Trudeau government announces privatization bank

London-based McKinsey & Co managing director Dominic Barton and Finance Minister Bill Morneau.

The Trudeau government has announced its intention to establish an "infrastructure bank" next year that would seek capital from global investment funds, encourage foreign ownership, and promote public-private partnerships for major infrastructure projects such as public transit and highways that would mean higher user fees and lower public revenues.

The Financial Post reports, "Prime Minister Justin Trudeau’s government is creating an infrastructure bank backed by billions in new spending to lure investment from global fund giants such as BlackRock Inc. [a New York City-based global investment management corporation]... The government will establish a Canada Infrastructure Bank in 2017 mandated to invest $35 billion over the coming decade. ...The infrastructure bank will seek to leverage global pension fund assets to speed up projects, while Canada creates a foreign-direct investment hub, and loosens both Foreign Direct Investment (FDI) regulations and immigration rules."

The article adds, "The bank will be mandated to invest in revenue-generating projects — particularly those that spur overall growth — and use 'innovating financial tools' including direct investments, debt and equity investments. The bank will deliver government projects while also accepting unsolicited bids. ...The plan proposes $35 billion in government funding [and suggests with a 4-to-1 ratio of private investment] an anticipated $175 billion portfolio managed by the bank. The precise figure will depend on market interest and individual deals."

And the Financial Post notes, "Canada will raise the threshold for government review of foreign takeovers to $1 billion by 2017, two years earlier than previously predicted. The government committed to publishing new guidelines for national security reviews of foreign investment by the end of this year."

Rabble.ca parliamentary report Karl Nerenberg comments, "In this, [federal Finance minister Bill Morneau] has heeded the advice of his high-powered, private-sector-dominated Advisory Council, headed by Dominic Barton, the U.K.-based head of the multinational McKinsey consultancy. There is one caveat though: those projects must be of the sort that produce revenues. Think toll roads, or electricity facilities; not such social infrastructure as safe drinking water for First Nations communities [unless it's a private utility]." The Globe and Mail says the bank would be "aimed at attracting private investment in major projects such as public transit and highways."

That newspaper also reports, "The Federation of Canadian Municipalities had said that the bank should be capitalized with new money, not with funds from already-promised programs for road, bridges, transit and other projects. However, FCM president Clark Somerville expressed support for the plan..." The Canadian Press adds, "Somerville said it is too early to know what projects would be involved. He said cities wouldn't worry about partnering with the private sector and would look at public-private partnerships for large projects as part of budget planning."

Last month, The Globe and Mail reported, "Federal Liberals are eager to entice international investors, including pension funds, to invest in Canadian infrastructure as a way of boosting a sputtering economy. Airports are widely considered to be a prime target for such investors..."

CUPE economist Toby Sanger says, "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."

Sanger highlights, "The public will always ultimately pay for these higher private financing costs through ongoing public subsidies, lower public revenues, higher user fees and in other ways. Privatization doesn’t just increase costs, it also results in greater inequality, as user fees are hiked, workers’ wages and benefits are cut, and executive compensation rises."

A CUPE media release this past week notes, "The finance minister’s plan for a Canadian Infrastructure Bank is a recipe for the cannibalization and privatization of Canada’s public infrastructure for profit by private institutional investors. ...Morneau should put the brakes on any move towards privatization and use low-cost public financing—instead of high cost private finance—for our public infrastructure."

The Council of Canadians believes that for public infrastructure to be truly in the public interest it must be publicly owned and operated.