RESOURCE SPENDING ‘ MORALLY FLAWED’
Such revenues belong to current and future generations, former minister says
David Emerson, a former senior federal cabinet minister, says the B. C. government’s economic plan is “morally flawed” because it promises to use the bounty of non- renewable resource exports to pay for current social programs and tax breaks.
Emerson said B. C. is mimicking mistakes made by successive Alberta governments that have “squandered” that province’s vast energy wealth.
Emerson, in an analysis in Policy Options magazine and in a subsequent interview with The Vancouver Sun, argues that non- renewable resources are the property of both current and future generations.
He said B. C.’ s proposal to use those revenues for social services or even to cut taxes is flawed because it leaves future generations saddled with expensive programs and potentially limited revenue to cover those costs.
“You’re basically saying, ‘ let’s grab what we can and let the kids pay the bills,’ ” said Emerson, who was a senior minister for both Liberal Prime Minister Paul Martin and Conservative Prime Minister Stephen Harper.
Using the term “morally flawed” in the Policy Options essay “might be a little strong, but I used it anyway because we have a moral imperative to our kids and grandkids.”
He said federal and provincial politicians are too focused on the 24- hour news cycle and the immediacy of social media reaction to policy decisions. “The long term is the next election” rather than future generations, he wrote in Policy Options.
Taxes and royalties should be treated as an asset on the balance sheet, rather than income, and used to invest in long- term infrastructure that will generate future sustainable economic growth, he argued.
He also said provincial and federal governments should follow Norway’s lead and set up sovereign wealth funds that invest in infrastructure, research, and foreign securities and assets.
The income from overseas investments could then be used to pay for programs, and the purchase of foreign securities would ease upward pressure on the Canadian dollar, Emerson argued.
The Clark government’s February throne speech announced plans to create a Prosperity Fund to take advantage of an expected boom in B. C. natural gas exports.
While the speech mentioned possible investments in longterm infrastructure projects, it also indicated the fund could be used for social services and even elimination of the provincial sales tax.
“That scared me a little bit, because it sounds very much like we’re going to monetize the natural resource assets,” he told The Sun. “I fear what the government is proposing in B. C. is a little bit similar to the problems Alberta got themselves into.
“The bottom line is, nonrenewable resources belong to all generations, and when you monetize them — when you turn them into cash — that cash should be used to deliver benefits across the generations, not just to pay for today’s government services. Those ought to be paid out of today’s tax revenues from today’s taxpayers.”
Emerson argues that Alberta covers roughly 20 per cent of its day- to- day government expenses with revenues from the oil and gas industry. He said Albertans are thus given the impression costly public services and low taxes are affordable.
“The message is, ‘ Gee we’re rich, we don’t need a sales tax.’ What they don’t say is that they’re using resource taxes that belong to all generations to pay for our ( present) consumption.”
Emerson, an Alberta native and former forest industry executive who once served as a senior B. C. government bureaucrat, said governments should make the politically challenging decision to cut spending and increase taxes in order to balance budgets.
Emerson said Ottawa also hasn’t confronted the issue.
“I’m puzzled by the federal government because … I actually have never seen a focused analysis of the contribution of resource revenues to the federal” treasury, he said.
“That’s problematic, because a lot of the federal fiscal position is really driven off natural resource revenues.”