After fall update, Morneau embarks on sales pitch to sell infrastructure bank

OTTAWA – Canada’s finance minister began the job Wednesday of selling his government’s new vehicle for building the country’s infrastructure — and, the Liberals hope, the economy — as critics insisted the whole idea is a red herring.

Under grilling by MPs on the Commons finance committee, Bill Morneau said the country needs a new infrastructure bank, designed to pump private dollars into infrastructure projects, because private investors are clamouring for it.

Morneau said none of the existing Crown corporations, like PPP Canada, which oversees so-called public-private partnerships on infrastructure projects, meet the needs of pension and equity funds. Private investors want a dedicated, arm’s-length agency to contract with on long-term infrastructure investments that make sense for their members.

“What they need is not what we currently have,” he said during a sometimes testy exchange with Conservative MPs.

“It is an idea that is going to have significant impact here in Canada and I expect it will be an idea that will be considered in other countries as they think about how to have the biggest impact on their infrastructure needs.”

The bank was a cornerstone idea in Tuesday’s economic and fiscal update, which outlined billions in new infrastructure spending, as well as almost $32 billion in additional federal debt in the coming decade. The Liberals say the extra money is needed to counteract what the Bank of Canada and private sector economists believe will be slower than expected economic growth in the coming years.

Much of the new infrastructure money doesn’t appear on the federal books until 2026, by which time the country will have gone through two federal elections and be preparing for a third.

And in the intervening years, the federal balance sheet will stay in the red even longer than the Liberals first promised, with the Finance Department predicting a total of $114.9 billion in deficits between 2016-17 and 2020-21, a jump from the $83.2 billion outlined in this year’s federal budget.

The government is banking that the new agency will pour more money into infrastructure and speed up work on large projects that the Liberals need to create economic growth, jobs and new tax revenues to eventually balance the budget.

Morneau wouldn’t say Wednesday just when that might happen.

Conservative MP Gerard Deltell decried Morneau’s update and subsequent testimony as evidence that the government has lost control of spending, with no clear idea about how the infrastructure bank will work.

Private funds can already invest in infrastructure projects in Canada and don’t need a political body to prod them to open their wallets, he insisted.

“The finance minister is all wrong,” Deltell said.

The bank would take $35 billion in public funds to leverage extra cash from the private sector and pay for large projects that Morneau said the federal government may not be able to fund fast enough through its existing funding programs.

He said the government expects to find projects that would be good fits for the bank without having to consider involving federally owned assets.

“We can do more because we have access to outside capital, more that will create more Canadian jobs that will create better, long-term infrastructure,” Morneau said.

NDP finance critic Guy Caron pressed Morneau on concerns that the infrastructure bank will lead to the privatization of public goods, leading to more tolls and user fees to give private funds a return on their investment. The finance minister said the government wanted to find opportunities that are good for investors and also good for Canadians.

Morneau called the infrastructure spending plan a long-term blueprint for future economic growth, but suggested there may be more immediate effects on employment through spending on social housing.

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