You need to have money to spend it — even on needed programs

NDP’s ‘ high-cost’ policies discourage investment that pays the freight

As the provincial government plods along to its budget in slow motion, the local NDP will need to find its own reason for why attracting investment to Alberta should matter.

Here is one example that should make sense: their own recent and laudable funding announcement of an extra $15 million annually for women’s shelters across Alberta.

When Premier Rachel Notley’s government announced the extra dollars for protecting abused women and children, it demonstrated an awareness of an oft-overlooked cohort where a (relatively) small amount of money can make a substantial difference to those in high-risk emergency situations.

But the ability of the provincial government to fund that priority, and anything else they might favour — justifiable (women’s shelters) or not (subsidies to corporations to switch from coal, rather than let the coal clock run out) — is dependent on a healthy private sector. It’s that private activity that fills Alberta’s coffers with a cornucopia of tax and royalty revenues that ultimately allows governments to spend a dime.

To get to the basics, Alberta is suffering through a massive drop in private-sector business investment. That investment is the money spent on construct- ing oilsands pits, office buildings, commercial real estate and the like ( but excludes investment in home construction in the Statistics Canada data used here).

Alberta has been here before, most recently in 2009. There is no guarantee the province will bounce back as quickly this time if oil stays low.

Also, should the NDP government continue on a path to raise the cost of doing business in Alberta, just as cash flow is declining because of low oil prices, one can bet a cheap mortgage that a recovery akin to post-2009 will not happen.

For the past 10 years, privatesector business investment in Alberta ranged from a low of $38 billion (in 2009) and soared upward, to almost $73 billion (in 2013), the latest year available for this statistic (and all figures in 2007 dollars).

To put that in some context, since 2003, Alberta attracted more private sector investment annually, on average, than did Ontario, a province with more than three times Alberta’s population. On average, every year since 2003, Alberta garnered $53.5 billion, Ontario $41 billion, and Quebec just $22.7 billion.

But such investment in Alberta will plummet by tens of billions of dollars this year, perhaps as low as the $38 billion observed in 2009.

So, tens of billions less will be spent on business investment, and thus tens of billions less on jobs and incomes in 2015 alone, relative to recent years.

When such a dramatic withdrawal of capital investment occurs in one year, to make investing in Alberta more expensive ( just as companies try to cut costs in order to survive the plunge) is folly.

But that “higher-cost” policy is what the NDP promised in its pre-election platform. It’s exactly what’s being implemented with the NDP’s higher taxes, decrees for higher wages — regardless of real-world conditions — and possible upped royalty rates yet to come.

Problem: An NDP made-inAlberta “high-cost” policy will not attract back the tens of billions of dollars needed to restore Alberta jobs, incomes, previously gushing tax receipts and swollen royalty revenues. A high-cost policy will do the opposite.

That lost business investment — already provoked by $45 oil and now exacerbated by poor provincial fiscal policy, instead translates into less corporate tax and royalty revenues, less from personal income taxes, and shrunken revenue in 2015 and beyond.

What the NDP needs to understand is that to permanently spend tax money even on justifiable initiatives — $15 million to help women to escape abuse — Alberta needs the tens of billions in private investment money to return. That massive capital flow is what fills up the tax coffers from which the government will cut cheques.