Finance Minister to include new infrastructure policy in fiscal update

theglobeandmail.com
By Bill Curry
Oct. 27, 2016

Finance Minister Bill Morneau will deliver a fiscal update on Tuesday that is along the lines of a mini-budget, with measures aimed at rolling out the federal government’s second phase of infrastructure spending.

Sources confirmed to The Globe and Mail that the government’s fall fiscal update will go beyond the traditional revisions of revenue and spending forecasts in order to include new policy measures. It will be delivered via an afternoon speech on the floor of the House of Commons.

The measures are expected to respond in part to last week’s recommendations from the minister’s Advisory Council on Economic Growth, which called for the creation of an infrastructure bank, a boost to immigration and a new agency focused on attracting foreign direct investment.

As recommended by the panel, the government will focus on policies that boost long-term growth. The update is not expected to include major new spending, nor will it be focused on short-term stimulus measures.

The Liberal government promised to spend an additional $60-billion over 10 years on infrastructure, with the funding divided equally among public transit, social infrastructure and green infrastructure. Some of the money has already been provided for a first phase, with about $48-billion remaining for Phase 2.

Sources declined to provide the precise details of the policy measures that will be announced next week.

Infrastructure is expected to be a major component of Mr. Morneau’s update and further details could come later next week from other ministers.

Infrastructure Minister Amarjeet Sohi is scheduled to speak about the “physical infrastructure of innovation” at a Canada 2020 conference on Thursday. At that same conference, Natural Resources Minister Jim Carr will discuss innovation in the natural resources sector.

On the same day, Transport Minister Marc Garneau will lay out his vision for the transportation sector in a major speech to the Montreal Chamber of Commerce.

The key features of the new transportation policy will be consumer-focused measures related to passenger air and rail travel and greater efficiency in moving goods from China and India into Canadian ports and down into the U.S. market.

Mr. Garneau is also expected to respond to the sweeping review of the Canada Transportation Act that was released in February. That report, written by former federal cabinet minister David Emerson, made wide-ranging recommendations, including a call for fully privatizing Canada’s airports.

As The Globe reported this month, the federal government has asked one of the world’s top investment banks, Credit Suisse, to conduct an in-depth review of options for airport privatization.

The Credit Suisse review is expected to be complete before the end of this year and will include a special focus on Canada’s top eight airports: those in Toronto, Vancouver, Montreal, Calgary, Edmonton, Ottawa, Winnipeg and Halifax.

The federal growth council called for a “flywheel” of reinvestment in infrastructure that would see the full or partial privatization of existing assets such as airports and seaports as a way of raising billions in revenue that could be reinvested in new infrastructure under the direction of an infrastructure bank.

The Federation of Canadian Municipalities warned this week that the promised funding for Phase 2 infrastructure spending should not be used to capitalize a new infrastructure bank. Ottawa has not said how it will finance the bank, which the growth council said will require at least $40-billion in capital.

NDP MP Matthew Dube said during Question Period that the Liberals never mentioned during the election campaign that they would be privatizing public assets. “The Liberals promised investments in infrastructure, but there is something sketchy about the roll out of the second phase,” he said.

Mr. Morneau’s March, 2016, budget projected a deficit of $29.4-billion in 2016-17 and $29-billion the following year. The deficit was then projected to decline to $14.3-billion by 2020-21, but no firm timeline was set for returning to balance.

Those figures included a $6-billion annual adjustment for unforeseen events and forecasting errors. Since the budget was released, economic growth has come in below expectations, meaning that the update is likely to show that much of that adjustment will, in fact, be needed.

Parliamentary Budget Officer Jean-Denis Frechette issued a report this week that said annual deficits are likely to be a bit smaller than the figures projected in the budget.

The Parliamentary Budget Office said its own projects are largely unchanged from April. The independent office said the fiscal landscape has worsened slightly for this year and next year but is expected to beat earlier expectations in future years.

This will be Mr. Morneau’s second fiscal update. His first was delivered on Nov. 20, 2015, on the heels of the Oct. 19 election. That update announced that the government’s financial health had worsened since the Liberal Party had crafted its spending plan, laying the political groundwork to announce larger deficits than promised.

The 2015 update was delivered in the National Press Theatre across the street from the Parliament Buildings. The first postelection sitting of the House of Commons did not take place until December of that year.

This year’s update will be delivered via a Commons speech. The previous Conservative government had faced criticism for frequently choosing to deliver the fiscal update away from Parliament.