Details on Diversification Scarce as Alberta Cuts Corporate Taxes, Reannounces Keystone Subsidy
A faster corporate tax cut, a C$600-million infrastructure investment, and reannounced funding that was already allocated in the province’s spring budget are key elements of a highly-touted, $10-billion recovery plan for Alberta that is already taking fire for being far more tame and fuzzy than its architects claim.
On Monday, Premier Jason Kenney said his government expected to create 50,000 jobs by 2022 with a program that he described as the “largest infrastructure build” in Alberta history, CBC reports. The plan was also touted as a bold move toward a long-overdue diversification of Alberta’s fossil-dependent economy. But just days before the announcement, Finance Minister Travis Toews said the government would only present an “architecture” for diversifying the provincial economy, adding that “he thinks there is only so much a government can do aside from creating an environment where other industries can flourish,” the Globe and Mail says.
Like this story? Subscribe to The Energy Mix and never miss an edition of our free e-digest.
In the end, out of the total $10-billion package, “$6.9 billion was already earmarked in the spring budget and it’s unclear just how much of the $3 billion left over is new spending that hasn’t previously been announced,” CBC writes. “CBC News is awaiting further clarification from the government. The province did say at least $600 million will be new, large-scale projects that will start construction this summer, but no details were immediately available.”
Kenney “also said his government would speed up the implementation of corporate tax cuts, slashing the rate to 8% from 10% starting on July 1,” CBC adds. “That’s 1.5 years ahead of schedule. The government claims the cuts will create an additional 55,000 jobs by 2022 and attract $4 billion in investment annually, starting in 2023.”
The province is also diverting $1 million from its hapless fossil energy “war room” to cover a four-month extension for its inquiry into alleged “foreign-funded radicals” opposing fossil development in Alberta.
The day after the announcement, U.S.-based Fitch Ratings announced it was reducing the province’s credit rating from AA to AA-, citing “a concern with sharply higher borrowing done by the province to deal with the economic fallout of the COVID-19 pandemic,” The Canadian Press reports. The news agency says the province’s budget deficit is on track to increase from $7 to $20 billion this year.
In its story leading up to the announcement, the Globe said the provincial plan would be “laid out in two stages: short-term investments centred on infrastructure and longer-term efforts to diversify the economy, according to a senior government source.” The paper added that “long-term diversification plans to help specific sectors will be announced by the government in the coming weeks, but the source said they would include items such as logistics hubs for e-commerce, agriculture, technology, and rare mineral development.”
But that was where Toews said he didn’t see much of a role for government. “I’ve come to the conclusion that, in some ways, there are limited things a government can do to truly diversify an economy,” he told the Globe. “There are a lot of things the government can do to get in the way of true diversification, and so our view is that we want to get government out of the way. We want to ensure we have the most attractive business environment where creative and innovative Albertans and businesses can allocate capital into sectors of the economy where they believe there’s promise and a future.”
On iPolitics, self-described “journalistic gadabout” Graham Thomson says the Kenney announcement “is either a bold and ambitious plan or a hackneyed and desperate gamble,” depending on who you ask. Thomson’s own view is that the recovery plan “is still fuzzy. Kenney says he’ll be releasing more details over the summer. Right now, it glances in the direction of diversification but remains overly focused on fossil fuels, cutting already low taxes, and ramping up a public relations campaign,” making it “neither bold nor ambitious”.
Thomson also echoes the observation that some of the big-ticket items in the announcement—including Alberta’s lavish, $1.5-billion subsidy to the Keystone XL pipeline—are not new investments. “Re-announcing the project doesn’t change the fact that it is a gamble,” he writes. “Joe Biden, the Democratic presidential candidate, has vowed to scrap the scheme should he win this year’s election.” [And by the way, in Thursday’s polling summary on electoral-vote.com, Biden was leading the current occupant of the White House by 368 electoral votes to 132, with 270 needed to win. Just 122 more sleeps until the vote, 200 until the inauguration.—Ed.]
CBC and the Globe have reaction from opposition politicians, Calgary Mayor Naheed Nenshi, the Canadian Association of Petroleum Producers, and at least two technology entrepreneurs who saw little to cheer about in Kenney’s announcement.