An oil rig in the Grand Banks off NewfoundlandPetro-Canada
A new report from the Canadian International Council, a non-partisan think tank that focuses on Canada's role in international affairs, makes nine suggestions for the improved management of this country's vast natural resources. Some are boilerplate recommendations, such as diversifying our trade partners, adding value to our resources before exporting them (e.g., refining crude oil into gasoline) and calling on governments to promote technological development, education and other worthy pursuits. One suggestion, however, stands above the others and deserves a full discussion in provincial capitals and in Ottawa. As the CIC puts it, "All levels of government in Canada with revenues from non-renewable resources should stop treating them as income to be spent and start treating them as capital to be saved or invested."
With the exception of the Heritage Fund in oil-rich Alberta, Ottawa and the provinces have treated the royalties they earn from the exploitation of oil, natural gas and mineral deposits as walking-around money and have failed to put any away for the day those resources live up to the "non-renewable" part of their name. Even in Alberta, the Heritage Fund has seen stagnant growth, as successive governments have relied on its investment income to fund ongoing programs without raising taxes. Other resource-rich countries, notably Norway and Saudi Arabia, have been much more committed to setting royalties aside for future needs. Both have funds that surpass $500-billion. The Heritage Fund sits at just over $15-billion. Combined with a nascent fund in Quebec, Canada has managed to save a laughable $15.6-billion.
As the CIC notes, large wealth funds "lessen currency volatility … help stabilize the economy through booms and busts … and provide a source of investment income over the long term." Mostly though, saving money just makes good sense in an era when government and personal debt are proving to be major hindrances to growth and prosperity. Canadian governments cannot continue to blithely rely on revenue that will by definition one day no longer exist, and they cannot fail to capitalize on the opportunity to begin putting money away for the future at a time when Canadian natural resources are in high demand.