VANCOUVER — A new study by the Fraser Institute finds the vast majority of new government infrastructure spending is unlikely to grow the economy.
A Canadian public policy think-tank, the institute reports only 11 cents of every dollar in new federal government infrastructure spending will be spent on highways, bridges, railways and ports. These are projects the institute states can actually help improve Canada’s economy.
This finding corroborates a Senate committee report from Feb. 28 that encouraged Ottawa to make transportation and trade infrastructure a priority, indicates a release issued March 2.
"The federal government has pinned its economic hopes on a major infrastructure spending plan, but only a small fraction of the money is going towards projects that are likely to spur economic growth," said Charles Lammam, the Fraser Institute’s director of fiscal studies, who co-authored the report entitled Myths of Infrastructure Spending in Canada.
According to the release, the study finds that of the nearly $100 billion in new infrastructure spending announced within the last year by the federal government, only 10.6 per cent will be spent on projects relating to transportation and trade, which have the potential to strengthen the economy by more efficiently moving people and goods across the country and to international markets.
Most of the new spending is instead going to so-called "green" and "social" infrastructure, including "pet" projects such as new parks, community centres and hockey arenas, the release indicates.
"Although communities may value and appreciate these initiatives, there is no evidence such spending will improve economic growth," it states.
The report finds that provincial governments too are only spending a small fraction of infrastructure dollars on projects that can improve the economy.
Of Ontario’s $138-billion infrastructure spending over the next 10 years, 18.8 per cent will be spent on highways. In Alberta, 20.6 per cent of the provincial government’s $34.8-billion capital plan is being spent on roads and bridges.
In addition, the study also claims to "dispel" other myths of infrastructure spending in Canada. For instance, it shows that governments have increased infrastructure spending over the past 15 years and the value of Canada’s total infrastructure is currently at the highest level in four decades.
"After adjusting for inflation, the net stock of government infrastructure per person (in Canada) has grown 27.3 per cent, from $16,394 per person in 2000 to $20,876 per person in 2015 (all in 2015 dollars)," the report notes.
"It’s a myth that governments have neglected spending on infrastructure," Lammam claims. "The issue, however, is that too few dollars are going to projects that would actually strengthen our economy."
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