Liberals consider ending costly Canada Savings Bond program

Finance Minister Bill Morneauis seriously consideringan end to the Canada Savings Bond program in his next federal budget, Radio-Canada has learned.

The program, introduced afterthe Second World War to help Ottawa raise money from individual Canadians,is about to launch its 70th year of sales, but senior government sources who spoketo CBC's French-language servicesay it could be the last.

Sales of the federal governmentbonds have been in a free fall since the late1980s, when the program was a lucrative savings tool for consumers looking to cash in onthen sky-high interest rates.

The bonds have been seen as one of the safest investment vehicles, because they are fullybacked by the federal governmentand can be cashed in at any time. Interest earned is also compounded, and at timesreturns could be lofty.

But now banks and other financial institutions offerreadily available products like GICs, self-directed trading accounts, mutual fundsand exchange-traded funds (ETFs), which oftenoffer better rates of return.

Fewer people are buying Canada Savings Bonds each yearbecause of paltrypayoutsin an era of sub-one per cent bankrates and the government is questioning the $60-millionprice tag itcosts to run the program each year.

Morneauhas in his hands a report from accounting firmKPMG, commissioned by the previous Harper government, which recommends Ottawa pull the plug. "There are currently no valid economic reasons to justify this program," the report reads.

Its main recommendation:"An orderly phasing out of the program."

• Stop selling Canada Savings Bonds, KPMG report recommends

The auditor general has in the past raised questions about the program's profitability. Administered by the Bank of Canada, it is costly to run because thousands of Canadians still hold bonds (even if they are buying fewer each year) and their main point of contact is the central bank itself.

The national advertising campaign, which coincides with the two-monthsales period each year, also costs millions.

A spokesperson for Morneau was unable to comment Monday.

Canada Savings Bonds were first offeredin 1946 in an effort to replicate the success of Victory Bonds campaign, launched during the First World War, which solicited funds from individualCanadians to help fund the war effort.

It was then much more difficult for a country to finance its sovereign debt, SergeCoulombe,an economist at the University of Ottawa,said in an interview,asinternational bond markets were not nearly as well-developed as they are now.

"This is probably the most expensiveloan tool for the government, and it can borrow on world capital markets with much lower costs," he said. "It's a program that wasdeveloped for another time, another world."

Canada would follow Germany, which also eliminated its savings bond program in 2012.