Public pension funds to bankroll infrastructure

Canadian government may have found a new way to deal with country’s mounting infrastructure costs

How does the government find money for the ever mounting need for new infrastructure across Canada? According to a new report, the solution may be public pension funds.

The Canadian Press has reported on a line that was quietly tucked away in last month’s federal budget. It outlined that the Liberals are considering making public assets available to non-government investors – using the phrase “asset recycling”, which is meant to help governments raise money in order to improve public infrastructure and bankroll new projects.

For investors with deep pockets, such as pension funds, asset recycling is meant to offer predictable returns.

The sentence reads:  “Where it is in the public interest, engage public pension plans and other innovative sources of funding - such as demand management initiatives and asset recycling - to increase the long-term affordability and sustainability of infrastructure in Canada.”

Asset recycling has garnered an increased amount of attention worldwide in recent months. One of the most notable examples comes in Australia, where the government hopes to attract billions of dollars through incentives across territories and states that sell public assets.

Now it seems possible that Canada could follow this lead – monetizing public assets in an effort to generate funds.

The Liberal Government has made no secret of the fact that it sees infrastructure investment as a way to boost economic growth and create new jobs in the country. It has already committed more than $120 billion towards infrastructure over the next 10 years.

Supporters of asset recycling believe that it can help governments avoid debts and raising taxes.

However, others have concerns, with Andrew McNeill, a researcher at one of the biggest unions in Canada telling the Canadian Press that it is just another name for privatization and is being pushed “very aggressively by companies that profit from privatization.” He fears that some governments use the model for short-term financial gain and that it can often lead to lower wages for workers.

Where do you stand on the issue of asset recycling? Is it a good thing for Canada in the long term? Leave a comment below with your thoughts.