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Why we need a Canada Infrastructure Bank

Date: June 16, 2017

Publication Type: Articles

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By John Manley, as originally published in iPolitics.

In a country as diverse as Canada, there aren’t many things on which we can all agree. But there’s one thing just about every Canadian can concur with — particularly while trapped in morning gridlock, or dodging chunks of concrete under a decaying bridge: Our infrastructure badly needs updating.

How big is Canada’s infrastructure deficit? The estimates vary widely, from $150 billion to as high as $1 trillion. Even if the funding gap is at the low end of the estimates, it’s large enough to constitute a serious problem for Canadian competitiveness and prosperity.

Well-functioning infrastructure underpins our economy, allowing governments to deliver essential public services and enabling citizens to live safe, productive lives. Businesses need high-quality roads, railways, ports and airports to serve customers efficiently and deliver goods to international markets. A competitive, 21st-century economy requires world-class infrastructure to connect businesses to customers around the globe.

One thing is certain: Our governments cannot hope to eliminate the infrastructure deficit solely on the backs of taxpayers. Public finances across the country are already seriously stretched, and the tax burden facing Canadians is too great as it is.

Last fall, the federal Advisory Council on Economic Growth, led by Dominic Barton, recommended an innovative solution that would address the deficit with the help of private investment. In its first report to Finance Minister Bill Morneau, the Advisory Council proposed the creation of the Canada Infrastructure Bank.

The objective of the proposed bank is to make taxpayer dollars go further by attracting private capital into revenue-generating infrastructure projects. As the Advisory Council points out, institutional investors around the world — such as pension funds and insurance companies — currently have trillions of dollars available to invest in long-term projects.

The job of the bank would be to identify a pipeline of infrastructure projects that are in the public interest and have revenue-generating potential. It would then attract private and institutional investors to those projects, leveraging $35 billion in federal funding to help pay for the infrastructure our country needs.

Now that legislation to create the Canada Infrastructure Bank is before Parliament, some people are suggesting the Bank’s governance model as an arm’s-length Crown corporation puts it at risk of political interference. The bill gives the government responsibility for the bank’s overall policy direction and high-level investment priorities, and empowers Cabinet to remove or suspend any director of the bank after consulting the Board.

Critics argue that the bank should be more independent to avoid situations in which politicians might attempt to influence spending decisions to their short-term benefit.

The critics are entitled to their views, but as a former finance minister I can assure you that I would have insisted on a similar level of oversight if I were spending $35 billion of the public’s money. Suggesting otherwise would be an affront to Canadians who deserve to know that their tax dollars are being spent on projects in the public interest.

Removing the government completely from the proposed bank would create the opposite problem — the spending of billions of dollars in public funds with no political accountability.

As with almost any government spending decision, there is a risk of political meddling. That’s why it will be important for the bank to operate with high levels of transparency when evaluating and choosing projects.

Equally important to the success of the infrastructure bank is ensuring predictability for private sector investors. Canada’s recent track record when it comes to approving and going forward with major infrastructure such as pipelines is concerning, to say the least. The federal government can lay the groundwork for new infrastructure projects by ensuring that regulatory approval processes are transparent, predictable, fact-based and capable of rendering decisions in a timely manner.

Not all infrastructure is created equal. The Canada Infrastructure Bank should focus on productivity-enhancing projects that would have a direct and measurable impact on the Canadian economy. In my view, priority should be given to investments in ports, rail, roads, airports and energy transportation networks that support high-value jobs and help Canadians deliver goods and services to international markets.

Our country’s infrastructure deficit will only grow the longer we wait. The proposal to create the Canada Infrastructure Bank is both timely and sound. I urge parliamentarians to pass the implementing legislation now.