OTTAWA – Critics say a move by the Bank of Canada to outsource administration of the Canada Savings Bonds program will erode national sovereignty.

In June, the Bank signed a $400-million contract with EDS Canada, a subsidiary of Texas-based EDS Corporation, to administer the sale of Canada Savings Bonds. The bank will retain responsibility for the program, and continue to set interest rates and conduct sales and marketing.

According to a statement issued by the bank, the outsourcing will “ensure more flexible and cost-effective service.” As a result of the contract, roughly 500 public employees will join EDS, a reduction in bank staff by nearly one third.

New Democratic Party Finance Critic Lorne Nystrom calls the move “privatization by stealth,” and “a prelude to a full monetary integration with the U.S.”

“No government in the world, including of course the United States, ever engaged in this kind of sell-out of one of the most crucial symbols of national sovereignty,” he says.

Canada Savings Bonds were initially implemented to help finance Canada’s efforts during the Second World War. They quickly became a nationalist symbol, and have been marketed ever since as an investment in the country.

However, since the early 1980s, the bonds have made up an ever-smaller share of Canada’s debt. Foreign ownership of the debt has increased and, even within the debt that is Canadian-held, the bonds have become less significant. In 1980, they made up about 22 per cent of domestically held debt. Today, the figure is roughly 8 per cent. Over this same period, private-sector financial institutions and pension funds have greatly increased their share of the debt.

Nystrom believes the government is gradually phasing out Canada Savings Bonds, part of a continuing shift in control over Canada’s debt and monetary policy to the private sector. To facilitate this shift, the government has removed incentives for Canadians to buy the bonds, such as the provision that allowed Canadians to earn $1,000 tax free on interest income from the bonds and other sources.

According to economist Hugh MacKenzie, research director of the United Steelworkers union, the outsourcing of Canada Savings bonds to a U.S.-based multinational will make it harder to market them.

“The more Canada Savings Bonds are seen to be like any other savings instrument, the more difficult it is to sell them,” he says. “It detracts from the emotional bond people have to them. Why would you buy Canada Savings Bonds as an act of patriotism if they are sold by an American company?”

MacKenzie also questions whether there will be any anticipated savings or service improvements as a result of the EDS contract. “It is one more example of the cant that the private sector can do everything better,” he says. “It is the ideology of privatization run rampant.”

Aaron Freeman is an Ottawa-based writer.