Ottawa's Ill Considered Asset Fire Sale

Steven Chase

OTTAWA — From Tuesday's Globe and Mail, Tuesday, Jun. 02, 2009 04:02PM EDT

No government asset is being spared scrutiny as the Harper government considers auctioning off holdings while it grapples with record deficits, sources say - and therefore those under review include entities such as the Canadian Broadcasting Corporation, VIA Rail and the Royal Canadian Mint.

Sources say while all government assets are on the table for a review first announced last fall, it's unlikely the minority Conservative government would move to spin off "highly iconic elements" such as the CBC or Via Rail in the short term.

"Everything's going to be included. We're not going to exclude anything off the top," the government source said.

"Everything's in."

However, the source said it's hard to imagine CBC or Via Rail being part of a privatization.

The review includes all government assets including Crown corporations as well as billions of dollars in federal land and building properties. The list includes Ridley Terminals, a cash-strapped coal-shipping Crown corporation in Prince Rupert, B.C.

Just last week the Tories announced they will seek buyers for the nuclear reactor business of Atomic Energy of Canada Ltd., Ottawa's flagship nuclear company.

Finance Minister Jim Flaherty first announced this asset review last November, although at the time he publicly ruled out selling the CBC. The review process was more formally launched after the Jan. 27 budget and Ottawa aims to generate up to $4-billion through privatizations or sales in this fiscal year.

The Tories are under pressure to generate cash as Ottawa struggles with shortfalls that could stretch for half a decade.

Last week Mr. Flaherty warned Ottawa will run a record $50-billion deficit this year alone and economists have predicted the projected shortfall for next year will rise, too.

Facing criticisms that it would be foolish to sell assets in a depressed market, Prime Minister Stephen Harper has pledged that this process will not lead to a "fire sale" of holdings.

The Harper government is depending on billions of dollars from asset sales as part of its plan to re-balance the books in Ottawa by 2013-14. Many economists though have suggested this deadline for eliminating the deficit is unrealistic without significant tax increases or spending cuts.

As the 2009 budget indicated, the assessment will take into account "the current relevance of the assets to government's core responsibilities, and of their market value."

In some cases, the budget said, the review may decide that "selling an asset to a private sector entity may generate more economic activity and deliver greater value to taxpayers."

It's expected the asset review could take four to five years - with perhaps 20 to 25 per cent of holdings reviewed each year.

Mr. Flaherty hasn't said whether possible saleable properties might also include the Canada Mortgage and Housing Corp.

It's likely, however, that assets headed for the block will include some holdings of the Canada Lands Co., a Crown corporation with a real-estate portfolio totalling about 970 hectares.

Last November, Mr. Flaherty suggested a selloff might include the CN Tower, but quickly made it clear he was joking.

If the government fails to sell the amount of assets it's hoping to unload, then the federal deficit will grow further - unless Ottawa can find spending cuts elsewhere.