Tuesday, 12 February 2013

Alberta Economic Summit

As a participant at the Summit, my first impression was  the diversity of the attendees, ranging from Union leaders, Academics, politicians and citizens on the right and the left, We inevitably had  Greenpeace  staging a protest as a diversion.

While the gathering made for very interesting discussions and ideas, I felt that the summit was held too late to have any impact on the March 7th budget. Therefore we shall have to wait a year before the government  implements any of the ideas put forward.

My observations will follow the Agenda which consisted of four discussion panels:
1.      What is the problem?
This discussion centred mostly on the revenue problem caused by the lower price of bitumen. The panel all agreed that the price differential was hurting the revenue. It was explained that we needed to find other markets for Alberta’s oil and that a solution to getting the oil to different markets would not happen immediately, but that it may take a minimum of 5years  before new pipelines and other means of transportation are put into effect. My conclusion is that this issue will not be resolved in the short term and that unless we see a huge jump in the price of oil, the revenue problem will be with us for some time.

2.      What services do Albertans need?
This panel had a diverse group, which included a union representative from Health, and a non-profit sector representative. The discussion was mainly in support of the status quo. That we need to spend to provide Albertans services. Of course cuts were not part of the discussion but that the government needed to continue to support the ever increasing costs of providing services. As a long-time proponent of the provision of public services through alternative means; I put forward that we should instead be discussing, not what Albertans needs were but rather that we should be asking whether Albertans care who provides the services? Public or Private? The panel had some responses but danced around the issue of private delivery with no real commitment either way.

3.      Perfecting Alberta’s revenue mix.
A panel made up of Dr. Mintz of the School of Public Policy,   was perhaps the most animated of all the day’s discussion groups. With Dr. Mintz supporting a revenue mix including a sales tax and Derek Fildebrandt of the CTF opposing it without a mandate, made for great debate. Albertan’s have for very long opposed a consumption tax of any kind, at the Institute we have always supported a reform of the tax mix, including a consumption tax with caveats. Taxpayers are very skeptical of politicians when new taxes are implemented.. The real issue is what should we do with the new revenue? Do we invest in the Heritage Fund or do we just use it for continued spending?

For those who believe we have a reveue problem a sales tax may make sense, but it may also be political suicide for any party who initiates it. The result may be that they would be voted out of office, and yet the new government would very likely not rescind the tax as they benefit from the increased revenue. The solution in IPSA”s view is tor educate the public on the merits and use of any new sales tax, combine with a change in the taxable income level which could be increased to mitigate the burden of a new tax for lower income families.

4.      Needs versus wants – setting the proper framework for spending.
With U of C’s Dr. Tom Flannagan and Mr. Gil McGowan president of the Alberta Federation of Labour on this panel, the debate got quite interesting. Dr. Flannagan proposing Ralph Klein across the board cuts while Mr.McGowan proposing continued spending to provide services, albeit promoting the benefits of a public sector union> However, the panel still did not address the question of excessive spending by the government. Participants who made comments ignored the real question of deficit financing by the government.

My comment to the panel was: “Alberta has a spending problem, it would be better to make cuts when the economy starts growing instead of  during a recession, when people cannot find jobs. So if we do not make cuts now, when should we do it?”

Unfortunately I received the usual response : that we cannot and need not make cuts because Albertans want services. The Chamber of Commerce representative said that the time was not right because the economy was still sluggish. With the exception of Dr. Flannagan, who wants cuts now, it left me  me wondering whether any significant cuts will be done under the so- called ‘results base budget’ At IPSA we advocate ‘zero-base budgeting’ which would identify areas of inefficiency immediately and then implement ‘ performance -based budgeting’ in following years.

On the financial status of Alberta, I am pessimistic in the short term, and yet optimistic in the long term. In my view, too much time was spent on new taxes and not enough on how to make necessary cuts or provide services by alternative models. Despite the fact that the Summit did not provide immediate solutions I believe that it was a worthwhile exercise. I also believe in the resilience of Albertans to push their politicians to make the right choice. If not there will be political cost to be paid at the next election.

Marcel Latouche