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Jeffrey Simpson
Jeffrey Simpson

Jeffrey Simpson

Prentice mustn’t let the oil-price crisis go to waste Add to ...

Never let a good crisis go to waste, Winston Churchill once quipped.

The collapse of oil prices is a crisis, at least for those who depended on high prices, such as the Alberta government. Will the government and people of Alberta whine about the crisis and waste it, or will they buck up and face facts?

The most evident fact for a very long time was – and remains – that the government depended far too much on fossil fuel revenues. A quarter, and sometimes up to 30 per cent, of revenues came from this source. If history taught any lesson, it was that these prices rose and fell without Alberta having the slightest control over the matter.

History’s lessons, however, are easily ignored. Alberta governments, and the population that elected them, just kept basing budgets on volatile revenues. No sane household would have budgeted this way – locking in spending commitments, the paying for which depended on up-and-down revenues.

Cut government waste! That was the cry from the many who insisted that Alberta had a spending problem, not a revenue one. If revenues went down, so should spending, they insisted with a beguiling simplicity.

But, by the way, when you’re doing all that necessary cutting of spending, don’t touch health or education, which together take up around 70 per cent of the budget. Pave those rural roads, and keep those other services we have come to expect in good shape. Civil servants? Too many. Cut them and the problem will be solved.

Except that, as Alberta Premier Jim Prentice explained this week, so severe is his province’s budget situation now that he could fire every civil servant outside health and still the gap from lower oil prices would not be filled.

The Premier laid it on the line: Even if oil were $65 (U.S.) a barrel (it is far below this price now), Alberta would be losing almost $7-billion this year and $5-billion a year for the next two years.

Who knows where oil prices will be in two years? That’s the point: No one knows. So why depend so heavily on the unknowable? Why, when Alberta is a price-taker, would it want to make book on something – the price of oil – over which it has no control but upon which it has consistently bet so heavily, and sometimes so wrongly?

Which brings up the question of how to stabilize government revenues, which in turns raises the issue of a sales tax, which in other jurisdictions is a normal topic for debate but which in Alberta is the “third rail” of public discourse: Touch it and you die.

Sales taxes exist in almost every jurisdiction for two reasons above all. They are relatively stable sources of revenue and they produce a lot of it, the amount depending obviously on the rate, any exemptions or credits, and the general state of the economy.

In Alberta, however, these elementary advantages were quashed by ideological opposition to taxes in general, the notion that it was somehow an Albertan’s birthright not to have such a tax and the overwhelming fear of retribution if any politician even hinted at imposing one.

These were among the factors that caused Mr. Prentice to insist, until this week, that he would not entertain any suggestion of a sales tax. In his welcoming of former Wildrose leader Danielle Smith, and her fellow betrayers, into his party, he and Ms. Smith both declared their opposition to such an idea.

Then the oil price crisis deepened, and deepened some more. An idea, widely regarded in Alberta as the pernicious invention of economic eggheads and Central Canadian commentators, is now to be considered under the hammer blows of reality, declared Mr. Prentice.

Even Ted Morton, the proudly right-wing former finance minister of Alberta, has come out in favour of a sales tax. Mr. Prentice, predictably, was tentative. He did not favour a sales tax personally, he said, but he would listen to Albertans on this and other ways of dealing with the crisis.

This is understandable politico-speak. But if Mr. Prentice waits for Albertans to clamour for a tax, it will never happen, since when does any public ever demand a new tax?

Bringing stability to Alberta’s long-term finances, which is what Mr. Prentice correctly says the province requires, will take political leadership. We can only hope that with all but a handful of seats in the legislature, Mr. Prentice will not waste this crisis.

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