Here’s what impact investors are urging the federal government to add to its COVID-19 aid package
Why It Matters
In response to COVID-19’s unprecedented impact, last week the federal government passed a huge stimulus package to help Canadians. But these impact investors from across Canada say much more can be done — from accelerating the launch of the Social Finance Fund to implementing a universal basic income.
Last week the federal government pushed its new stimulus bill through parliament in response to the COVID-19 crisis. With infection rates surging and the global economy experiencing a meltdown, Ottawa passed a $107 billion package to help Canadian people, businesses and non-profits. Friday morning, Justin Trudeau announced an update to the aid package, which included increasing the wage subsidy available to employers from 10 percent to 75 percent and deferring HST and GST payments until June.
This may only be the start, however. Upon announcing the measures on March 18, Finance Minister Bill Morneau said it was just the “first phase” of the government’s response and that “there will be more to come.”
In what ways does the current stimulus package fall short? What more could or should the government be adding in the coming days and weeks as the crisis develops?
Future of Good asked some prominent Canadian impact investors for their ideas. We wanted to know what the biggest pain points are for social enterprises, and what kind of response to the crisis could be viable in a short timeframe.
Bolder solutions
For Mike Winterfield, Founder and CEO of Active Impact Investments, the wage subsidy was top of mind — the government’s original commitment was 10 percent of employee wages for three months, but Justin Trudeau announced Friday morning that number would increase to 75 percent, in response to heavy criticism like Winterfield’s: “When you have a government that mandates you’re not allowed to operate your business, should that same government not also mandate that your costs should be either frozen or subsidized as well?”
Many are calling for the government to go even further by introducing a universal basic income. The debate over universal basic income (UBI) is never too far from the news, especially in Ontario where a short-lived basic income pilot took place in 2017-2018. The COVID-19 crisis, which has led to people struggling for their livelihoods in an economic downturn, has renewed calls for UBI as an efficient, universal way of getting people the support they need. President of Good & Well Alexandra Baillie argued that now could well be the time.
“The unemployment rates are increasing so quickly, and I think what will give people comfort is cash in hands. I don’t have the best mechanism to do that, but some kind of tool like a guaranteed basic income. From my perspective, now would be the right time to be starting something like that,” she said.
“I think it would have to come in as an emergency measure. If you were going to do it as a long-term measure, it would take longer to think through the process and how to do it most efficiently. It has to happen quickly at this time, because people are losing jobs now.”
A massive capital injection
The economic downturn triggered by the COVID-19 outbreak has wiped trillions from the global economy in the past few months, crippling the ability of investors to inject much-needed capital into businesses. Jeffrey Cyr, managing partner of Raven Indigenous Capital, and Lina Bowden, founder of VERGE Capital, both argued the government should utilize the Social Finance Fund: an $805-million fund to help social entrepreneurs access capital, which was set to launch later this year.
“The one thing that the federal government has to do in the short term is move flexible capital into the marketplace, in my opinion. What we’re going to see is a drying up in the normal investor marketplace. So if you want large foundations, trust funds, financial institutions to release capital, you have to take some of that risk out of it for them,” said Cyr. “The government of Canada had the social finance fund in place. It should seek to move that quicker into the hands of intermediaries, I think is the way to do it. Because it already exists. I’m trying to create paths of least resistance.”
Bowden agreed. “I know that [the government is] probably looking at how social finance can play a part as well in the government’s support package here. I wouldn’t be surprised if they’re working on something because they have already designated dollars towards social finance” she said.
“I do really believe that what’s needed most right now are the grants and the ‘free money.’ Loans can be fairly tricky at a time like this, because if people are not using those loans to generate new revenue streams then we may not be doing the organization any favours by imposing debt on them.”
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