Alberta
Alberta awash in corporate welfare
From the Fraser Institute
By Matthew Lau
To understand Ottawa’s negative impact on Alberta’s economy and living standards, juxtapose two recent pieces of data.
First, in July the Trudeau government made three separate “economic development” spending announcements in Alberta, totalling more than $80 million and affecting 37 different projects related to the “green economy,” clean technology and agriculture. And second, as noted in a new essay by Fraser Institute senior fellow Kenneth Green, inflation-adjusted business investment (excluding residential structures) in Canada’s extraction sector (mining, quarrying, oil and gas) fell 51.2 per cent from 2014 to 2022.
The productivity gains that raise living standards and improve economic conditions rely on business investment. But business investment in Canada has declined over the past decade and total economic growth per person (inflation-adjusted) from Q3-2015 through to Q1-2024 has been less than 1 per cent versus robust growth of nearly 16 per cent in the United States over the same period.
For Canada’s extraction sector, as Green documents, federal policies—new fuel regulations, extended review processes on major infrastructure projects, an effective ban on oil shipments on British Columbia’s northern coast, a hard greenhouse gas emissions cap targeting oil and gas, and other regulatory initiatives—are largely to blame for the massive decline in investment.
Meanwhile, as Ottawa impedes private investment, its latest bundle of economic development announcements underscores its strategy to have government take the lead in allocating economic resources, whether for infrastructure and public institutions or for corporate welfare to private companies.
Consider these federally-subsidized projects.
A gas cloud imaging company received $4.1 million from taxpayers to expand marketing, operations and product development. The Battery Metals Association of Canada received $850,000 to “support growth of the battery metals sector in Western Canada by enhancing collaboration and education stakeholders.” A food manufacturer in Lethbridge received $5.2 million to increase production of plant-based protein products. Ermineskin Cree Nation received nearly $400,000 for a feasibility study for a new solar farm. The Town of Coronation received almost $900,000 to renovate and retrofit two buildings into a business incubator. The Petroleum Technology Alliance Canada received $400,000 for marketing and other support to help boost clean technology product exports. And so on.
When the Trudeau government announced all this corporate welfare and spending, it naturally claimed it create economic growth and good jobs. But corporate welfare doesn’t create growth and good jobs, it only directs resources (including labour) to subsidized sectors and businesses and away from sectors and businesses that must be more heavily taxed to support the subsidies. The effect of government initiatives that reduce private investment and replace it with government spending is a net economic loss.
As 20th-century business and economics journalist Henry Hazlitt put it, the case for government directing investment (instead of the private sector) relies on politicians and bureaucrats—who did not earn the money and to whom the money does not belong—investing that money wisely and with almost perfect foresight. Of course, that’s preposterous.
Alas, this replacement of private-sector investment with public spending is happening not only in Alberta but across Canada today due to the Trudeau government’s fiscal policies. Lower productivity and lower living standards, the data show, are the unhappy results.
Author:
From the Fraser Institute
By Tegan Hill
According to the recent mid-year update tabled Thursday, the Smith government projects a $4.6 billion surplus in 2024/25, up from the $2.9 billion surplus projected just a few months ago. Despite the good news, Premier Smith must reduce spending to avoid budget deficits.
The fiscal update projects resource revenue of $20.3 billion in 2024/25. Today’s relatively high—but very volatile—resource revenue (including oil and gas royalties) is helping finance today’s spending and maintain a balanced budget. But it will not last forever.
For perspective, in just the last decade the Alberta government’s annual resource revenue has been as low as $2.8 billion (2015/16) and as high as $25.2 billion (2022/23).
And while the resource revenue rollercoaster is currently in Alberta’s favor, Finance Minister Nate Horner acknowledges that “risks are on the rise” as oil prices have dropped considerably and forecasters are projecting downward pressure on prices—all of which impacts resource revenue.
In fact, the government’s own estimates show a $1 change in oil prices results in an estimated $630 million revenue swing. So while the Smith government plans to maintain a surplus in 2024/25, a small change in oil prices could quickly plunge Alberta back into deficit. Premier Smith has warned that her government may fall into a budget deficit this fiscal year.
This should come as no surprise. Alberta’s been on the resource revenue rollercoaster for decades. Successive governments have increased spending during the good times of high resource revenue, but failed to rein in spending when resource revenues fell.
Previous research has shown that, in Alberta, a $1 increase in resource revenue is associated with an estimated 56-cent increase in program spending the following fiscal year (on a per-person, inflation-adjusted basis). However, a decline in resource revenue is not similarly associated with a reduction in program spending. This pattern has led to historically high levels of government spending—and budget deficits—even in more recent years.
Consider this: If this fiscal year the Smith government received an average level of resource revenue (based on levels over the last 10 years), it would receive approximately $13,000 per Albertan. Yet the government plans to spend nearly $15,000 per Albertan this fiscal year (after adjusting for inflation). That’s a huge gap of roughly $2,000—and it means the government is continuing to take big risks with the provincial budget.
Of course, if the government falls back into deficit there are implications for everyday Albertans.
When the government runs a deficit, it accumulates debt, which Albertans must pay to service. In 2024/25, the government’s debt interest payments will cost each Albertan nearly $650. That’s largely because, despite running surpluses over the last few years, Albertans are still paying for debt accumulated during the most recent string of deficits from 2008/09 to 2020/21 (excluding 2014/15), which only ended when the government enjoyed an unexpected windfall in resource revenue in 2021/22.
According to Thursday’s mid-year fiscal update, Alberta’s finances continue to be at risk. To avoid deficits, the Smith government should meaningfully reduce spending so that it’s aligned with more reliable, stable levels of revenue.
Author:
Better, faster, more affordable auto insurance
Alberta’s government is introducing a new auto insurance system that will provide better and faster services to Albertans while reducing auto insurance premiums.
After hearing from more than 16,000 Albertans through an online survey about their priorities for auto insurance policies, Alberta’s government is introducing a new privately delivered, care-focused auto insurance system.
Right now, insurance in the province is not affordable or care focused. Despite high premiums, Albertans injured in collisions do not get the timely medical care and income support they need in a system that is complex to navigate. When fully implemented, Alberta’s new auto insurance system will deliver better and faster care for those involved in collisions, and Albertans will see cost savings up to $400 per year.
“Albertans have been clear they need an auto insurance system that provides better, faster care and is more affordable. When it’s implemented, our new privately delivered, care-centred insurance system will put the focus on Albertans’ recovery, providing more effective support and will deliver lower rates.”
“High auto insurance rates put strain on Albertans. By shifting to a system that offers improved benefits and support, we are providing better and faster care to Albertans, with lower costs.”
Albertans who suffer injuries due to a collision currently wait months for a simple claim to be resolved and can wait years for claims related to more serious and life-changing injuries to addressed. Additionally, the medical and financial benefits they receive often expire before they’re fully recovered.
Under the new system, Albertans who suffer catastrophic injuries will receive treatment and care for the rest of their lives. Those who sustain serious injuries will receive treatment until they are fully recovered. These changes mirror and build upon the Saskatchewan insurance model, where at-fault drivers can be sued for pain and suffering damages if they are convicted of a criminal offence, such as impaired driving or dangerous driving, or conviction of certain offenses under the Traffic Safety Act.
Work on this new auto insurance system will require legislation in the spring of 2025. In order to reconfigure auto insurance policies for 3.4 million Albertans, auto insurance companies need time to create and implement the new system. Alberta’s government expects the new system to be fully implemented by January 2027.
In the interim, starting in January 2025, the good driver rate cap will be adjusted to a 7.5% increase due to high legal costs, increasing vehicle damage repair costs and natural disaster costs. This protects good drivers from significant rate increases while ensuring that auto insurance providers remain financially viable in Alberta.
Albertans have been clear that they still want premiums to be based on risk. Bad drivers will continue to pay higher premiums than good drivers.
By providing significantly enhanced medical, rehabilitation and income support benefits, this system supports Albertans injured in collisions while reducing the impact of litigation costs on the amount that Albertans pay for their insurance.
“Keeping more money in Albertans’ pockets is one of the best ways to address the rising cost of living. This shift to a care-first automobile insurance system will do just that by helping lower premiums for people across the province.”
Quick facts
- Alberta’s government commissioned two auto insurance reports, which showed that legal fees and litigation costs tied to the province’s current system significantly increase premiums.
- A 2023 report by MNP shows
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