Trudeau taking calculated political risk on CEBA repayments: analysts

Prime Minister Justin Trudeau made it clear Wednesday he would not extend Thursday’s deadline for businesses to repay their federal pandemic loans — a move that shows he believes taking a fiscally prudent stand likely outweighs any political fallout, analysts say.

Thursday marks the last day businesses that received money through the Canada Emergency Business Account (CEBA) program are eligible for forgiveness of up to $20,000 of the money they borrowed, but only if they repay their outstanding balance in full.

But even as business owners have been pushing for an extension to this deadline, Trudeau said Wednesday the pandemic is over and the bills are due.

“We understand that things, even as the economy has bounced back from COVID, continue to be challenging, which is why we extended twice the repayment deadline for the CEBA loans,” he told reporters at an event in New Brunswick.

“But we are now far enough from the pandemic that we do have to wrap up pandemic programs.”

In Atlantic Canada, over 40,000 businesses received more than $2.1 billion in interest-free CEBA loans between 2020 and 2021 to help them weather the financial hardships caused by COVID-19 lockdowns, border closures and supply-chain disruptions.

But even after the federal government twice extended the deadline for repayment, up to 28 per cent of businesses in Nova Scotia and New Brunswick that received CEBA funds have not yet been able to repay them, according to the Canadian Federation of Independent Business (CFIB).

Business lobby groups like the federation and chambers of commerce have been pushing hard to get the message to Ottawa that this deadline could cause financial hardship for small-business owners.

Inflation has increased many costs for these businesses over the last few years, which is why businesses owners have been pleading for a third extension to the repayment deadline, says Duncan Robertson, the CFIB’s Nova Scotia senior analyst.

“It’s abundantly clear that the current economic climate is not one where businesses really have a chance to catch up and fully recover,” Robertson said.

“But at the same time, we’re seeing (Ottawa) provide tens of billions of dollars in subsidies to big businesses like Stellantis and Volkswagen, so we just find it a very odd time for them to be playing hardball at this moment, when it’s the beginning of a lot of small businesses’ slow seasons and they have so many costs going up across the board.”

Trudeau’s firm stance in the face of vocal business concerns comes at a time when both he and his Liberal party have been facing steep declines in voter support. In Atlantic Canada, recent polling numbers suggest the Liberals could be in danger of losing 11 of their 24 current Atlantic seats, according to the polling aggregator site 338Canada.com.

Businesses’ CEBA concerns could further erode Liberal support in the region, says Lori Turnbull, director of the school of public administration and an associate professor of political science at Dalhousie University.

“In Atlantic Canada, honestly, I think the Liberals are probably in for a tough fight in a number of ridings even without this issue, so I wouldn’t be surprised if this made things a bit more tense.”

But the Liberals have also been taking a beating from the Conservatives over their handling of the economy and, in particular, how much federal money was poured into pandemic programs.

That’s why Turbull says Trudeau may believe showing a desire to get those programs closed and the money paid off may work in his party’s favour.

“I think (Finance Minister Chrystia) Freeland is obviously under pressure to show some fiscal prudence,” Turnbull said.

“So I think, all in all, they’ve done the math on it and the political risks of an extended forgiveness period are going to be worse and the political consequences are going to be worse than applying that deadline (Thursday).”

Scott Matthews, political science professor at Memorial University, agreed, noting Conservative Leader Pierre Poilievre has been conspicuously absent from the debate over CEBA loans repayments, even while it presents an opportunity for him to criticize Trudeau, who he has been blaming for most of Canada’s economic woes.

With the next federal election as far as 21 months away, Matthews questions whether this issue will be one that will ultimately affect many Canadians’ votes.

These loans were offered with zero interest and were dispersed under the clear understanding they would have to be repaid within certain timelines, which have been extended twice, he said.

“For how many Canadians will it be felt that the government asking these businesses to now start repaying loans . . . that this is a really unjust, unfair thing for government to do?” Matthews said.

“My gut tells me that that won’t be the kind of opinion that will dominate.”