During the 1990s, Alberta established itself as one of the best places in the world to do business. We limited government spending growth, paid off the debt, lowered taxes, and provided tax incentives to attract new business and industries.
The people of our province proudly referred to this as the ‘the Alberta Advantage.’
Although Alberta still possesses some of these same features, our edge has slipped dramatically over the last decade.
Our personal and corporate tax advantage has decreased and will soon be surpassed by several provinces. And our provincial government has no plan to regain it.
Only a few short years after declaring Alberta debt-free, the provincial government has taken on billions in new and unnecessary debt with no commitment to paying it off over the short term.
Tens of billions of dollars in investment in Alberta’s energy sector has fled to neighboring jurisdictions due in large part to the new royalty framework – one of the most misguided and mishandled policies in Alberta’s history.
Provincial government spending has been growing out of control for some time. Over the past several years we have spent far more per capita than any other province in Canada. Government spending increases have been more than double the rate of provincial inflation plus population growth. By refusing to control spending to sustainable yearly increases, the provincial government now finds itself in the position of both taking on massive amounts of debt while cutting the promised programs that Albertans have come to rely on.
The current government’s failure to plan was a plan to fail.
Restoring the Alberta Advantage
Despite the recent damage done to our financial reputation and well being, it is not too late to turn things around.
An obvious first step would be to reverse the damaging royalty hike imposed by the current government on our conventional oil and gas entrepreneurs. However, we must also develop and implement a long term financial plan to become more economically competitive with jurisdictions around the world.
In short, it is time to restore the Alberta Advantage.
Control Government Spending
The first component in a long term financial plan for our province is to stop the financial bleeding. The current provincial government is spending beyond its means. It is accruing debt for future generations to pay. The temptation to impress constituents with unnecessary frills, the knee-jerk reaction to solve societal problems with public spending, and the general desire to be seen to be doing something, have become far too ingrained in our political culture.
In my view, piling up billions in debt on the backs of future generations to dull the pain of a self-inflicted spending hangover, is the height of irresponsibility. So too is expanding the size of government entitlement programs to the point where the only way to adequately fund such is to raise taxes or increase debt on future generations.
Alberta needs to reform its spending practices by legislating a cap on year-over-year increases in government spending to the rate of inflation plus population growth.
The Alberta government should also institute ‘pay-as-you-go’ legislation mandating that any new non-budget, non-emergency expenditures approved during the year must be offset by a corresponding decrease in expenditures elsewhere.
Instituting these measures, which have been proven very effective in other jurisdictions, will ensure that spending is controlled through good times and bad while providing the funds necessary for successful core social programs and required infrastructure. They will also have the effect of curtailing the size and scope of government bureaucracy as departments look for innovative ways to provide more efficient and better services by reallocating existing resources rather than simply asking for more funding while perpetuating outdated and wasteful programs.
In fact, if our federal and provincial governments of the day had controlled spending in this way starting in 2000, both would be running surpluses this year despite being in the midst of a global recession.
Diversify through Less Taxation and Red Tape
Alberta is endowed with a vast amount of oil and natural gas resource wealth. Over the past several decades we have relied on this wealth to lower taxation rates while increasing spending on infrastructure and social programs. Continuing this course is unsustainable. We must diversify our economy and decrease our reliance on non-renewable resource revenues.
Of course, almost every Albertan understands the need to diversify; the real question is how to effectively do so.
In a global economy, entrepreneurs, businesses and ideas flow to where the best opportunities for success exist.
The best minds don’t necessarily work where they graduate; skilled workers are highly mobile and will go wherever the best opportunities arise. A technological breakthrough is often not commercialized where created; when contemplating where best to develop a new technology or product, entrepreneurs and corporate executives generally seek out jurisdictions where levels of taxation and burdensome regulations are low. Historically, governments who gamble taxpayer money on ‘investing’ in the next big idea or industry, generally end up with the bill and nothing to show for it at the end of the day.
If Alberta wants to successfully diversify its economy, we must make our province more fiscally attractive to the brightest people, best entrepreneurs and most successful businesses. We can accomplish this by substantially reducing taxes and red tape while maintaining solid core infrastructure and social programs.
I want to see an Alberta where my children and grandchildren will have jobs in industries that people are just now starting to dream about. We need to start planning today to make this a reality.
A Financial Plan for Alberta
Advocating for lower levels of taxes and regulation is easy; accomplishing such without gutting key programs is more difficult. A long term financial plan for Alberta will be needed to accomplish this goal. I believe any such plan should include the following three components:
- Limit yearly government spending increases to the rate of inflation plus population growth;
- As economic growth increases and government revenues begin to outstrip newly restricted spending levels, invest the majority of resultant budget surpluses in Alberta’s Heritage Fund;
- As annual earnings from the Heritage Fund increase, thereby replacing our reliance on non-renewable resource revenues, gradually begin lowering personal and corporate income taxes.
This kind of sustainable fiscal planning coupled with a commitment to actively examine how we can minimize unnecessary regulation for business will accomplish the goal of diversifying our economy and will leave our children with even greater opportunities than we enjoy today.
Video
How much longer will it be until the Treasury Board President is honest with Albertans? April 12, 2010
The Premier dosn't have to cut programs, he has to cut waste (part 1). March 24, 2010.
The Premier dosn't have to cut programs, he has to cut waste (part 2). March 24, 2010.
The Premier dosn't have to cut programs, he has to cut waste (part 3). March 24, 2010.
The Premier dosn't have to cut programs, he has to cut waste (part 4). March 24, 2010.
The Premier dosn't have to cut programs, he has to cut waste (part 5). March 24, 2010.
The Premier dosn't have to cut programs, he has to cut waste (part 6). March 24, 2010.
Let's put our fiscal house back in order (part 1)
Let's put our fiscal house back in order (part 2)
Stelmach's deficit numbers don't add up
Competitiveness: The Premier was warned (part 1)
Competitiveness: The Premier was warned (part 2)
Competitiveness: The Premier was warned (part 3)
Rob calls on the PC government to introduce a realistic spending plan of inflation plus population growth. February 24, 2010.
Bill 1 - Alberta Compteitiveness Act. February 23, 2010.
The Wildrose Alliance response to Budget 2010 (part 1). February 10, 2010.
The Wildrose Alliance response to Budget 2010 (part 2). February 10, 2010.
