Showing posts with label privatization. Show all posts
Showing posts with label privatization. Show all posts

Thursday, March 23, 2017

Just A Couple Of Questions



Given that I have no background in economics, I will leave it to more finely-tuned minds to debate the merits of yesterday's federal budget. However, there are a couple of things that, from my perspective, need to be answered, and they both relate to the Infrastructure Bank the Liberal government is touting.

Introduced in last fall's economic update, the goal of the Bank, according to Finance Minister Bill Morneau, is
to attract private sector dollars at a ratio of $4 to $5 in private funding for every $1 of federal money.
While that sounds fine on the surface, the question about the returns that will prompt private investors, including institutional ones, to invest in infrastructure projects the bank will help fund needs to be answered. And it is here that things becoming a tad murky.

In yesterday's budget, Morneau had no real details to provide about it, other than a motherhood statement:
Ottawa has said it wants to leverage every dollar it puts in its infrastructure bank into $4 of investment, the balance kicked in by private-sector investors. The government thus hopes to fund $140 billion in infrastructure projects with an upfront Ottawa investment of just $35 billion.
Sound too good to be true? Perhaps it is:
The catch here is that only infrastructure projects with revenue streams will attract private investment. To be sure, that includes a lot of infrastructure, including toll roads and bridges; alternative-energy suppliers that reap revenues from power consumers; and water and transit systems that earn back their cost of capital through mill rates and Metropasses.
One can't help but wonder, like the idea to sell off our airports, this is just another neoliberal ploy, thinly disguised, that will redirect revenue from the public to the private domain.

The Canadian Centre for Policy Alternatives has released a study that suggests we will all be paying more for this largess gifting the private sector:
This study finds that private financing of the proposed Canada Infrastructure Bank could double the cost of infrastructure projects—adding $150 billion or more in additional financing costs on the $140 billion of anticipated investments. It would amount to about $4,000 per Canadian, and about $5 billion more per year (assuming an average 30-year asset life). The higher costs would ultimately mean that less public funding would be available for public services or for additional public infrastructure investments in future years.
The full study, which you can obtain here, suggests there is a better way:
There’s no reason the federal government can’t make the Canada Infrastructure Bank a truly Public Infrastructure Bank, with a mandate to provide low-cost loans (or other “innovative financial tools”) for large public infrastructure projects. The federal government already has banks and lending institutions that provide low-cost loans, financing, credit, and loan guarantees for housing, for entrepreneurs and for exporters. So why not also provide low-cost loans and other financing for public infrastructure projects? This bank could be established as a crown corporation with initial capital contributions from the federal government (and perhaps other levels of government) and backed by a federal government guarantee. It could then leverage its assets and borrow directly on financial markets at low rates and then use this capital to invest in new infrastructure projects.

This approach would involve a slightly higher cost of financing than direct federal government borrowing, but it would be considerably below the cost of private finance.
And finally, is it simply a coincidence that one of the government's tools for borrowing at ultra-low rates is ending?
The federal government is phasing out the Canada Savings Bond, a popular savings vehicle introduced after The Second World War.

The Liberals’ 2017 budget stated the bond program peaked in the late 1980s and has been in a prolonged decline since.

“The program is no longer a cost-effective source of funds for the government, compared to (other) funding options,” the budget document reads.
Perhaps it is naive of me to suggest, but wouldn't paying a higher rate of return on savings bonds that average citizens can benefit from also be a source of much-needed cash for infrastructure?

Just wondering.

Wednesday, September 30, 2015

A Vanity Production?



Yesterday morning, I read a piece by Martin Regg Cohn on the impending sale of Ontario's Hydro One. When it is completed, 60% of our publically-owned asset will have been sold off. During a brief walk in the afternoon, I decided to write a letter to my local MPP with a copy to Premier Kathleen Wynne to protest the sale. While it may be of some interest to people residing in Ontario, my letter may be regarded by those residing elsewhere as a vanity production, perhaps, given the ultimate futility of speaking or writing to our representatives in our currently debased democracy.

Whatever its ultimate utility may be, writing this missive has at least been personally cathartic:
I am writing to express my deep disappointment over your government's decision to sell off 60% of Hydro One. It is a profound betrayal of the people of Ontario and a flagrant abuse of democracy that I fear will have far-reaching consequences.

I was one of the many who chose to cast my vote in the last election, not for the NDP but for the Liberals. Their platform seemed sound, and I was repulsed by what I saw as the political opportunism of Andrea Horwath in forcing the election. A leader's integrity is one of my paramount considerations when I vote, and I thought I saw it in Kathleen Wynne.

While I admire that Ms. Wynne has shown strength of conviction in some areas, such as the revamping of the sex-ed curriculum, despite fierce opposition from some quarters, I lament the fact that she does not have the same courage and principles to resist the neoliberal siren call of privatization of public assets. As we well know, the private sector's sole responsibility is to its shareholders and the profits they expect, and we have no reason to believe that its majority ownership of our Hydro assets will change that. The public good will always be, at best, a tangential consideration.

Not once during her bid for re-election did the premier talk about privatizing Hydro One. To say that a general review of all assets was to be undertaken as the cover for this decision is, frankly, dishonest and insulting. Also, the Hydro assets are, as you well know, generating very healthy annual profits. To suggest their sale is needed to fund infrastructure projects is disingenuous, and indicative of a very narrow vision that excludes other possibilities, such as road tolls or an increase in the income tax rate to fund such construction. I will also state the obvious: those assets belong to all Ontarians. They are not your government's to sell.

At a time when cynicism about the electoral process is widespread, and voting numbers continue to decline, the decision to sell such a prized asset can do nothing but promote more of the same. If you are so convinced that this is a good decision, then hold a provincial plebiscite. Only with the approval of the people can you make any claim to be representing them in this matter.

I am one of the electorate with a very long memory. I can assure you my support for your party and government ends the day the sale of Hydro One begins. Next election, my vote will be for the NDP.

Friday, March 22, 2013

Score Another One For Orwell

If you want a picture of the future, imagine a boot stamping on a human face — forever. - George Orwell

As always, the writer had exceptional clarity about where Western society was headed.

H/t Steve Collett