-- CTF Reacts to Industry Canada $154 Million TPC Loan to Aerospace Giant --

OTTAWA: The Canadian Taxpayers Federation (CTF) today reacted to the federal government's $154 million gift to Pratt & Whitney Canada. Under the Technology Partnerships Canada (TPC) program, Industry Minister John Manley will announce a $154 million "conditionally repayable contribution" to the Montreal-based aerospace giant to fund engine development technology.

"The Minister will call this a job-creating investment. We call it corporate welfare," said CTF federal director Walter Robinson. "Our research, released last spring, showed that most of these types of loans will never be repaid. Indeed, of the $3.2 billion that Industry Canada has lent out over the past 17 years, only 15% has been repaid."

The CTF released two studies (April and June 1998) which clearly show that the record of repayment for "conditionally repayable contributions" is abysmal. In return for investment capital, corporate recipients enter into an agreement with the federal government which guarantees repayment based on royalties and product sales.

"Even the Auditor General has singled out these types of loan programs for special scrutiny and remarked in 1995 that they are usually based on overly optimistic sales projections and that government bureaucrats have no expertise to judge sales forecasts or ascertain that monies are actually going to their intended projects," added Robinson. "In short, this is one big boondoggle and its taxpayers who are left holding the bag"

"Equally troubling is the fact the World Trade Organization has ruled that TPC is an illegal export subsidy. But the Canadian government continues to defy this international ruling. And it has done so in an arrogant manner today with this gift to Pratt & Whitney," said Robinson. "As a trading nation, how can our partners take us seriously when we choose to obey the rules of trade only when they suit us "

"We reiterate our call for an end to TPC funding and government business subsidy programs in general," concluded Robinson. "Government must exit the venture capitalist game. Only then will Canada free business to create wealth, rather than seek the wealth of taxpayers."