BUSINESS
10/23/2018 09:12 EDT | Updated 10/23/2018 09:12 EDT

Liberals Write Off $2.6B Bailout To Chrysler From Harper Government

The government is also forgiving billions in loans to students and other businesses it never expects to collect.

The Peace Tower is seen on Parliament Hill in Ottawa on Nov. 5, 2013.
THE CANADIAN PRESS/Sean Kilpatrick
The Peace Tower is seen on Parliament Hill in Ottawa on Nov. 5, 2013.

OTTAWA — The federal government says it won't collect $6.3 billion in loans, a figure fuelled by the write off of a nearly decade-old automaker bailout that the Liberals say had no hopes of being recouped.

The Liberals have written off some $3 billion in loans in each of the past two years, but they jumped past that mark in fiscal year 2017-2018.

Key to the jump was a $2.6 billion writeoff that was part of a financing package the previous Conservative government made in 2009 to keep automaker Chrysler afloat and save an estimated 52,000 Canadian jobs during the recession.

Still a loan on the books when Liberals took office

In 2011, former finance minister Jim Flaherty said taxpayers would likely never recoup the full value of the bailout when Chrysler repaid $1.7 billion provided to the restructured company, now known as Fiat Chrysler.

There was still a US$1.125 billion loan, excluding interest, sitting on the books to the "Old Chrysler" when the Liberals took office in late 2015.

The company had paid back about $238 million from its original loan, but the Liberals decided to write off the remaining principal and interest in March after officials exhausted every avenue for recovery.

Bloomberg via Getty Images
Jim Carr speaks during the World Gas Conference in Washington, D.C., U.S, on Tuesday, June 26, 2018.

International Trade Minister Jim Carr blamed the terms of the loan set out by the previous government to explain his government's decision.

"At the time they handed out the loan, they knew it would be 100 per cent written off," Carr said Monday.

"The 'Old Chrysler' did not have an opportunity to pay it back ... there are no surprises here."

Forgiving some student loan recipients

Separate from the writeoffs, the government is also forgiving other debts to the tune of about $1.1 billion, including nearly $344 million that officials don't expect to recover from student loan recipients.

Combined, the annual public accounts documents show the Liberals decided in the 12 months ending in March that the government wouldn't collect $7.4 billion owed the federal treasury — a record since they took office in late 2015.

The detailed accounting documents provide an annual window into how much the government spent in the last year, what it spent money on, and just how much wasn't spent.

Lapsed spending this year, for example, totalled $10.7 billion, but the numbers in the public accounts are not always big.

The government still has not shown signs that it has reduced the impact of pay errors coming from its transformation of pay administration, which includes the Phoenix pay system.Michael Ferguson, auditor general

A review of the documents shows the government paid $58,803 in damages and other legal claims because of the problem-plagued Phoenix pay system that has left civil servants underpaid, overpaid or not paid at all.

Canada's auditor general estimated in a report that the government owes underpaid employees some $369 million and overpaid others about $246 million. The total is $615 million worth of pay errors as of March 31, 2018.

The Phoenix fiasco was the "one significant blemish" on the government's books for the last fiscal year, Michael Ferguson said in his audit opinion about the public accounts.

He said the number of employees affected by Phoenix pay problems has continued to grow.

"The government still has not shown signs that it has reduced the impact of pay errors coming from its transformation of pay administration, which includes the Phoenix pay system," Ferguson wrote.

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Federal books finished in the red last fiscal year as the government posted a second consecutive $19 billion deficit as overall spending across ministries, departments, agencies and Crown corporations hit $332.6 billion.

The deficit for 2017-18 was slightly smaller than what the Liberals predicted in February's budget.

There are concerns the Liberals' deficit-spending plan at a time of economic expansion could lead far deeper down the deficit hole in the event of a recession, fuelling criticism from the Opposition Conservatives about the lack of a road map to return to a balanced budget.

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