Alberta’s next budget is only nine days away. Alison Redford, the Premier, on a visit to Washington on the weekend (lobbying for the Keystone XL pipeline), said that the provincial government’s priority will be diversification of the province’s economy, rather than deficit reduction. Diversification has long been desirable, but Ms. Redford is apparently choosing the easier path of the uncertain prospects of a new industrial policy, instead of the painful clarity of spending cuts – let alone any hope of an unpopular but beneficial consumption tax.
Although Ms. Redford has acknowledged that Alberta has “a spending problem,” she and Doug Horner, the Minister of Finance, seem to be headed toward subsidies or tax preferences for sections of the “non-oil economy,” specifically agriculture, forestry, health research and green technology. It is difficult enough to diversify within the oil export business to markets outside the United States (even including Central and Eastern Canada). The measures intended to favour other sectors are not likely to be well-designed or fine-tuned in time for next week’s budget, considering the Progressive Conservatives’ hasty changes of course over the past several weeks.
In the current predicament, the Official Opposition, the Wildrose Party, does not emerge better than the Conservatves. To them, it seems the province’s fiscal problem can be solved almost by spending cuts alone, especially in public-sector pay. At least the Conservatives are not so simplistic.
The Alberta Taxpayer Protection Act of 1995, enacted when Ralph Klein was premier, makes tax reform very difficult, because it requires approval by referendum of any provincial sales tax – even if income tax were to be correspondingly reduced, in order to make government revenue less volatile.
Every Alberta government within living memory has preached economic diversification, to prepare for the depletion of oil and gas, but little has been achieved. At this rate, things may have to become quite a lot worse, before they get better.
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