Transport Committee on April 25th, 2013

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

The next question is for Mr. Stoney. You talked about the issue of free money and your preference for transferring tax room to the municipalities. But municipalities are not short of money, they've had a spectacular growth in revenues, probably bigger than any other level of government. Municipal revenues were up 71% between 2001 and 2011—

[Mike Sullivan, NDP, York South—Weston, ON]

Mr. Chairman, he's well past seven minutes.

[The Chair, Conservative, Larry Miller]

Yes, and your colleague was over nine minutes.

I'm going to cut him off. I try to be generous with everybody.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

—and population growth and inflation combined have been 30%. We continue to see revenues to the municipalities. When they receive these revenues, they demand matching funds for individual projects on top of them.

Isn't it really the case that no matter how much tax room and dollar figures we transfer to municipal governments, they will take that and then they'll expect the federal government to match it anyway?

[The Chair, Conservative, Larry Miller]

That's your time, but I'll let him respond.

[Dr. Christopher Stoney]

I think there is a dependency culture we've created. I think you're absolutely right. I think it would be good if the cities, certainly the larger cities, had their own means for using income tax as I think they grow with wealth better than relying on property taxes. They do have the financial wherewithal to raise the money they need, but wouldn't you as a politician rather get money from another level of government, let them raise it rather than raise it yourself? That's the idea of free money.

It doesn't mean to say the federal government has to keep responding to that demand. Like to a petulant child, I think you say sorry but you have to raise more of that yourself.

[The Chair, Conservative, Larry Miller]

Thank you.

Mr. Watson, you have seven minutes.

[Jeff Watson, Conservative, Essex, ON]

Thank you, Mr. Chair. Thank you very much to our witnesses for appearing here today.

I'll start with you, Mr. Moist. On page 2 of your presentation you bring up the U.K.'s experience with its public finance initiative. You conclude the top bullet point by saying, “The Conservative health minister said it helped bring the health system to the 'brink of financial collapse'.”

To the best of your knowledge are all of the 60-plus health trusts in the National Health Service in the U.K. on the “brink of financial collapse”?

[Paul Moist]

Through the chair, I don't know that all of them are, but I know the way many of these new hospitals manage the debt problem is by closing wards and beds, and most of them are closed.

[Jeff Watson, Conservative, Essex, ON]

In fact, it's about a third of the health trusts that are struggling with respect to their payments.

If you had read the article perhaps, what the Conservative minister had said was that it parts of the national health system were on the brink of financial collapse. Of the remaining 40 or so health trusts, a number of them were built as part of the public finance initiative and they're not on the brink of collapse. Is it the PFI that's the problem then? Can we conclude that PFI is the reason the health system is truly on the brink of collapse?

If as many are doing well financially.... In fact, John Appleby, who is an independent economist, says that many hospitals remain “perfectly healthy financially”, despite being financed under the PFI.

Isn't it more correct to say the reasons that health trusts in the U.K. are struggling are complex and not necessarily or singularly related to the PFI?

[Paul Moist]

Through the chair, that could be a true statement, but the overall amount of debt is what rests with the U.K. government, and it's large.

[Jeff Watson, Conservative, Essex, ON]

I'm simply dealing with the accuracy of your statement. Your statement is inaccurate.

[Paul Moist]

Well $300 billion is a significant chunk of change, and that's attributable to the health care system, a big chunk of which was built by PFI. Not all of them. You're right.

[Jeff Watson, Conservative, Essex, ON]

By the way the Conservative minister you quote didn't actually say specifically it was the PFI. I'm going to get to the quote on the brink of financial collapse. He actually blamed the Labour Party for bringing parts of the system to the brink of financial collapse. I'm quoting an article from the The Guardian in the U.K. in terms of the policy of PFI.

I think the statistical point is that when you have hospitals, and it's many that are not on the brink of financial collapse, PFI is not in and of itself the problem.

I want to ask most pointedly, Mr. Moist—because one of your previous answers wasn't as clear as I thought it should be—is there any P3 model that is workable and that you would recommend?

[Paul Moist]

As Mr. Stoney said, there's a range of different P3 definitions out there. He read one. Marrying together design and build. I'm not an engineer, but I believe it's actually efficient, and it helps save money. Design-build-transfer is a form of P3.

As you will see, Dr. Loxley doesn't use rhetoric in his book. He canvasses a number of different types of P3s. The historical partnership of separately tendering design and build is a form of partnership. One form of P3s the fellow that appeared from P3 Canada with the previous committee, the Standing Committee on Government Operations and Estimates, talked about.... He talked about the range of P3s and them not being appropriate for all infrastructure.

CUPE has no issue personally with design-build-transfer. Design-build-finance-operate and transfer in 35 years is where I think we get into trouble.

[Jeff Watson, Conservative, Essex, ON]

You did table Mr. Loxley's book. Isn't the point of his book that municipalities retreat from P3s entirely and focus only on conventional delivery? That's on page 31 of his book.

Is that your position as well?

[Paul Moist]

No.

That might be what Dr. Loxley's position is, but he canvassed the City of Moncton. They decided on a P3 for waste water treatment. Unsolicited, a private sector company said they could do a better deal for the city's whole water system, and the council said no. These are the problems you get into with sole sourcing.

Dr. Loxley canvasses a range of issues in his book, and I think in a very fair and non-ideological way.

[Jeff Watson, Conservative, Essex, ON]

Our government is proposing that a new international crossing between Windsor and Detroit will be a P3 project, design-build-finance-operate-maintain.

Are you principally against that being done for the project?

[Paul Moist]

No. I wouldn't be principally against that. I don't know anything about it.

We canvassed one bridge story from Winnipeg. It was much smaller. It was a beautifully built bridge. It was not an issue of CUPE jobs or anything. But when we finally got our hands on the information four years after the bridge was built, the City of Winnipeg was paying about twice as much as they could have paid by building it through tendering with the city financing it. The city could borrow at half the rate of the private sector.

The devil will be in the details for the Windsor crossing, but I wouldn't enter that debate. I'd just say let's not borrow more expensively than we need to.

[Jeff Watson, Conservative, Essex, ON]

Mr. Stoney, one of the things I'm hoping will come out of a report like this would be some very practical, manageable types of steps with respect to removing red tape.

Do you have any succinct recommendations for the federal government as we handle infrastructure projects, for example, where we could make a significant difference in accelerating the ability to carry out infrastructure projects without harming due diligence?

[Dr. Christopher Stoney]

In a sense, that's difficult to say without knowing exactly what's in place. It's a case of saying, does this activity add to the oversight, the due diligence, the accountability? If it doesn't, then why not consider taking it out?

As I mentioned, I think there are ways we tend to get caught, particularly with the P3s, by saying that if they are made more or less transparent then we will get a quicker process. So it tends to become more of a backroom type of operation.

I don't think that's always the case. Again, one only needs to look...and this is what the Asian investment bank predicted in their report. The public will become suspicious. There's a lack of trust and opposition to P3s, as we saw with Lansdowne, which ultimately slowed it down.

In terms of the steps—

[Jeff Watson, Conservative, Essex, ON]

I was asking more generally, not specifically to P3s but in any federal infrastructure program.

[The Chair, Conservative, Larry Miller]

Your time has expired.

Could you answer very briefly, Mr. Stoney?

[Dr. Christopher Stoney]

I did take part in the red tape reduction project. I actually wrote a long paper for that, which I'd be happy to resubmit to this committee because there were some specifics around that.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Sullivan, you have five minutes.