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Economic Competitiveness & Fiscal Management
During the 1990s, Alberta established itself as one of the best places in the world to live and do business. We limited government spending growth, paid off the provincial debt and lowered taxes to attract new people and businesses. Our province proudly referred to this as the ‘Alberta Advantage’. Unfortunately, this advantage has slipped dramatically, and in many cases disappeared entirely, over the last several years.
Since the most recent election, the current PC Government has plunged our province back into deficit and debt, has spent every cent of interest earned in the Heritage Fund and continues to spend billions of our ‘rainy day’ Sustainability Fund far past the end of the recent recession. This government has also overseen an explosion of anti-business regulations, and has raised taxes, levies and fees on our most economically important industries making them less competitive with neighbouring jurisdictions.
It is undeniable: the current PC Government has mismanaged our province’s finances, has allowed our province to lose its economic competitiveness, and has no credible plan to put us back on the right track.
The Wildrose has a plan that will bring back and elevate the Alberta Advantage, return our province to sustained balanced budget practices, and ensure financial prosperity for generations to come.
Spending Control Strategy
Provincial government spending has been growing out of control for some time. Over the past several years the Alberta Government has spent far more per capita than any other province in Canada. Spending increases have been more than double the rate of provincial inflation plus population growth. This has plunged our province back into deficit and debt, and has made Alberta dangerously reliant on highly volatile non-renewable resource revenues to pay for key social programs like health and education. What’s even more disturbing is that despite this spending spree, we have not seen a corresponding increase in the quality of our core social programs.
If our provincial government had controlled spending increases to the rate of inflation plus population growth Alberta would have continued to enjoy multi-billion dollar surpluses these past few years, instead of being mired in multiple record billion dollar deficits. These surpluses could then have been put towards increasing our savings. Had spending been limited to the rate of inflation and population growth for the past seven years, we would have accumulated $50 billion more in surpluses and our Heritage Fund would be well on its way to ensuring our long-term prosperity.
Instead, by undoing years of fiscal restraint and sacrifice by our province during the 90’s, the PC Government is now accruing billions in debt and liabilities for future generations to pay. The temptation to impress constituents with unnecessary frills, the knee-jerk reaction to solve political problems with public spending sprees, and the general desire to be seen to be doing something have become hallmarks of this Government’s money management policy.
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 to the point where the only way to finance essential social programs is to slash spending, raise taxes or increase debt on future generations.
Conversely, implementing proven and reasonable austerity measures will have the effect of curtailing the size and scope of government bureaucracy. Departments should look for innovative ways to provide more efficient and better services by reallocating existing resources rather than simply asking for more funding while outdated and wasteful programs are permitted to linger.
Albertans deserve better. A Wildrose Government will responsibly prioritize and control government spending by implementing the following financial reforms:
- Legislate a cap on year-over-year increases in overall government spending to the rate of inflation plus population growth.
- Prioritize spending on front line staff and critical core social services such as Health and Education. Reductions in spending should be targeted at unnecessary bureaucracy, executive bonuses, non-priority infrastructure and corporate grants.
- Institute ‘pay-as-you-go’ legislation which means that any in-year non-budgeted expenditures approved during that same budget year (excepting emergencies) must be offset by a corresponding decrease in the budget elsewhere.
- Reduce government waste by requiring all government departments to implement a zero-based budgeting program mandating that every Ministry justify the effectiveness and efficiencies of their expenditures and programs each and every year.
- Improve financial accountability and transparency in government by passing legislation that will:
- Establish an independent Cabinet and MLA pay and benefits review process preventing the Premier, Cabinet and MLAs from setting their own salaries.
- Ensure all MLA expenses are publicly posted online.
- Implement a government ‘Waste Buster’ program and website that allows the public and government employees to anonymously report instances of government waste and mismanagement.
This program would also create a set of financial incentives for public service employees and departments who reduce waste and find ways to run programs and initiatives more efficiently.
- Introduce whistleblower protection for all government-paid employees who might wish to report inefficiencies, waste or wrongdoing.
Strengthen the office of the Auditor General.
- Create budget transparency guidelines to ensure government debts and cash deficits are reported accurately and in plain sight.
- Mandate public disclosure of the Government’s priority list and rationale for all infrastructure projects and maintenance.
- Guarantee an open tendering and bidding process on all major government-sanctioned and approved procurement and contracts.
- Provide easier and more affordable public access to Freedom of Information requests as well as to the financial information of all Crown corporations and government investments.
Heritage Savings Strategy
Over the past several decades our province has come to rely on non-renewable resource wealth to maintain low taxation rates while dramatically increasing spending on infrastructure and social programs. Continuing this course is unsustainable – it simply can’t be done without mortgaging our and our children’s future.
In 1976, Premier Peter Lougheed created the Alberta Heritage Savings Trust Fund. The purpose of the Heritage Fund was to save a significant portion of non-renewable resource revenues so that when oil and gas revenues decreased permanently, future generations would be able to use the Fund’s interest to maintain our competitive advantage and continued prosperity.
Unfortunately, the temptation of politicians to dip into the fund was too strong, and tens of billions of dollars in savings from the fund continue to be used for the wants of here and now. In Budgets 2009 and 2010 for example, the PC Government withdrew billions from the fund in order to mask the enormity of their deficit and their return to debt financing. Such mismanagement has resulted in the Heritage Fund being worth less today per Albertan (when adjusted for inflation) than it was when first established by Premier Lougheed in 1976. What a sad and selfish legacy to leave future generations of Albertans.
Albertans deserve better. We need to turn our sea of volatile non-renewable oil and gas revenues into a mountain of permanent investment capital that sustainably improves our economic competitiveness and quality of life. A Wildrose Government will implement a Heritage Savings Strategy that will:
- Refrain from transferring any portion of the Heritage Fund (including annual interest earned) into general revenues until the total yearly interest earnings from the Fund exceed that of the average annual provincial revenues from oil and gas.
- Implement the Spending Control Strategy detailed in the previous section. As economic growth increases and government revenues begin to greatly outstrip newly restricted spending levels, invest the growing budget surpluses as follows:
- Grow the Heritage Fund so the total yearly interest earnings from the Fund exceeds that of the average annual provincial revenues from oil and gas
- Pay down or offset the new debts and liabilities incurred by the current Government
- Sustainably lower personal and business taxes and fees
- Invest in infrastructure critical to economic growth and development
- Establish endowments dedicated to excellence in research and education
Market-Driven Diversification Strategy
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 as skilled workers are highly mobile and will go wherever the best opportunities arise. A technological breakthrough is often not commercialized where created.
The PC Government recently convened a competitiveness council to determine why the Alberta Advantage is disappearing. The Council concluded what most Albertans already know: over-regulation, out-of-control spending and fiscal mismanagement are the root cause of the problem. Despite the Council’s correct diagnosis, it got the prescription horribly wrong by recommending higher taxes to balance the budget while encouraging the Government to spend non-renewable resource revenues on grants and funding for private businesses and initiatives it feels will help diversify the economy. In effect, the Council recommends institutionalizing the Government’s ill advised role in picking winners and losers in the private economy. This type of strategy has repeatedly failed around the world and it is certainly not the Alberta way.
To strengthen and successfully diversify Alberta’s economy, we must make our province more fiscally attractive to the brightest people, best entrepreneurs and most successful businesses. We can accomplish this by reducing taxes and red tape while maintaining solid core infrastructure and social programs. The current PC Government has failed to do this.
In fact, under their administration Alberta has lost much of its tax advantage and has become one of the most over-regulated jurisdictions in all of Canada.
Albertans deserve better. A Wildrose Government will diversify Alberta’s economy by introducing the following initiatives:
- Implement the Spending Control and Heritage Savings Strategies outlined in the previous sections in order to grow the Heritage Fund so that annual interest earned from the Fund is enough to end our dependence on non-renewable resource revenues, permanently maintain well funded core social programs, and sustainably lower personal and business taxes and fees for all Alberta residents and businesses.
- Actively review and reduce the unnecessary regulatory burdens faced by most Alberta industries that harm their competitiveness with other North American jurisdictions.
- Commit to proactively restoring and maintaining the most competitive tax rates in Canada for individuals and businesses; continue inflation-proofing the basic personal and spousal income tax exemption in order to maintain low taxes for all Albertans – particularly those with modest incomes.
- Implement broad based tax incentives (i.e. accelerated capital cost allowance, flow through shares, etc) to stimulate research, investment and economic activity across all sectors.
- End the current provincial government’s failed strategy of handing out grants to corporations of its choosing.
Industry Competitiveness (Arts, Tourism and Forestry)
The Wildrose Energy and Agriculture policies (as outlined in separate policy statements) will make Alberta’s largest two industries much more competitive than they have been under the current PC Government.
And although Alberta is better known for its vast non-renewable resources and millions of acres of fertile agricultural land, there are many other industries important to Alberta’s continued economic growth. Forestry, arts and culture, tourism, research, technology development, construction, manufacturing, food processing, the service industry and others account for billions of our province’s gross domestic product.
The PCs poor handling of Alberta’s arts, tourism and forestry sectors in particular, has resulted in continued struggle and hardship for these industries. Having world-class artists and cultural institutions plays an essential role not only in attracting the best people and industries to our province, but also in ensuring that talented young Albertans choose to stay here. Great musical, theatrical, and other artistic events and institutions also enhance the widespread economic boost that tourism provides Alberta’s economy.
World-class artists from Alberta can also play a vital diplomatic role in a globalized political and economic environment. By telling the Alberta story far more effectively than any political delegation, great artists can be the best ambassadors we have.
The current government delivered a serious setback to our film and television industry when they failed to match the tax credit system in other jurisdictions, while maintaining direct grants to projects chosen by the Government. The PCs proved how bad government is at picking winners and losers when it was found they had given $50,000 to a film attacking the very oilsands they have spent billions attempting to defend. A generous film and television tax credit regime will work much better, keeping government out of the business of picking winners and losers, as it does in other jurisdictions.
In Forestry, the Government has been placing additional expectations on the industry to address the demands that have come from changes within the sector as well as those imposed by governments. This added responsibility comes at a cost, whether in termsof time and effort or in the increased risk of companies losing access to forest resources because of unexpected political interference.
The existing command and control authority in legislation regulating this sector has permitted the Government to off-load and delegate its responsibilities to business thereby significantly decreasing the industry’s competitiveness. There needs to be a re-think of the province’s land-use planning and administrative processes to facilitate the forestry industry’s economic viability and ability to effectively help the Government steward this valuable natural resource.
Get it Right
Albertans deserve better. A Wildrose Government will implement the following initiatives to make the arts, tourism and forestry industries more competitive:
- Bring Alberta’s film industry back to life by implementing a generous tax credit regime comparable to other successful North American jurisdictions.
- Increase the charitable tax credit for donations to non-profit groups (including organizations that fund arts and culture) to be at least as or more generous than the tax credit given for political contributions.
- Promote stay-in-Alberta tourism through an industry sponsored rewards program such as the, Stamp-Around-Alberta initiative, for visiting multiple attractions across the province.
- Significantly reduce timber royalties and temporarily ease regulations on pine beetle damaged timber to encourage its expedited harvest and replanting.
- Support an outcome-based forest policy that balances social and environmental objectives rather than micro-managing by government prescription.
- Work proactively with Alberta’s forest industry and Federal Government to ensure a fair and equitable Softwood Lumber Agreement with the US and trade agreements with other countries.
- Commit to consulting with the forest industry on any changes to government policy or regulatory items which may impact forest resource sustainability or cost structure of the industry.
For more on Wildrose Caucus’ Economic policies, go to: Wildrose Caucus Policies