Read the report by Canadian Union of Public Employees (CUPE) economist Toby Sanger that warns against the Canada Infrastructure Bank.
The Council of Canadians Halton chapter is planning to challenge the Trudeau government’s proposed Canada Infrastructure Bank.
During the October 2015 federal election campaign, the Liberals promised in their platform: “We will establish the Canadian Infrastructure Bank to provide low-cost financing for new infrastructure projects. The federal government can use its strong credit rating and lending authority to make it easier and more affordable for municipalities to build the projects their communities need.”
But by November 2016 the government opted instead to pursue global capital to finance infrastructure projects. The government is now seeking $20 billion from private investors for this bank. The Canadian Press has reported, “[Prime Minister Justin] Trudeau is hoping to persuade some two dozen representatives of large international pools of capital – including central banks, sovereign wealth funds, insurers and pension funds whose combined assets are worth a staggering $21 trillion – that Canada offers a stable economic and political environment in which to safely invest.”
The Globe and Mail adds, “Provincial and municipal governments have long pursued public-private partnerships – or P3s – for projects such as hospitals and highways, but observers say they have never seen such a concerted and direct appeal from the federal cabinet for private investment in infrastructure.”
Those P3s could also include, among other public assets, toll bridges, rail lines, energy grids, ports, airports and water systems.
In February, Trudeau named Jim Leech as his special advisor for the new bank. Notably, Leech, when he was the president of the Ontario Teachers’ Pension Plan (OTPP), approved OTPP investments in private, for-profit water systems in Chile.
In early May, The Globe and Mail reported, “The University of Ottawa’s Institute of Fiscal Studies and Democracy argues that the Liberal government has yet to make a compelling case for why it would be better to work with private investors seeking higher returns when Ottawa has the ability to finance projects itself at much lower rates.”
That article adds, “Authors Azfar Ali Khan and Randall Bartlett argue that with yields on 30-year Government of Canada bonds currently sitting at 2.2 per cent, Ottawa can borrow at much lower rates than what is available in the private sector.”
And the article higlights, “NDP finance critic Alexandre Boulerice said his party agreed with the view – as expressed in the Liberal Party election campaign – that it was a good time to borrow money for infrastructure spending given the historically low interest rates. But he questioned why the government is now looking to reach infrastructure deals with private partners at higher rates.”
CUPE economist Toby Sanger has previously argued, “There’s no shortage of low-cost public financing available to Canadian governments. Ottawa can now borrow at 0.6 per cent over a year and issue 30-year bonds at 1.8 per cent, with provinces a percentage point higher. Long-term borrowing rates have never been this low. Meanwhile large private infrastructure investors expect ‘stable, predictable returns in the 7 to 9 per cent range’…It doesn’t take an economist to understand it makes no sense to finance projects at seven to nine per cent when you can do so at two per cent.”
Yesterday, The Globe and Mail noted, “Since the budget legislation was introduced in April, the provisions creating an infrastructure bank have faced criticism on several fronts. From a procedural point of view, critics have said that an initiative as large as this should have been introduced as a stand-alone bill, for more detailed study, rather than as part of an omnibus budget bill.” Despite that, Liberal MPs have indicated that they will not be proposing amendments to the Canada Infrastructure Bank.
The federal government intends to launch the bank by the end of this year.
The Council of Canadians believes that for public infrastructure to be truly in the public interest it must be publicly owned and operated.
The Canada Infrastructure Bank would mean higher private financing costs, more privatization, increased profits for global investors, bigger executive salaries, lower workers’ wages, higher user fees, and greater inequality.
The Council of Canadians first spoke against Trudeau’s policy of asset recycling (the selling of existing public infrastructure to fund new public infrastructure) in this April 2016 blog. Prior to that, in November 2014, we highlighted in this blog that Trudeau had given a speech to the Canadian Council of Public-Private Partnerships where he promoted P3s as a solution to infrastructure needs.
