Apr 18, 2016

Summary

As promised and expected, the 2016 federal budget focuses extensively on infrastructure. While the proposed spending falls short of the Liberals’ promise to provide an immediate injection of $5 billion into the economy, it does outline a substantial output of $11.9 billion over the next five years, much of which will be available immediately.

The infrastructure spending will come in two phases. The first phase begins in 2016 and comprises the $11.9 billion, allocated in three major areas:

• infrastructure ($3.4 billion)
• Water, wastewater, and green infrastructure ($5 billion)
• Social infrastructure such as affordable housing and child care ($3.4 billion)

Phase one has been described as the “maintenance” phase, where existing infrastructure or already-planned infrastructure projects will receive a necessary influx of federal cash. To this end, a number of new funds, such as the Public Transit Infrastructure Fund, have been established to manage disbursement. The government will also leverage existing funds, such as the Gas Tax Fund, to target infrastructure priorities. Finally, the government plans to download some of the fund management to partners such as the Federation of Canadian Municipalities – which will deliver $250 million of new funding to its members for various infrastructure projects – and the Canada Mortgage and Housing Corporation – which will participate in the design of affordable housing strategies.

Phase two of the infrastructure funding will commence in two years, and will be focus on larger long-term goals such as transitioning to a clean and green economy, and facilitating a greater capacity for global trade.

The Good

There are a number of aspects of the federal budget’s infrastructure plan that appear positive. Generally speaking, the Liberal government has halted the previous government’s trend of reduced social spending and austerity budgets. Increased infrastructure spending is the right move in a stagnant economic period, when borrowing costs are relatively low.

More specifically, we are pleased to see the government:

• Remove the public-private partnership (P3) screen on large infrastructure projects, and the P3 requirement on transit projects.
• Commit to funding up to 50 per cent of most infrastructure projects, rather than maintain the previous 1/3 ratio. Many communities would have been unable to meet the previous financial threshold, so this is a welcome change.
• Focus on the importance of water-related infrastructure, particularly on First Nation reserves.
• Focus on affordable housing, including housing for seniors, for the homeless, and for those fleeing domestic violence.
• Commit to green infrastructure, including the integration of climate resiliency into building standards. In particular, we applaud the commitment to environmentally-conscious repairs and retrofits for federal infrastructure, which includes an exploration of alternative energy sources.

The Bad

While this budget reverses the previous government’s move to shackle public infrastructure spending to the private sector, the current government’s infrastructure plan establishes an open and fertile ecosystem for privatization. Indeed, the budget specifically mentions that the government will “examine new innovative financing instruments” and “engage public pension plans and other innovative sources of funding” to get projects moving. It also states the government’s interest in so-called “asset recycling” – one of the newest terms used for the privatization of public assets to for-profit interests.

Most of the evidence suggests that when public services and public assets are privatized, costs are higher and quality suffers. The private ownership of infrastructure – even if that owner is a workers’ pension plan – represents a real diminishment in value for Canadians. It is both ironic and unfortunate that the loosening of P3 requirements by the Liberals may result in a proliferation of privatization fights over infrastructure.

In addition to its gestures toward privatization, the amounts allocated in the budget are not sufficient to close the infrastructure gap in Canada. Furthermore, we note that a financial commitment and a capacity to carry out that commitment are very different things. Already, for example, Engineers Canada has speculated publicly about the shortage of engineers prepared to carry out this work, and the Federation of Canadian Municipalities has pointed out that detailed spending requirements have not yet been established.

The Fix

While the federal budget displays an important commitment to infrastructure spending, we call on the government to bolster this commitment – in policy and/or in subsequent budgets – with the following:

• Implement strict rules around transparency and accountability for public-private partnerships.
• Eliminate PPP Canada Inc. and redirect the $1.25 billion P3 Canada Fund to public infrastructure projects.
• Ensure that federal money only goes to projects with clear ethical procurement policies.
• Maintain basic oversight over projects that receive infrastructure funding to ensure shovels in the ground as quickly as possible.

CUPE will continue to encourage our members, and other labour organizations, to:

• Speak out against the privatization of infrastructure in your communities.
• Resist moves by municipalities to enter into P3 arrangements for infrastructure and public services.
• Challenge the administrators and trustees of pension plans to move away from investment in P3s for infrastructure, and support investments that renew and strengthen public ownership and control.

Source: Federal Budget 2016 in depth: Infrastructure | Canadian Union of Public Employees