Federal News Highlight: Advisory Council on Economic Growth
A panel led by a consultant with close ties to the Liberal government is calling for the government to create a national infrastructure bank capitalized with $40-billion in federal funds.
The Advisory Council on Economic Growth released three reports calling for the national infrastructure bank, a new agency to attract foreign investment and a massive increase in immigration. The council is chaired by Dominic Barton, managing director of McKinsey & Co., a business consulting firm operating globally.
But it is the call for the infrastructure bank that is creating the most buzz on Bay St. and in international finance circles.
At the heart of the Council’s proposal for an infrastructure bank is the belief that the bank could raise private capital at a four-to-one ratio from pension funds, foreign sovereign wealth funds, private equity, insurance companies and other institutional investors.
Ottawa’s previous efforts to attract private infrastructure investment – including through an agency focused on public-private partnerships called PPP Canada – have had limited success. Bay St. insiders say Canadian projects to date have simply not been big enough with too few opportunities for providing the kind of returns that private investors demand.
Examples of potential projects to be funded by the bank listed in the report include toll highways and bridges, high-speed rail, port and airport expansions, city infrastructure, national broadband infrastructure, power transmission and natural resource infrastructure.
In addition to the government’s initial capitalization and private capital, the report also says the bank could issue infrastructure bonds as a way of raising additional funds to invest. Another key recommendation is a suggestion that Ottawa should privatize – in full or in part – some of its existing assets as a way of raising money that could be spent on other infrastructure priorities.
That advice comes as the government recently hired Credit Suisse AG to analyze several privatization options for Canadian airports.
According to the Star’s Paul Wells, Canadian Union of Public Employees president Mark Hancock said in a statement that he strongly opposes the call for an infrastructure bank and asset privatization, calling it “a recipe for the cannibalization of Canada’s public infrastructure.”
“Nowhere in the report does it mention that investors in these schemes demand a much higher rate of return than the government can borrow at,” he said, warning it will lead to new user fees on Canadians.
Hancock’s concerns are certainly given credence in the fine print of the report where the Council talks at length about creating new revenue streams in infrastructure projects that currently have no mechanism for providing a return to private investors. It is common knowledge on Bay St. and in foreign financial circles that the reason much of the available $13 trillion in foreign capital hasn’t been invested in Canadian infrastructure is because the investment returns are not attractive to that kind of investor.
That said, one way or another Canadians will have to pay more than they do now if private investors are going to get the kind of returns that they demand. Moreover, nowhere in the report does it acknowledge that if new revenue streams can be created to give private (and mainly foreign) capital the returns that it wants, then those very same new revenue streams can be created to increase government returns for 100% publically-owned infrastructure projects.
More on infrastructure in a Canada Fact Check feature post in the near future!
Projected House Business for Friday, Oct. 21 (subject to change):
Main Chamber Business
The House is meeting between 10:00p.m. – 2:00 p.m. today.
- 10:00 a.m. – Government Business: Bill C-26: An Act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act may be debated at Second Reading. Watch Here!
- 11:15 – Question Period. Watch Here!
- 3:15 – Government Business: Supply Motion may be debated. Watch Here!
Projected Committee Business for Thursday, Oct. 20
- 2:00 – 4:00 p.m. – The Standing Committee on Public Safety and National Security is meeting in Halifax to examine Canada’s National Security Framework
- 5:30 – 6:30 p.m. – The Standing Committee on Public Safety and National Security is meeting in Halifax to examine Canada’s National Security Framework
- Get a full list of House committee meetings scheduled for today on the House committee page.
Search the full text, approval status, committee hearings and other details of all Federal bills from the current session here!