. It is immediate. We need to act now. And so we're going to do something a little unusual here. We're going to flow billions of dollars out the door with very little in terms of checks and balances. We're going to take people at their word. If you qualify for these programs, as long as you sign an attestation saying, you know, yes, I meet the criteria, we're going to give you the money. But there was also a very big caveat to that, which they said in the House of Commons at the time when they announced these programs is we're going to double check later on. So if you falsely claim that you meet the criteria and you get the money down the line, whether it's a year or two or three years from now, somebody's going to be

knocking at your door asking you to repay that amount. The big summary of the report was, yes, the government did a very good job on the first part, getting the money out the door and preventing the worst in terms of big spikes in poverty. But she says the promises in terms of double-checking are really falling short, and she's concerned that they're going to run out of time, and ultimately there are some deadlines that apply to these programs, and if they don't get the money back by a certain time, they're going to have to start reporting this in the public accounts as just written off, which means taxpayers never got their money back. And when we're talking about collecting the money,

so this is ineligible people collecting the money or ineligible businesses who didn't qualify for these programs collecting the money, and the government now trying to recoup those costs. So yeah, so what did we find there? Right. So she found that there's about 4.6 billion that is clearly ineligible that went out to workers and businesses. And then what was particularly interesting is she found a further category of over 27 billion that she says at first glance, it looks ineligible. She didn't quite have enough research to be able to say definitively whether that was the case. But she said at the minimum, that $27 or so billion should be investigated. And then she found other examples on top of that that she also flagged, but she didn't have enough information to say definitively what it was. Okay, so it sounds like there could be over $30 billion in these kinds of payments here that went to ineligible recipients. Can you just break that down for us, Bill? What would have made them ineligible?

Ineligible essentially means that it doesn't meet the criteria. So for the payments to individuals, you had to have essentially lost all of your income to qualify. You also have had to have had some income in the previous tax year, like $5,000. And that was just to essentially weed out people who essentially were not in the workforce to begin with, and so they were not eligible. And then for the business side, which is particularly interesting, is you had to show, if you were a business owner, that you'd had a steep drop in revenue or profits as a result of COVID. What the Auditor General report says is there was about over $15 billion in payments to employers that it looks like they really didn't have much of a revenue drop at all.

And the biggest chunk of money went to the CEWS program, which is that wage subsidy program for businesses that we're talking about here. It was over $100 billion that went to businesses. And Bill, I know that when you and other Globe colleagues looked at this report, you found something kind of surprising here about the info that the government collected in order to determine whether a business qualified or not. What did you find here? So what was interesting here in the Auditor General's report is, she said the government really failed to collect really important data that would allow her or anyone else trying to review the effectiveness of this program to determine the social insurance, social security numbers of their employees. And so as a result of that, the government doesn't really know if an employer that would have provided a little bit of a sense of how a business is doing. And you could have used that to cross-reference whether a business really is having a steep drop in revenue or not.

The Auditor Journal says that was not done. It should have been done. And as a result, we've got a situation where potentially more than $15 billion went to companies that didn't, on the face of it, meet the criteria. And we actually don't know, you know, over the $100 billion or so that went to this program, whether it was successful in keeping people on payroll or not. So this is a really interesting and important point here, because it sounds like if this kind of was done at the start, it would have been a lot easier to track now. But because it wasn't done, we're kind of we're kind of left in the dark a little bit, unable to see where this money flowed. This was one of the few red flags, I think, that you

noticed in this Auditor General report, Bill. Can you can you tell me about one of the few red flags, I think, that you noticed in this Auditor General report, Bill. Can you tell me about some of the other ones? Because I understand that some money actually went to dead people. Is that right? Yeah, there was an interesting section in the back of the report where the Auditor General says there are some areas that's not included in the $27 billion because she couldn't get enough information to really understand what happened there. But she wanted to flag it for the government to look into it further. And some pretty interesting examples there. So among them for the CERB, she said over 190,000 people received that payment who appeared to have quit their jobs.

It was not supposed to go to people who quit their jobs. It was people who couldn't work because of COVID. Then there was 6.1 million that went to people who were in prison for the entire time that they were receiving the benefit. As you mentioned, there's 391 dead people who received a combined 1.2 million. And then she also suggests the government might want to take a look at 2.2 million that went to 434 children under the age of 15. So how they applied successfully for CERB is a question that the Auditor General could not answer and thought the government should have to explain. Wow. Very interesting there. Just out of curiosity, Bill, how does the Auditor General get these numbers that she's working with here?

It's a very large shop, the Auditor General's office, and it has a significant budget. So it can do a very thorough job and get access to information that journalists or the public don't have. What I found interesting in this report is normally in the back, there's a series of recommendations, and then the government responds to each of them. And almost all the time they agree. But I think it's important to note that this was unusual in that in the document, they only partly agreed to the main findings of this report. The government really questions that number, that there's 27 billion or so that needs to be investigated. They don't think it's that high. And they also question whether it would be worth it to spend the extra money that it would take

to go after these individuals. So if the CRA is saying it's not worth going after every single penny, the Conservatives would like to see at least an estimate. Like, show us the numbers here. How much would it cost? You know, how many people would you have to hire or devote to chasing down this money? What would be the cost to collect it? And then the parliament could determine whether that is the right thing to do or not.

But obviously this is a sensitive topic for the government because it was a big part of their response to the pandemic. They argue that they are on the case, that they are already recouping some money, and the amount that goes uncollected is going to be a lot smaller than what the Auditor General is warning about. The Auditor General was asked about this later, and she says she stands by our numbers. We'll be right back. Can you maybe put these numbers in context for us a little bit, Bill? Like, according to this report, the government may be out more than $30 billion. It's kind of hard to fathom this kind of money, I think, right, for those of us who aren't dealing with this kind of money on a day-to-day

basis. And if we combine the ineligible payments and the amount that the Auditor General says needs to be investigated, $30 billion is about 15% of the total COVID benefit money that was distributed. Can you put that into perspective for us? Is that a lot? Like in terms of a big program like this to see 15% be questioned in this way, is that significant? I mean, I cover budgets. So any number during the period of COVID is a lot. I mean, we had a deficit of $327 billion. So that was unprecedented. The size of the federal debt grew above $1 trillion. So there are a lot of big numbers that

flow from the pandemic response. The only thing we really have to compare it, and it's a fairly small comparison, is the 2008-09 financial crisis. And there was roughly about a $50 billion stimulus package that the conservative government approved in response to that. And they took a different approach and went through, essentially focused on infrastructure, what they called at the time shovel-ready projects and people who would probably remember the signs, blue and green, Canada Economic Action Plan billboards went off across the country. And that actually triggered three Auditor General reports

after the fact. And they were largely positive, but there were, you know, certainly whenever you are sending billions out the door in record time, there's going to be mistakes. People might remember there's questions about Tony Clement was the Treasury Board Minister in the Parry Sound area. And there was, you know, he got a nice new gazebo in his riding. So there were stories like that about, you know, questionable spending, projects that didn't get built fast enough or on schedule. Yeah.

So like we were talking about here, the government distributed this money without doing the usual checks, but this was done in order to get the money out the door fast, to get it to people. Because it was a pandemic, a lot of people couldn't work, businesses couldn't operate, so they needed something. What would have been the alternative if the government didn't do this? Well, I think we would have had a very significant spike in poverty in the country, and the Auditor General points that out. So in terms of things that the government would want to highlight from this report, that would be the main one, I think. It also talks about some of the economic downsides, which is it did have a negative impact in terms of

labour market, the availability of workers for businesses. As they reopened and tried to hire staff, they found a harder time finding workers, in part because of these benefits like CERB. And, you know, business leaders were saying at the time that these programs were acting as a disincentive for people to go back in the workforce, and the Auditor General essentially agreed with that. I want to ask you about other potential negative impacts of this. On Wednesday, the Bank of Canada raised interest rates again, which is the seventh rate hike this year. And we know this is because the bank is trying to fight inflation. And of course, pumping money into the economy like the government did during the pandemic, that can increase inflation.

We know that. So what do we know about the impact that these COVID benefits had on the current inflation that we're experiencing now? Yeah, that's a great question. We had a really interesting report earlier this week from Scotiabank, which has some economists who used to work in the finance department. So I always pay close attention to their reports on these matters. And they really looked at that question of how much of the current spike in inflation is attributable to domestic factors like the federal stimulus programs that we've talked about, these benefit programs, because that is a very lively debate in the House of Commons.

So this, we had the Scotiabank economists look at this, and where they came at is, you know, it is a factor, but it's not the biggest factor. They said the spike in inflation is 50% due to global events outside of Canada's borders. Then another 35% or so is supply chain issues. And then only about 12 percent is attributed to the federal programs. The impact is not zero. It's not the biggest factor, but it is a factor. And it went further and said, the impact is actually larger when you look at what the Bank of Canada is doing right now in terms of trying to raise interest rates to cool this inflation, because the Bank of Canada is focused on domestic issues, it's had kind of an outsized impact on the Bank of Canada's

efforts to raise interest rates to cool inflation. So the Bank of Canada is now having to raise interest rates by a higher degree now. These federal programs helped Canadians in the moment with short-term financial pressures, but there is a cost to that, and that cost comes through higher interest rates. So anybody with a variable mortgage or who is borrowing money is now having to pay more in that way. All right. Okay. So I guess to get back to the main question, Bill, I just want to ask you about the fairness of this all here, because some individuals have already repaid money that they were ineligible for. They did that of their own accord when they got a benefit that

they later learned they weren't eligible for. Wouldn't it be unfair to them if the government didn't go after the rest of the ineligible benefits that were sent out? Yeah, that's a really interesting question, and it's a very live debate on Parliament Hill. You've got the NDP, Daniel Blakey, the finance critic, suggested that there should be essentially an amnesty or a waiving of these debts based on income, so the people who are lowest income shouldn't have to pay it back. It's an interesting consideration because these programs generally went to people who are among the lowest income percentiles in Canada. So when you think of, you hear the big numbers, 27 billion, do you really want as a government to go shake down some of the lowest income individuals in the country at a time when they're already dealing with higher inflation that we were just discussing? So that's one issue. We put that to the Auditor General.

Karen Hogan said, you know, if that's their thinking in not aggressively pursuing this, then they should just say so, which they haven't. And then Carla Qualtrough, the employment minister, gave a pretty interesting answer when we put it to her this week, where she said, you know, it is an interesting debate about how to deal with this matter. But she pointed out, as you just did, that there is a question of fairness, that in the early days, because CERB kind of went in waves, they did actually claw back some benefits. When people got paid too much at the start, they would have got paid less in future installments. So some of that clawback has already occurred. So if some people have already had to pay it back, is it fair to go after others

who haven't yet paid it back? She insists that the government is, in fact, identifying all the people who owe money and is trying to find a balance between collecting this and not, in her words, jamming Canadians. So she's looking at things like payment plans. I mean, the government ultimately is in charge of tax collections, so they can make adjustments come tax time if you owe money. So there's ways for them to collect this money.

They are just a little vague in terms of how they're going about it. Wow. Bill, it was great to talk to you. Thank you so much for being here. Thanks, Manika. That's it for today. I'm Manika Raman-Wilms. Our producers are Madeline White, Cheryl Sutherland, Mainika Raman-Wilms. Our producers are Madeline White, Cheryl Sutherland, and Rachel Levy-McLaughlin. David Crosby edits the show. Kasia Mihailovic is our senior producer, and Angela Pichenza is our executive editor.

Thanks so much for listening, and I'll talk to you tomorrow. Thank you.