MPs grill Morneau’s growth adviser on ambitious infrastructure plans

theglobeandmail.com
By Bill Curry
Oct. 27, 2016

Parliamentarians got their first chance to debate ambitious plans for a national infrastructure bank as a hearing revealed general support from the Conservatives, strong concern from the NDP and signs of division within the Liberal caucus.

Members of the House of Commons finance committee had the opportunity on Thursday to question Dominic Barton, the head of Finance Minister Bill Morneau’s Advisory Council on Economic Growth.

The council issued its first wave of recommendations last week, calling for an infrastructure bank capitalized with $40-billion in federal funds, a new agency that would attract foreign direct investment and a 50-per-cent increase in yearly immigration.

Speaking via video link from Seoul, Mr. Barton argued that Canada faces a $500-billion infrastructure gap and that public money alone is not enough to address the problem.

He said private investors such as pension funds have so much money parked in low- or even negative-interest savings that they would be willing to accept relatively small returns in exchange for long-term equity in reliable Canadian infrastructure like airports, seaports, rail lines and energy grids.

Mr. Barton said Canada needs to package these projects via an infrastructure bank in a way that attracts that investment.

“There is a humongous oversupply of long-term capital versus infrastructure projects,” said Mr. Barton, who is global managing director with McKinsey & Co. “When you see a project in Australia where someone does put in a bankable project for people, you literally have a swarm of [investors]...There’s just simply not enough infrastructure projects and it’s one of the strangest problems in the world because we have all of this infrastructure [demand] and we have all of this money, but it’s not happening.”

The federal government is expected to act on some of the council’s recommendations when Mr. Morneau releases his fall fiscal update on Tuesday. As The Globe and Mail reported on Thursday, the update will go beyond the traditional revision of revenue and spending projections and will include new measures focused on infrastructure.

Mr. Morneau has expressed support for the concept of an infrastructure bank and the government recently hired Credit Suisse to conduct a detailed study of options for fully privatizing Canada’s airports, but it is not clear exactly how Ottawa will respond to the growth council’s advice.

The government has not said how an infrastructure bank would be capitalized. The Federation of Canadian Municipalities has said the money should not come from the $60-billion pledged by the Liberals for a 10-year infrastructure plan.

Prime Minister Justin Trudeau is expected to meet with major institutional investors on Nov. 14 to discuss infrastructure investments at an event hosted by BlackRock Inc., the world’s largest institutional investor. Mr. Morneau’s 14-member growth council includes Mark Wiseman, senior managing director of BlackRock, who was recently the head of the Canada Pension Plan Investment Board.

The meeting of the Commons finance committee revealed that at least one Liberal MP is strongly opposed to the direction advocated by Mr. Morneau’s growth council.

“I’m glad to hear some of my colleagues are for the sale of public infrastructure like roads and hospitals,” Winnipeg Centre MP Robert-Falcon Ouellette said sarcastically. “I fail to understand why private investors like BlackRock would invest in infrastructure projects unless they could make a profit, and even an infrastructure bank seems like a means of ensuring...that that investment money will be making a profit on the backs of Canadians. It almost seems like a massive transfer of public funds toward the private funds in order for them to make money - a subsidy towards business.”

Conservative and NDP members of the committee both pointed out to Mr. Barton that the growth council’s recommendations appear to be at odds with the infrastructure plans outlined by the Liberals during the past election campaign. The Conservatives appeared to be generally supportive of the growth council’s proposals, while NDP finance critic Guy Caron expressed similar concerns to those of Mr. Ouellette.

Mr. Caron, who represents the Quebec riding of Rimouski-Neigette-Temiscouata-Les Basques, said private investors would likely demand a higher rate of return than the borrowing rates available to government.

“I’m trying to see how this privatization, or this move, will actually be to the benefit of the country. Especially since most of the risk will be assumed by the federal government,” he said. “We never had this debate in this country. I don’t recall the word privatization being said during the electoral campaign and now this is the direction we’re going towards.”

Conservative Ron Liepert, MP for Calgary Signal Hill, said he disagreed with Mr. Caron, except for the point that the growth council’s recommendations are at odds with the Liberal Party’s campaign promises.

“The Liberals did not campaign on this agenda. In fact, their agenda in the election campaign was trying to out-NDP the NDP. So I actually think, Mr. Barton, your committee has thrown this government a real hot potato, because they did not campaign on the kinds of things you’re talking about, almost all of which make sense.”