Good afternoon. My name is Sunil Johal, and I'm the policy director at the Mowat Centre with the University of Toronto. I'd like to thank the committee for the opportunity to participate in these pre-budget consultations.
My remarks will focus on the role of infrastructure investments in enabling prosperous and secure communities. I will briefly touch on four issues: the need for investment in infrastructure, the importance of linking investments to broader policy considerations, challenges with existing federal investment plans, and how Ontario is disadvantaged by existing approaches.
First, Canada has a clear and recognized need for infrastructure investments that support future prosperity. Public infrastructure investments—over 5% of GDP through the 1960s—declined in subsequent decades, with some recovery over the past decade. This trend can be seen in figure 1 of my brief.
This period of lower levels of public investment was exacerbated by low levels of private capital investment in Canada compared with OECD peers. This investment shortfall has left a significant share of public infrastructure in need of renewal, from our increasingly congested cities to first nations communities with substandard housing and inadequate water systems.
Canadian governments have recognized the need for infrastructure investments and responded with long-term investment plans.
This brings me to my second point. As these plans move forward, it is essential for our economic prosperity that they be adequate, aligned, and integrated with other policy objectives. The increasing prominence of the service sector in our economy, an aging population, and urbanization among other trends demands different approaches to what we consider critical economic infrastructure. Additionally, federal infrastructure investment decisions ought to take into account the way emerging technologies might cause an existing infrastructure to fall out of step with the needs of communities and the economy.
Given the long life of assets, it is essential that the choices we make today on public infrastructure set us on a sustainable course. This means ensuring that investments maximize efficiency of our resource usage and minimize impacts on air, water, and land resources. Adaptation to climate change must also be integrated into design and planning.
The third issue I'd like to address is the fact that it will be difficult to meet these objectives in the context of existing federal infrastructure investment plans. While the long-term commitments in the new Building Canada plan are welcome, federal infrastructure investments are by far the smallest contribution to public infrastructure in Canada. According to the Canadian Centre for Economic Analysis, the federal government is responsible for about 12% of public infrastructure investments in Ontario, with provincial and local governments covering the remaining 88%.
Canada stands apart from OECD peer federations by a large margin in the role that subnational governments play today in public investment, as can be seen in figure 2 of my brief.
Building adequate infrastructure to meet our needs depends on greater investment from the federal government. However, not only must the level of federal infrastructure investment be addressed but also the way those investments are managed. Federal dollars are delivered through a long list of programs that have often diverged from their original commitments on focus and funding level. It is exceedingly difficult to map which projects have been selected under which program and why. One example is the green infrastructure fund, which has nearly $150 million unexplained publicly.
ln addition to transparency challenges, the use of boutique programs brings challenges from a policy and operational standpoint. Designing programs to leverage additional funding from other governments makes the returns on federal investments appear larger, but skews local investment decisions to federal criteria. The need to fit federal project selection windows for limited funds often prioritizes the shovel-ready over the important. Furthermore, transaction costs are higher and flexibility is limited by the multitude of infrastructure programs.
Finally, I'd like to address how the current federal approach disadvantages Ontario. The largest of these concerns stems from the provincial-territorial infrastructure component of the Building Canada fund in the new Building Canada plan. Ontario is set to receive about 28% of this $9.6-billion fund over the next 10 years, compared to its 38.5% share of the population. This is because the federal government has carved out about one-third of this fund to distribution to provinces on an equal basis: $250 million per jurisdiction, regardless of size or need.
In conclusion, to take advantage of a generational opportunity to invest in our infrastructure, Canada will need to move towards a more strategic and coordinated approach that takes account of a broader range of policy considerations and the priorities and capacity of other governments and sectors.
Thank you.