Monday, July 15, 2024
Doug Ford and Justin Trudeau at the April 21, 2023 Volkswagen announcement. Photo: YouTube

PBO pegs total cost of federal government’s Volkswagen plant deal at $16.3 billion

Economic benefits of building the new facility “marginal”

A new estimate of government investment into the Volkswagen battery plant in St. Thomas has resulted in calls to cancel the project.

On June 14, the Parliamentary Budget Officer (PBO) released his analysis of the Government of Canada’s electric vehicle battery manufacturing facility agreement with Volkswagen.

“Based on our analysis, the federal government’s financial commitment to Volkswagen will total around $16.3 billion over the period of the agreement,” says PBO Yves Giroux. This increase represents about 20 per cent more funding than was announced by Prime Minister Trudeau and Premier Ford on April 31, 2023.

The PBO’s total cost estimate includes $12.8 billion in production support, a $0.7 billion contribution through the Strategic Innovation Fund (SIF) for the construction of the plant, and an estimated $2.8 billion in tax adjustments, that are needed to achieve an after-tax equivalency to support offered under the U.S. Inflation Reduction Act (IRA), as per the Government’s stated intention.

Image: Parliamentary Budget Office

As a result of the report’s findings, the Canadian Taxpayers Federation (CTF) called upon the federal government to cancel the Volkswagen deal.

“Shovels haven’t even hit dirt and the Volkswagen handout will cost taxpayers billions of dollars more than the government let on,” Franco Terrazzano, CTF Federal Director, said. “Taxpayers don’t have $16.3 billion to give to a multinational corporation and we certainly don’t have billions more to give to other companies that are demanding their own handouts.”

The PBO’s report also examines the economic and budgetary impacts of the Volkswagen plant’s construction.

“The economic benefits of building the new facility are marginal,” adds Mr. Giroux. “We estimate the plant will increase real GDP in Canada by 0.01 per cent above its baseline projection by 2027 and will add around 1,400 jobs by the same time.”