Fiscal update: privatization of public infrastructure a major step in wrong direction



STATEMENT by Andrew Jackson, Senior Policy Advisor, Broadbent Institute, on the fall Economic and Fiscal Update.

Today, Finance Minister Bill Morneau released the federal government's Economic and Fiscal Update that included support for the creation of an independent Canadian Infrastructure Development Bank (CIDB) that earmarks $35 billion in public money to help finance $200 billion of infrastructure projects over the next decade. The bank's express mandate is to finance "revenue-generating" projects along with the private sector.

There is consensus that major investment in public infrastructure, such as roads, mass transit and waster water treatment, is required. There is also good evidence from other countries, like Brazil and Germany, that state-led investment banks can help generate and realize badly needed new public infrastructure projects. But there is no case for this massive and costly privatization plan.

The plan goes off the rails in proposing that major new projects be proposed, financed and operated by the private sector. This is twinned with a further proposal to raise more funds by privatizing existing federal public infrastructure, such as airports.

The CIDB would be a source of finance and expertise to support large private projects. This would be partly financed by a revenue stream from which the bank would recoup its investment. The CIDB is not designed to fund priority projects of Canada's municipalities, such areas as mass transit, environmental infrastructure and affordable housing. Rather, it is designed to promote private infrastructure projects that can generate revenues and profits.

Alarmingly, the announcement commits to $15 billion for the bank being "sourced from the announced funding for public transit, green infrastructure, social infrastructure, trade and transportation, and rural and northern communities." This departure from what the Liberals campaigned on puts private capital in the drivers seat, and leaves promised funding for socially useful, non-commercial projects like child care or affordable housing to cash-strapped cities.

A further requirement for user fees would leave out many needed transit projects by public authorities which, like the TTC, already charge very high fares.

There is a case for new financing mechanisms for infrastructure, such as a federal agency or bank to guarantee city and provincial borrowing for new projects which serve national economic, environmental and social needs. This would lower interest costs and also improve the quality of cost-benefit analysis of major new projects.

But massive privatization of public infrastructure would be a major step in wrong direction.