Alberta looks to private sector and pipelines to deliver better times
Kenney government reveals 'ambitious' plan for economic growth
Last spring, United Conservative Party Leader Jason Kenney captured the premier's office on the promise of more jobs and better economic fortunes.
To use a baseball analogy, he called his shot.
On Thursday, his government took its first big swing — unveiling a budget that emphasizes lower corporate taxes, less red tape and, of course, more pipelines to help turn things around in Alberta's economy.
If all goes according to the UCP's plans, Albertans will be back to work at pre-recession levels by 2023 — the same year the government is forecasting its first budget surplus in years.
Alberta will be transformed, it says, into one of the most attractive jurisdictions on the continent for business.
"This is a budget that is ambitious in its drive for economic growth," Finance Minister Travis Toews told the legislature.
But there are few guarantees in Alberta these days and this is a budget that comes with a note of caution.
Indeed, it illustrates two risk scenarios that could sideswipe Alberta's economy: a global recession and cancelled pipelines. It would be hard to call either scenario outlandish these days.
If a global recession were to take hold in the first quarter of next year, Alberta's resource revenues and income taxes would be lower by about $4.2 billion annually, according to the budget.
In a scenario where three key pipeline projects — Trans Mountain, Keystone XL and Line 3 — are permanently cancelled, oil production is expected to fall. That would hurt investment and employment, too. Under that scenario, lost resource revenues and income taxes are estimated at over $5 billion between 2019 and 2023.
Those are the gloomiest of scenarios.
The UCP government, however, has built a budget that foresees better times — though it doesn't assume a quick rebound.
It forecasts real GDP growth to slow to 0.6 per cent in 2019, and then improve to 2.7 per cent in 2020, and then again to three per cent over the medium term.
The plan, which includes cuts to public spending, is to halt growing deficits and produce a surplus by 2023 of nearly $600 million.
But it's a plan that needs a little help.
The government is looking for at least two of three pipelines to be built: Enbridge's Line 3 in early 2021,the Trans Mountain Expansion in late 2022, and Keystone XL in early 2023.
It's also anticipating rising revenues from bitumen royalties and other resource dollars. It forecasts resource revenues to grow to $8.6 billion by 2022-23, up from $6.5 billion for 2019-20.
University of Calgary economist Trevor Tombe said it's reasonable to assume two of the pipelines do get built. He said the government's forecast of greater revenues from resource royalties makes sense, too.
"I have no concerns there, although I'll note that, of course, royalties are volatile and unpredictable," Tombe said.
"They're a key part of this plan. They need 12 per cent of the budget to come in the form of royalties in 2022. That's a significant share, although I'll note it's lower than the past."
The government is also hoping to lure corporations — and investment — back to the province.
One way is by reducing the corporate income tax rate to eight per cent, from 12 per cent, over four years. The government introduced that strategy earlier this year, but it received added emphasis again Thursday.
"The weight of historical evidence overwhelmingly shows that when we improve our corporate tax advantage, our provincial GDP goes up and our share of national GDP increases," Toews said in his budget speech.
"So do jobs. And so do government revenues."
The NDP has challenged the strategy, branding it a giveaway to big corporations.
Earlier this week, the NDP's energy critic, Irfan Sabir, was critical of the corporate tax cuts, charging that the "handout" hasn't stopped job losses in the oilpatch.
But the UCP believes it's on a path to making Alberta among the most attractive investment destination in North America by 2022. This, along with improved market access for Alberta oil, "will set the stage for improved investment."
The budget also confirmed a number of other promised initiatives intended to help the private sector, including efforts to reduce red tape.
However, economist Tombe noted that the government also announced steps to eliminate five tax credits, including the the Alberta Investor Tax Credit, which aimed to help diversify the provincial economy and create new jobs in fields like information technology and clean tech.
"I think that's something that will discourage activity in areas that were benefiting from the Albert Investor Tax Credit, for example," Tombe said. "I would have preferred to see the program expanded."
The government could well face questions about whether it's still leaning too hard on fossil fuels and whether it's doing enough to address climate change. Cuts to post-secondary education and tuition hikes will also raise concerns.
Tombe, meanwhile, cautioned about overstating what a budget can do.
"I don't think we should view the budget as a tool to kick-start the economy," he said.
"The recovery is ongoing. Yes, it is slow and has been for a year and a half. But the pace of the recovery is expected to improve. And that's the case regardless of what changes were made in the budget."
For now, though, the Alberta government has its plan, one that its finance minister is calling "a turning point."
Many Albertans will hope so.