November 26, 2012
Archived - Speech by the Honourable Jim Flaherty, Minister of Finance, at the 20th National Conference on Public-Private Partnerships of the Canadian Council for Public-Private Partnerships
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It is a pleasure to be here today.
Incredible progress has been made in the world of public-private partnerships in the past decade. It is really quite heartening because the reality is all of us in government know that we are not going to have the kind of capital resources in the medium term that we may have had at one time, nor are we going to deficit finance, at the federal level at least. So we have to be innovative and we have to make use of public-private partnerships, because the infrastructure demands across Canada are very substantial and are fundamental for our government’s agenda—and that is the creation of jobs, growth and long-term prosperity for the country.
I am very pleased with the result of the referendum on the Detroit-Windsor crossing that was held in Michigan. We look forward to moving forward in cooperation with the State of Michigan and the American authorities on that project.
I want to recognize the significant contribution of the Canadian Council for Public-Private Partnerships over the past 20 years in promoting P3s. Your vision to “influence the way in which public services are financed and delivered in Canada” has undeniably helped to usher in a new era of cooperative effectiveness that’s getting things built right across the country—and doing so in a way that makes best use of taxpayers’ dollars.
I would also like to congratulate you for choosing such a timely and appropriate theme for this conference: The Power in Partnership.
We all understand that we work better when we work together toward the same goal. Canada is a federation, with the federal government, 10 provincial governments and 3 territorial governments. We also have many municipalities, and some of our cities are growing into substantial governments. So we need to work together and I am happy to say that we do.
In 2008–2009, we were faced with the deepest global recession since the 1930s. Along with the provinces, we injected stimulus into the economy to ensure that we did not have double-digit unemployment in this country, with millions of people out of work, and to moderate the depth and length of the recession.
The G-20 leaders met in Washington in November 2008 and agreed to stimulate our economies by 4 per cent of GDP. We were successful in doing that in Canada because of the cooperation of the provinces with the Government of Canada, injecting stimulus representing 2 per cent of GDP at the federal level and another 2 per cent at the provincial level. A lot of infrastructure was built because of that. Our unemployment rate never went into double digits. It remains significantly below that in the United States when measured on a comparable basis, the first time that has happened since the 1970s.
So no single level of government can address the country’s infrastructure needs on its own. We need to work together. I will be meeting with the Finance Ministers of the provinces and territories in December, as we do each year. We need to make sure that we work in partnership to modernize the nation’s infrastructure. The reality is over 90 per cent of the public infrastructure in Canada is owned at the provincial, territorial and municipal levels.
Today, I want to talk about three things: first, the significant value that P3s generate; second, what our government is doing to move the P3 agenda forward; and finally, some of the key successes we have achieved so far working together.
But before I do that, I want to talk about the economy for a moment, because all of this discussion is premised on the economic performance of our country as well as other industrialized countries. As I said two weeks ago in our Economic and Fiscal Update, we have had a resilient economy in Canada relative to the rest of the industrialized world. Compared with most advanced economies, we are in a good position.
Since our government introduced the stimulus phase of Canada’s Economic Action Plan to respond to the global recession, we have more than recovered all of our economic output and all of the jobs lost during the recession. In fact, Canada has the best job creation record in the industrialized world since the recession. In Canada, the private sector has been the primary driver of new job creation, with over 90 per cent of all new jobs in full-time positions and more than two-thirds in high-wage industries.
So our economic fundamentals remain sound, but the risks to the global economy remain serious. As I highlighted in the Update two weeks ago, global weakness has resulted in lower projected government revenues. Because of spending reductions and controls, we remain on track to balance our budget in the medium term. And that is our goal, certainly, which we will accomplish.
The two most worrisome risks are the so-called fiscal cliff in the United States at the beginning of January and the continuing crisis in Europe. We are not immune to these global developments. In fact, we have been living through the European situation now for four or five years. This is not new and it is not yet resolved. The American situation is capable of resolution. We encourage our friends in Washington to move forward as expeditiously as possible.
Our government remains committed to keeping Canada strong and prosperous by creating the right conditions to enable Canadians and Canadian businesses to feel confident to invest, to create jobs and to grow our economy.
So in this environment, our government remains focused on what we can control. We can’t control what happens in Europe or the United States.
We can control our discretionary spending, our program spending in the Government of Canada, and we are doing that. We are not going to reduce our transfers to the provinces, which another government did in the 1990s, and which was very detrimental to schools and hospitals in this province. And we are not going to reduce transfers to individuals, to seniors and to persons with disabilities. But we are going to continue to watch carefully about a third of our budget, which is the program spending of the Government.
We are committed to returning to balanced budgets in the medium term. We are committed to controlling the growth in government spending by implementing the savings that we announced in the budget this year. And we are committed to implementing the commitments made in the budget this year to encourage jobs and economic growth, such as the Hiring Credit for Small Business. There are 534,000 businesses that would be entitled to use this tax credit, if they chose, to hire new staff, which would help us have an even better employment rate.
The goal, whether in Europe or here in Canada, is to strike a balance between controlling spending and making sure there’s economic growth, because you can’t impose an austerity program such that the economy goes into recession and expect that economy to produce jobs. So that’s the balance we are seeking to strike here in Canada. Our real GDP growth is about 2 per cent, and we have some weakness in nominal GDP growth, and the economists anticipate that we will be able to maintain that level going forward.
A friend from Western Canada recently said we are steering between the ditches. I think that was a helpful description of what we try to do at the Department of Finance.
Let me now talk about P3s and the significant value that they offer in terms of lasting infrastructure in Canada. The contribution to economic growth is very important. The Council believes that public-private partnerships can play a key role to address the infrastructure needs that currently exist in Canada, and I heartily agree.
During the global economic recession, our government responded with a massive stimulus program. We went from running a balanced budget to running a large deficit. Now we’ve reduced it by half, and we will balance the budget within the next couple of years.
It was a dramatic thing to do and it was only possible because we did it in partnership with other levels of government. We sometimes hold different viewpoints than our provincial colleagues, but I think we all agree on the importance of infrastructure as something we have in common.
Since 2006, the Government of Canada has significantly increased its direct support for provincial, territorial and municipal infrastructure. We have done this as a result of two key initiatives: the seven-year infrastructure plan that was launched in 2007, Building Canada; and the infrastructure measures found in the 2009 stimulus budget.
- First, $8.8 billion under the Building Canada Fund, of which about $5 billion will continue to flow this year and over future years to municipalities, provinces and territories to reflect project timelines.
- Secondly, predictable and long-term funding for municipalities under the Gas Tax Fund and the Goods and Services Tax rebate for municipalities. The Government has made the $2-billion annual allocation under the Gas Tax Fund a permanent legislated measure. Every time I meet with mayors, as I did last week in Ottawa, I encourage them to leverage that money. They have a guaranteed Gas Tax Fund flowing to them from the best credit risk in the country—the Government of Canada—and I would like them to make use of it and maximize that resource over the long term.
- Thirdly, investments to strengthen trade-related infrastructure through the Gateways and Border Crossings Fund and the Asia-Pacific Gateway and Corridor Initiative.
Overall, there are about 30,000 infrastructure projects that have been completed with support from the Economic Action Plan since January 2009. And very importantly, a lot of the money got out the door quickly, creating tens of thousands of jobs in communities across Canada at a time when it really mattered and we needed those jobs desperately.
So our government’s infrastructure plan is comprehensive. It brings our partners on board—all of our partners, including the private sector.
Governments throughout the world have been increasingly turning toward P3s to deliver much-needed public infrastructure. We need creativity and vision when it comes to financing, delivering and maintaining infrastructure. In our view, P3s can and should be used when they make sense, which is when they provide better value for taxpayers’ money than traditional procurement can. Notice that I am not saying cheaper or less expensive. I am saying better value for taxpayers’ money. And as you all know, there are lots of factors that go into that consideration.
We believe in sharing risks with the private sector, such as design, construction, operating and maintenance, as opposed to the traditional approach of governments taking on all project risks. By using public-private partnerships, more infrastructure can be created more quickly, economic infrastructure that creates jobs and growth.
I want to talk for a moment about what our government is doing to support P3s, but first I will provide you with a little history.
When we were elected in 2006, there was no federal P3 agency. Now, there is PPP Canada Inc., which has been growing and doing a good job, and doing more and more creative work at the federal level in cooperation with others. PPP Canada Inc. does not report to Parliament through the Infrastructure Department. It reports through the Finance Department because we see it primarily as an enabling or facilitating source of activity, as well as a source of expertise and a screen, which I will come back to in a moment.
Encouraging P3 opportunities is not an ideological project for our government. It is a logical project. It should appeal across ideological lines.
When I was a Minister in the Ontario government some years ago, I had the opportunity to travel to the UK to look into their experience with P3s. I met with Prime Minister Blair’s Chief of Staff and his P3 expert. They told me that the Labour government of Prime Minister Blair was pursuing P3s as a matter of policy, even though the concept had been introduced by the previous Conservative government. At that point, the Labour government of Prime Minister Blair had over 200 public-private partnership projects underway or in planning. The Chief of Staff said it is a Conservative idea, but it works. So I encourage all governments to avoid any sort of ideological approach to the idea of P3s.
I had the opportunity on that trip to see the Darent Valley Hospital, which had just been opened on time and on budget, with the unions and the patients happy. That encouraged us in Ontario to go ahead with the Royal Ottawa Hospital, which we announced in 2001 and which opened in 2006, the first teaching hospital, I’m told, done as a P3 in Canada. It is well loved by the physicians, the nurses, the technologists, and the true test above all, by the patients.
We created PPP Canada Inc. Its purpose is to act as a centre of expertise for the Government of Canada on P3s and facilitate the creation of P3s in Canada. A fund was provided to assist PPP Canada in circumstances where it was necessary for government to make some investment to make the public-private partnership work. It became operational in 2009. Led by John McBride and its Board of Directors from the private sector, the Corporation is already making a difference.
It works with provincial and territorial governments, municipalities and First Nations to promote the increased adoption of P3s in infrastructure procurement.
PPP Canada has created a suite of tools and products aimed at sharing their knowledge with other organizations considering the P3 option.
In Budget 2011, our government went further, instituting a requirement that federal departments evaluate the potential for using a P3 to deliver large federal capital projects. This is the P3 screen I mentioned a moment ago.
As a result, all federal infrastructure projects creating an asset with a lifespan of at least 20 years, and having capital costs of $100 million or more, must be assessed to determine whether a P3 may be a suitable procurement option.
Should the assessment conclude that there is P3 potential, the procuring department is required to develop a P3 proposal among possible procurement options. Departments are also encouraged to explore the potential of P3 approaches for other types of projects and procurements of services.
All of these initiatives will mean getting the P3 approach considered more often, for more projects, across the country.
Now I would like to provide some highlights of the success of P3s.
I am a strong advocate of P3s because I have seen what can be accomplished.
PPP Canada has been acting as an advisor during the past year alone to Transport Canada on both the new bridge over the St. Lawrence River in Montréal and the Detroit River International Crossing at Windsor, which are two of the largest potential P3 projects under consideration in Canada.
It was reassuring to hear of the recent defeat of Proposition 6 in Michigan. I thanked the Governor for his hard work yesterday and also the Consul General, who did yeoman’s work, going from town to town in the State of Michigan and from town hall to town hall encouraging the citizens of Michigan to vote to defeat the idea of not building the span.
The new span is very important. I’ve been working on this since 1995 as an elected person, first of all in Ontario and then federally. We are getting realistically close to be able to accomplish the new span at Windsor-Detroit.
It will attract new investments and business opportunities to boost both local and national economies and will create much-needed jobs for both Michigan and Ontario communities. The crossing will also increase border capacity to handle future trade and travel growth, and will be built with the security of both of our countries in mind. It’s very important for the auto sector, which is very important to the province of Ontario, particularly employment in southwestern Ontario. So with the cooperation of the Michigan government and the help of PPP Canada, we will get this important project built.
PPP Canada has also successfully launched four annual Rounds calling for applications to the P3 Canada Fund from provinces, territories, municipalities and First Nations. Their outreach and awareness strategy, combined with their expert advice, has resulted in the announcement of several P3 projects across Canada totalling close to $1.7 billion in eligible construction costs alone.
- The Iqaluit International Airport Improvement Project in Nunavut, which will improve existing infrastructure and build a new airport terminal building in Iqaluit.
- A new train maintenance facility in Lachine, Quebec, and in Whitby, Ontario. These are both in aid of public transit in large cities like Montréal and Toronto.
- The construction of the North Saskatchewan River crossing in Alberta to alleviate traffic congestion.
- The construction of a new organics biofuel facility for the city of Surrey, British Columbia.
- And the Downtown Eastside Housing Renewal Project, which is an innovative project to help marginalized people, such as those with addictions and the homeless, in Vancouver. This is a P3 project through PPP Canada Inc. in cooperation with private partners. It is a project which I am going to watch closely. I wish it every success because it addresses a serious social need that exists in most of our big cities across Canada.
While still new for some Canadian provinces, territories and municipalities, Canada can and should celebrate this success, including at events like this one.
As a member of the Ontario government more than a decade ago, I was a strong advocate of tapping into pools of capital that exist in the private sector and I remain so today. I mentioned the Royal Ottawa Hospital; I was very proud of that. I was very proud to see more hospitals being built in Ontario and across the country. And I know that a lot of the provincial infrastructure agencies have been in the forefront of all that work.
In the area of trade, we have the federal departments and agencies such as the Department of Foreign Affairs and International Trade, Export Development Canada and the Canadian Commercial Corporation, along with PPP Canada, the Canadian Council for Public-Private Partnerships and many of you here today from the private sector sharing knowledge and experience and helping to transform the global P3 market in the process.
The P3 approach is an essential part of our government’s future plans. The reality is that governments are cash short. The good news is that the balance sheets of corporations in Canada are very strong and are awash in cash.
We have been working with provinces, territories, the Federation of Canadian Municipalities and other stakeholders on the development of a long-term plan for public infrastructure that extends beyond the expiry of the Building Canada plan in 2014.
As we have noted previously, we are working on a new plan that will focus on investments in infrastructure that support long-term economic growth and prosperity, while encouraging greater private-sector involvement and increasing the use of P3s. A new plan will be designed to leverage funds from all levels of government and the private sector, and ensure affordability and sustainability over the long term.
In their consultations on the new plan, my colleagues, Ministers Lebel and Fletcher, have been travelling the country consulting with municipalities, provinces, territories and other stakeholders on the future of the Government of Canada’s role in infrastructure. While there are various perspectives and opinions across the country, we have heard strong support for the greater use of the private sector in infrastructure.
I am not here to reveal the contents of the new plan today. It is a work in progress. But I will say that at a time when governments at all levels are increasingly pressed for funds, creativity and innovation are required to maximize value for taxpayers. It is incumbent on us as governments to evaluate the old delivery methods for their effectiveness. We need to ensure people and communities have the tools they require to prosper. P3s have been effectively used to deliver projects in Canada through both federal and provincial government entities. And at the federal level, we intend to do more P3s.
Now let me conclude.
We know that P3s can allow more projects to be built on a more timely basis across Canada, with added value to taxpayers. Quite simply, we need P3s and we can’t afford to overlook their potential as we deal with persistent global uncertainty. I expect P3s will continue to play an increasingly significant role in infrastructure investment, helping to connect and strengthen this great country and to accelerate economic growth and jobs. Infrastructure is key to our success as a nation, and our success as an economy capable of producing jobs, growth and long-term prosperity.
This conference takes place during a challenging time globally, yet one full of opportunities for those with new ideas and innovative thinking, which is the very foundation of P3s. We believe that the ingenuity and creativity of individual Canadians, such as the people in this room, will create lasting economic growth and jobs through investment and innovation. In working toward a better Canada, infrastructure will play a key role in connecting Canadians to the world and to each other, and I look forward to working with innovators like you to help make this happen.