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Crown corporations could be sold, privatized

Harper government checking its assets

By: Andrew Mayeda

18/02/2009 1:00 AM | Comments: 24

The Royal Canadian Mint is one Crown asset that could be put up for sale.

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The Royal Canadian Mint is one Crown asset that could be put up for sale.

OTTAWA -- The Harper government, under pressure to prevent the federal deficit from ballooning, is pressing ahead with an asset review that could lead to the sale or privatization of several well-known Crown corporations, including Canada Post, Via Rail, the Royal Canadian Mint and the agency that oversees security at Canada's airports.

The mint has a major production plant in St. Boniface.

The government signalled its intent to sell Crown assets last fall, but it was only in the federal budget that it identified the four ministerial portfolios to be reviewed first: Finance, Indian and Northern Affairs, Natural Resources, and Transport and Infrastructure.

Some of the Crown corporations that fall under the authority of those departments have been known to be on the block for some time, such as Atomic Energy of Canada Ltd.

But the review also will cover some names likely to raise eyebrows, especially in the Transport portfolio, which includes Canada Post, Via Rail, the mint, and the Canadian Air Transport Security Authority.

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In the next few months, Finance Department officials will ask each of the four departments to identify assets that could be sold, including any real estate in their portfolios. Although the process is still at a preliminary stage, Finance officials have not ruled out any Crown corporations from the review.

"The corporate asset review is proceeding as planned," Mike Storeshaw, a spokesman for Finance Minister Jim Flaherty, said in an email. "Departmental officials will be working over the coming year to analyze the relevance of specific assets to the government's core responsibilities."

The budget states that Finance officials could conclude that "selling an asset to a private-sector entity may generate more economic activity and deliver greater value to taxpayers."

The challenge for the government is that its budget forecast is based on the aggressive assumption that officials will be able to raise as much as $4 billion through sales or privatizations by the end of March 2010.

Flaherty started musing publicly about selling Crown assets in November, but department officials only formally launched the review process after the budget was introduced on Jan. 27. That gives the government about 14 months to oversee a large-scale divestiture of assets, a complex process that will involve numerous layers of bureaucracy, might require major legislative amendments, and could create serious political headaches for the Harper cabinet.

If officials can't find enough assets to sell, the government could be forced to revise its forecast to show a bigger deficit for 2009-10, when the deficit is already expected to hit $34 billion.

In a recent analysis, Parliamentary Budget Officer Kevin Page warned of a "significant risk" that the government might not climb out of deficit as quickly as projected, because of several assumptions that might not pan out, including a quick recovery in tax revenue and expected savings from spending cuts and asset sales.

Don Drummond, chief economist for TD Bank Financial, said the review should be a useful exercise for assessing the value of the government's holdings, but he recommended waiting until asset values recover to close any deals.

"If you're not getting good value for them, or if there's a more efficient way of delivering the public service they're providing, I think you should always be looking at selling them," Drummond said in an interview. "That said, asset values are depressed right now, and, if you try to unload them, now might not be a great time to do it."

In deciding which assets to put on the short list, Finance officials will consider a number of criteria, including whether Crown corporations are still meeting their stated policy objectives, whether assets can be sold within the tight time frame set by the budget, and how best to maximize returns for taxpayers.

Eventually, the review will be expanded to include all government departments. The review of the Canadian Heritage portfolio, which includes the CBC and the Canada Council for the Arts, could be a political minefield.

Another option for the government will be to expedite the transfer of surplus real estate from departments to Canada Lands Co., a Crown corporation that sells rezoned federal lands to private developers.

 

-- Canwest News Service

Republished from the Winnipeg Free Press print edition February 18, 2009 A3

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24 Commentscomment icon

Maples Cynic: while there are sound economic reasons for government to divest of operations that are not core competencies, there are also sound economic reasons to NOT do so at this particular time, not the least of which is the complete absence of credit or the devaluation of virtually all asset values during this recession: sell when you can get a good price, yes, but not when it's only to give your cronies a bargain and open a spot for you on the board of directors.

@double nickel - just because it's in the rules and they are technically allowed to do it, doesn't mean that in this situation they were justified to do it. Their "loss of confidence" was just an excuse for them to try and grab power. Especially when even most people who voted for those individual parties where NOT in favour of their jimmy-rigged coalition. Are you really so naive that you can't understand that a politician could possibly use a legitimate practice to further their own ambitions??

"The Shock Doctrine" in action! Use the cover of the global economic crisis as a means to implementing your political ideology. Milton Friedman is smiling in his grave.

That would be a bad move. Who does Harper think he is? Why not cut down on Government spending? No senate, no trips, no fancy dinners. Oh yah, and no bail-outs!!!

Well then local guy, if you are so smart then you already know that the opposition has the right to ask the GG to allow them to form a government when they have lost the confidence of the party in power. It's not a power grab, it's the rules. The only party "grabbing' onto power is the Harper government.

@GreatFlatLand - I agree with you about government becoming less about governing and more about politics. It's also nice to see reasoned responses. But do you really think that selling crown corporations is the easy way out, or really a bad thing? Like the Maples Cynic said, a company that answers to shareholders is always more efficient and profitable than one run by the (notoriously wasteful) government. @Double nickel - I'm not a neo-con and I do understand how a parliamentary democracy works (and how it is supposed to work)... do you? Seems like you are the one without the understanding of politics and of what power-hungry politicians do to try to get power.

I think the power plays are why most Canadians are getting tired of politics. Government has become less about governing and more about politics. I think we can both agree about that. I never said that the overspending was Harper's fault. I just think that he's taking the easy way out of bad economic times by balancing the budget by selling off assets that all Canadians helped to build.

"a childish grab for power"? That statement demonstrates a serious lack of understanding of how a parliamentary democracy works. Try to stay off the neo-con Kool-aid.

You just can't make the "bleeding-hearts" happy in this country eh? They were angry at Harper for not spending enough at the end of '08, now their angry he's spending too much in '09. I haven't read one good reason for not selling the Crowns on this page. As for "Meeting the needs of Canadians"; a company that answers to shareholders is always more efficient and profitable that one run by "red" tape (is it any wonder the Liberals favourite colour is red?).

I'll add a little something to the post above - I'm not saying Harper's reasons are purely unselfish; he probably wanted to stay in power as well. But that's still better than the childish grab for power that the opposition parties tried, using whatever excuse they could find to use as their rally cry - which is what led to all the government spending that other posters want to try to blame on the Conservatives.

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