Infrastructure Minister Amarjeet Sohi
There are growing concerns about how the Trudeau government will fund its promised $120 billion in infrastructure spending over the next decade.
The Canadian Press reports, "The federal government has identified a potential source of cash to help pay for Canada’s mounting infrastructure costs — and it could involve leasing or selling stakes in major public assets such as highways, rail lines, and ports. A line tucked into [their] federal budget reveals the Liberals are considering making public assets available to non-government investors, like public pension funds. The sentence mentions 'asset recycling', a system designed to raise money to help governments bankroll improvements to existing public infrastructure and, possibly, to build new projects."
CUPE has previously explained, "Asset Recycling is a new phrase describing corporatization, marketization and privatization of government assets. An asset is 'recycled' when a government, corporation or bank either sells or borrows against its physical assets to get money for investment in new capital. ...Asset recycling is just another scheme driven by bankers and governments desperate to hide past failures of neo-liberal privatization policy." The term 'recycling' comes from the notion that, as described by the Mowat Centre, governments "dispose of legacy assets to generate capital to invest in new assets or to refurbish existing infrastructure."
The clearest example of this may be the Ontario Liberal government selling 60 per cent of Hydro One, the provincially owned electricity transmission utility, to generate funds to spend on transportation infrastructure. The grim truth is that a publicly-owned utility that generates about $750 million a year in "profit" and puts another $100 million a year in the provincial treasury in lieu of taxes is being privatized. Federally, just a few examples of Crown corporations (state owned corporations) that could be subject to asset recycling include Atomic Energy of Canada Limited, Canada Post Corporation, the Canadian Broadcasting Corporation, the Halifax Port Authority, and Via Rail.
Another Canadian Press article examines more closely the issue of public pension fund investments in public infrastructure.
That article notes, "The Trudeau government's newfound enthusiasm about a big Montreal transit proposal has given Canadians a glimpse at one way Ottawa could fund billions in public infrastructure... [Quebec's public pension fund manager], the Caisse de depot et placement du Quebec, is prepared to pump $3 billion into [a $5.5-billion light-rail plan for Montreal] — and it wants the provincial and federal governments to kick in the rest. ...A subsidiary of the Caisse would operate the rail network and gradually recoup the pension plan's investment through user fees. Eventual profits would be funnelled into Quebecers' public nest egg — the Quebec Pension Plan — which is managed by the Caisse."
Finance Minister Bill Morneau says, "I salute the innovative efforts of the Caisse de depot et placement du Quebec, which, through its metropolitan electric network, is proposing a new business model to implement major infrastructure projects." And Infrastructure Minister Amarjeet Sohi says, "I see this as a great opportunity for us to support innovation in delivery of infrastructure, because we do need to engage public sector pension funds, as well as private sector funds, to make sure the amount of infrastructure that we build across the country engages other stakeholders and partners.''
We do not share the enthusiasm of these ministers for this model.
The Montreal transit project is not a public-private partnership nor the privatization of an existing publicly-owned asset. But it is just as problematic that the ownership and operation of this new rail line will be in private, for-profit hands from the start. We believe that public services and public infrastructure, including transportation infrastructure like this rail line, is most efficiently operated on a publicly owned and democratically accountable basis. The involvement of a public pension fund does not change the reality that the service is to be operated and controlled by a for-profit corporation.
It should also be noted that pension fund companies do not pay income taxes on their profits. That's why in some instances pension funds take the lead in a consortium with tax-liable corporations in order to shield the entire consortium of investors from their obligation to pay taxes. That is not fair and hurts the public purse.
CUPE has stated, "The Liberals are clearly hoping that Canadian pension funds could become privatizers of infrastructure. ...CUPE strongly opposes this concept. Privately-owned and operated infrastructure will result in more expensive, lower quality, less accessible services for Canadians. We are strongly opposed to privatization, whether the private owner of the infrastructure is a profit-seeking corporation or a worker’s pension plan. In either case it is wrong; if future infrastructure improvement and development is to truly benefit all Canadians, it must be publicly owned and run."
Infrastructure Minister Amarjeet Sohi