Province is still riding the royalty roller-coaster

It's not uncommon in the aftermath of an election for a new government to embark on a dramatically different policy course while denouncing the previous approach as reckless and irresponsible. It's quite uncommon, though, to see that from a re-elected government.

Yet, that was the takeaway from the premier's address to Albertans last week. The pre-election budget loaded with record levels of spending topped off with a campaign tax cut promise is precisely the sort of approach that Alberta must now abandon. And we are to trust the government that succumbed to that temptation a year ago to be the guardians against such impulsive and imprudent behaviour in the future.

Albertans are right to be skeptical. It's not the first time we've heard talk of getting off the royalty roller-coaster and we'd be foolish to assume it will be the last. The premier's not wrong to lament the problem of Alberta governments wanting to have it both ways with low taxes and high levels of spending, but she's just as guilty of it.

It might seem harsh to be critical of an elected official who's willing to acknowledge an important and inconvenient truth. Conversely, though, no government should get a pass on such a cynical flip-flop. As University of Calgary economist Trevor Tombe noted during the election: “Any proposal that lowers revenue or increases expenditures increases our reliance on natural resource revenues.” The premier was undoubtedly aware of this fact and yet she pressed ahead.

Now, the UCP'S promised tax cut — which we were told would “boost the economy” and “provide meaningful, timely tax relief to Albertans at a time when they need it most” — is indefinitely on hold. The premier said it would be

This week's budget will give deeper insight into the commitment to this new direction.

“phased in responsibly” down the road, but it's hard to see how the fiscal landscape is going to look significantly different in a year or two.

It's quite a task the government has laid out for itself. As noted in the premier's address, the 2023 budget “required about $16 billion of resource royalties just to balance our roughly $70-billion provincial budget.” That's a massive deficit absent that resource revenue, and the premier is also promising no spending cuts, no new taxes and no deficit. Plus, we're not yet debt-free.

(It was also interesting to hear the premier make the argument against higher taxes while also touting Norway's success in building up a massive wealth fund. Norway has much higher tax rates, in addition to having a 25 per cent sales tax. It's unclear whether this is a model to copy or to shun.)

It is truly a shame our Heritage Fund is nowhere near the level it could be. A steady annual flow of $10 billion or $20 billion in interest from such a fund would be an ideal replacement for the volatility of annual resource revenues. A desire and a commitment to achieving that is quite laudable indeed.

This week's budget will give deeper insight into the commitment to this new direction.

But what will be more revealing is the 2027 budget, which will come down on the eve of the next provincial election. If that budget avoids pricey pre-election goodies, and it's followed by an election campaign that eschews expensive promises, it will represent a powerful signal as to the government's commitment and intent.

Of course, it's also fair to ask why such a disciplined fiscal approach has not been the centrepiece of any successful election campaign in recent memory. If governments are comfortable tabling budgets with high spending and low taxes, it must be because they're convinced it's what the voters want. Part of the test here falls on all of us.

But it's not unreasonable to expect honesty and consistency. Time will tell whether this premier is prepared to deliver that.