Parliament is being asked to approve $108-million for a new embassy building in central London that Foreign Affairs bought in November, a move that is raising questions over whether the Conservative government's plan to save millions abroad is going to pan out.
The federal government currently operates out of two prominent properties in central London that are less than 10 minutes apart – Macdonald House on Grosvenor Street and Canada House at Trafalgar Square.
Last March's 2012 federal budget said restructuring foreign offices and missions would save $80-million at Foreign Affairs. It was one of the few concrete examples listed in the budget's promise to find government-wide savings worth $5.2-billion a year. The government later confirmed that consolidating Canada's embassy at Canada House was part of that plan, and Macdonald House would be put up for sale.
However, one year later, Ottawa has yet to announce an asking price for Macdonald House. It bought a large property on Trafalgar Square at 2-4 Cockspur St. in November from the British government for about $114-million adjacent to Canada House, and the government plans to centralize its operations in those two buildings. Any leftover space would be rented out.
Ottawa's real estate moves won't end there. The embassy – led by high commissioner and former B.C. Premier Gordon Campbell – is in the market for a new ambassador's residence.
The department expects the sale of Macdonald House to cover the cost of the new building at Trafalgar Square, a new residence and renovations. However, DFAIT won't say what it expects to get for Macdonald House. The Globe and Mail has previously estimated its value at about $500-million, based on conversations with local real estate agents.
Yet Conservative and Liberal senators expressed strong concern this week when senior DFAIT officials could not guarantee all of the buying, selling, moving and renovating would produce any savings at all.
Nadir Patel, the assistant deputy minister and chief financial officer at DFAIT, would only commit to breaking even when he appeared on Tuesday before the Senate national finance committee.
"The entire cost of the project will, of course, depend on how the preliminary planning work goes now and what the expected sale of Macdonald House would generate. We are confident in the fact that this will generate at least cost neutrality, but likely [a] return of additional funds back to the fiscal framework once the project is complete," he said.
But DFAIT still needs to find a buyer. Ottawa floated the idea of selling Macdonald House in 2007, but no sale took place.
Mr. Patel said the department bought the additional property in November even though it didn't have enough money in its budget, which is why it is asking Parliament to approve an extra $108-million through supplemental estimates tabled last week.
The department's answers didn't sit well with Conservative Senator Irving Gerstein, who questioned whether the department has studied the plan appropriately.
"Let us be absolutely clear to Canadians: This is a Crown jewel location that is being sold. I must say that I am very saddened by the fact that the Canadian flag will no longer fly over Grosvenor Square for Canadians to admire for future generations," Mr. Gertstein said.
Liberal Senator Céline Hervieux-Payette told the DFAIT officials that their promise to break even was "pure fantasy."
On Wednesday, the Senator told The Globe she questions why the department is asking for the $108-million now, even though the purchase is complete.
"Don't you think it's already a little bit peculiar that they're asking for the money after they bought the property?" she said.
Ms. Hervieux-Payette said she was not convinced at all by DFAIT's extensive property plans in London.
"This was the most ridiculous thing I have heard from our government," she said. "I think their calculations are not very solid."