Canada needs infrastructure bank now
Newcomers to the Senate lacking experience in government often find themselves, like me, absorbing a lot of lessons that might first appear to have little to do with our role of soberly examining and, when necessary, amending legislation.
I’ve learned, for example, that passing a bill can be an often-technical process; that the rules of debate are complex and, even though this Senate is becoming a more independent place, that political matters can sometimes obscure what the Senate really does.
And while I’ve become appreciative that these are necessary facets of governing, the recent debate surrounding the Canada Infrastructure Bank (CIB) suggests to me that perhaps we ought to be talking a little more about the substance of this proposal, rather than having a breathless procedural discussion about how to split this government’s budget in two.
The real issue is that some want the CIB to take effect as soon as possible, while others would prefer to delay it until the fall. Put me firmly in category one.
A large part of the 2015 federal election was fought on the critical policy debate over whether Canada should undertake investments in productivity-enhancing infrastructure projects to address the national infrastructure deficit of $500 billion-plus. Canadians decided our country’s roads, highways and other infrastructure are in need of massive replacement and upgrade, and the $35-billion proposal the Senate is currently studying is a good start toward addressing this deficit.
The CIB will bring in badly needed private capital, reduce risk to government and tap valuable expertise from the private and institutional sectors. It would fund projects that are too costly for government alone to undertake, but also too risky for private sector investors to assume on their own.
Despite these good reasons, critics have raised a number of concerns. Notably, they argue that the CIB is not really a bank; that there aren’t enough details available on how projects become eligible; and, finally, that the bank’s CEO and its board should not serve at the pleasure of the government.
With respect to the first argument, as a former banker myself, I can attest that the CIB is, very much a merchant bank that structures projects, takes equity positions and makes investments.
Second, the fact that there aren’t enough details on projects that would be eligible for funding shouldn’t be a surprise. I have seldom found all of the details of a new institution’s undertakings are laid out before the institution is enacted into law. Furthermore, projects of the CIB should be funded on a case-bycase basis, and only after careful review by the experts at the bank.
Lastly, and perhaps most controversially, there are those who argue the bank’s CEO and board should not serve at the pleasure of the government, because that would provide elected officials with the temptation to direct the banks’s activities. With this, I also disagree.
The legislation contains provisions that require the minister responsible to consult with the bank’s board of directors prior to any termination, removal or suspension of the CEO or chairperson.
This is a standard higher than that at Export Development Canada or Canada Mortgage and Housing Corporation, and we have been happy with the governance there for years. Why then would we be unhappy with something that has a higher standard?
Moreover, this bank will be a steward of taxpayer funds and therefore the government has a responsibility to ensure it is properly managed and in the public interest.
Further, should the private sector have the impression that their investments would be subject to undue political interference, the bank’s reputation would suffer and be contrary to its long term success.
I believe this governance structure strikes the right balance between the interests of taxpayers, and institutional autonomy in the interest of optimal performance.
The argument that the CIB has not been studied carefully enough runs counter to what I’ve seen. In a thorough prestudy of the bill, the Senate banking committee held six meetings and senators heard from a 29 expert witnesses. This qualifies as a solid review.
The CIB is a creative, risk-mitigating and cost-effective way to deliver some of our public infrastructure projects that may otherwise not be built, or be built over an extended period of time. This is in the best interest of taxpayers, the overall economy and Canada. Delaying the CIB serves little purpose.