Finance Committee on May 15th, 2017

[Bill Morneau, Liberal, Toronto Centre, ON]

Is it?

[The Chair, Liberal, Wayne Easter]

Yes, it is.

[Bill Morneau, Liberal, Toronto Centre, ON]

Are you ready for me to answer?

[Pierre Poilievre, Conservative, Carleton, ON]

We've been waiting for you to answer for the duration, so any time now. Who will repay the money?

[Bill Morneau, Liberal, Toronto Centre, ON]

What I was about to say was that in each project there will be specific situations, so in many cases there will be security behind that loan. The security behind the loan would mean that if in the case that you identified, that an organization wasn't able to repay the loan, the security would come back for the federal government in that case.

What I can't do is give you every specific project right now. What I can do is tell you—

[Pierre Poilievre, Conservative, Carleton, ON]

Forgive me, minister.

[Bill Morneau, Liberal, Toronto Centre, ON]

Again, would you like an answer to the question or not?

[Pierre Poilievre, Conservative, Carleton, ON]

The question is, who would repay it?

[The Chair, Liberal, Wayne Easter]

The minister is answering your question. Give him time to answer it instead of interrupting.

[Bill Morneau, Liberal, Toronto Centre, ON]

Do you understand the concept of security behind a loan?

[Pierre Poilievre, Conservative, Carleton, ON]

I do, in fact.

Chapter 2 of your budget touches on that. It says that you will use subordinated debt.

According to Investopedia, subordinated debt is more risky than unsubordinated debt. Subordinated debt is considered any type of loan that is repaid after other corporate debts and loans are repaid in the case of borrower default. That means that the debt owed to taxpayers would not be secured; the senior debt would be secured. You're factually wrong. You're contradicting your own budget documents. It would not be secured.

[Bill Morneau, Liberal, Toronto Centre, ON]

Actually you're confused and you're inaccurate. If you'd like an answer, I'm happy to answer—

[Pierre Poilievre, Conservative, Carleton, ON]

You've been asked four times who would pay back the taxpayer. So, if a builder takes a $1-billion loan from your taxpayer back to the infrastructure back and goes bankrupt, who would repay taxpayers? Is it (a), no one; (b), the tooth fairy; or (c), you would take it out of your personal retirement funds? Who would repay taxpayers?

[The Chair, Liberal, Wayne Easter]

Minister, we are going to give you time to answer that question; and your time is up, Mr. Poilievre.

Go ahead.

[Bill Morneau, Liberal, Toronto Centre, ON]

I appreciate the opportunity to reply.

The good design that we've put in place for the Canada infrastructure bank would allow us to create an agency with expertise around how you can deliver on complex financial arrangements to make sure that significant infrastructure projects actually get done. That would mean that what's required is not only seeking institutional investors, but considering the possibility of also finding ways to ensure that projects get done that might require loans, or in some cases loan guarantees. We've given the bank flexibility to do that. Of course, we'll be relying on the expertise of this agency in order to make sure that they do this on commercially successful terms, as we do with other Canadian government organizations like the Business Development Bank and the Export Development Corporation, which are very successful in terms of not only being able to provide loans, but being able to provide returns to the Canadian government through those loans. That's what we expect would happen in this case. We will be able to do more infrastructure through crowding and private sector investment. We'll be able to create structures that provide financing opportunities that allow us to get more done while creating better outcomes for Canadians both through jobs and through a better, long-term infrastructure, and a low level of financial risk.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Minister.

Thank you, Mr. Poilievre.

Mr. Dusseault, you have five minutes.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

Thank you, Mr. Minister, for being here.

I would like to continue with the Canada Infrastructure Bank, which has been the focus of much discussion since you introduced Bill C-44 and even before that, obviously, since it was already in your department's sights.

An advisory council produced a report on economic growth and advised you. You subsequently almost copied and pasted it into Bill C-44.

Of the people who participated in the report, several—one in particular—mentioned that the objective of these infrastructure projects was to provide a return of 7% to 9%.

Can you confirm that the objective of the Canada Infrastructure Bank is to give investors a return of 7% to 9%? Can you confirm these percentages, which were put forward by people with special interests in the bank?

[Bill Morneau, Liberal, Toronto Centre, ON]

Thank you for your question.

An advisory council did, indeed, help us to make decisions and advised us on how we can improve Canada's level of economic growth. This committee was made up of experts from across Canada, including Quebec, which was very important to us. These experts helped us to find ways to increase investment in our infrastructure. This will make it possible to carry out projects, such as the Réseau électrique métropolitain, or REM, in Montreal. This type of project, which creates jobs, is very important for the community.

Since the projects will be different, I can't give you exact details on one. A good example of a project is the REM in Montreal, and it's a project that will be possible to accomplish with institutional investors. This transformative project will help the people of Montreal by creating jobs. In my view, it is very important to carry out projects like this.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Will the performance be 3%, 5%, 7%, 9%? Can you give us details of the return that investors are expecting? Investors who participated in the development of the bank are expecting a return on their investment. What are you guaranteeing them? Can you give us a specific percentage or a range of rates of return?

[Bill Morneau, Liberal, Toronto Centre, ON]

To begin, I would say that there is no guarantee of return on investment. Each project will be different. If a project involves a lot of risk, the return on investment may be higher. If a project is less risky, even if it is transformational for our economy, the return on investment may be less.

I can't tell you exactly what is going to happen, but I can assure you that the Canada Infrastructure Bank will allow us to do more for Canadians, including Quebeckers, to create more projects and to ensure that there is more money for infrastructure. All of these projects will create jobs and, as a result, contribute to our country's economic growth.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you.

The bank's main purpose is to generate revenue. Section 6 of the Act establishing the Canada Infrastructure Bank explicitly states that the infrastructure projects must generate revenue.

Can you explain to me how an infrastructure project, or the infrastructure that will be built, can generate revenue?

[Bill Morneau, Liberal, Toronto Centre, ON]

You haven't understood the bank's purpose at all. It's about ensuring that there are more infrastructure projects in this country.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Clause 6 talks about infrastructure projects that will generate revenue. Can you give us an example?

[Bill Morneau, Liberal, Toronto Centre, ON]

As I said, the bank's goal is really to ensure there are more infrastructure projects, which will help Canada to be more productive and create jobs. At the same time, we will find projects that will generate revenue for an investor.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

How will this revenue be generated?