“Opening new markets across Canada and around the world has become job one for this government.”—Finance Minister Horner on the 2013 Budget priorities, Alberta Hansard p1440.
That simple sentence tells you all you need to know about Budget 2013 and how your tax dollars are going to be spent in the coming years. What it doesn’t explain is why the government thinks that it’s in the oil and gas business.
But I’m getting ahead of myself.
On March 7, 2013 I dragged myself out of bed (I had the flu) to watch Finance Minister Horner deliver the “transformational” budget. What I saw was Mr Horner unfurling a baffling budget that would plunge Alberta into debt and the PC caucus go all dewy-eyed as he invoked the legacy of Peter Lougheed (really guys, this is wearing a little thin).
Mr Horner set out three priorities:*
- Investing in Alberta families and communities by investing in schools, health facilities and roads. Isn’t that their job? They weren’t planning on investing in BC families and communities by any chance were they?
- Ensuring that the government lives within its means by “challenging every dollar this government spends.” That’s definitely their job. I’d hardly expect a budget priority that said we’ll waste the taxpayers’ money at every opportunity.
- Ensuring that Alberta’s resources—food, technology and especially oil and gas, get to market for the highest possible price. A glimmer of hope for agriculture and technology that sputtered and died under Mr Horner’s relentless focus on oil and gas and his pitiful defense of the government’s forecasting fiasco of 2012.
The PCs were deliriously happy with Mr Horner’s brilliant speech. The rest of us were stunned.
Budget 2013 is all about the coddling the oil and gas industry—at the expense of the young, the old, and the sick and those who educate and care for them. The government is under the delusion that it is capable of playing with the Big Boys instead of being played by them.
Big Boy Rules
Given that the government doesn’t own oil and gas, or the companies that extract it, or the companies that transport it, it’s impossible for the government to achieve its #1 priority—getting our natural resources to markets for the highest possible price. That’s industry’s job, not the government’s. But pause for a moment to consider what would happen if government pulled on its Big Boy pants and played by Big Boy rules.
First Rule: Deliver Results
If the government were a business its shares would be in the tank and it would have been ousted by its shareholders in 2011. ’Nuff said.
Second Rule: Develop A Robust Business Strategy
The only way an executive leadership team (the Premier and Cabinet in this case) could possibly hold on to their jobs with its appalling track record would be to come up with a creative new business model—a “transformational” budget might do the trick.
Ms Redford hasn’t proposed a new tax structure or a new royalty structure or a new anything (other than debt), so what’s her strategy?
Are you ready for this—it’s hope! In the words of renowned economist Jack Mintz: “There is really no plan in this budget except for hope—hope that prices come back and they have money coming back in.”**
Third Rule: Don’t Do Something Stupid
When times get tough (say for example you’re sitting on a $2 billion deficit when you promised to break even) an executive leadership team has to resist the urge to do something really stupid while it’s waiting for the markets to rebound.
Ms Redford and her team must have missed the memo. They’ve decided that the only way to avoid drowning in the rising deficit is to take on more debt—something in the $8 to $12 billion range. They say this makes sense because interest rates are low.
To which Mr Mintz replies: “There’s no such thing as a free lunch. A province like Alberta should not be taking on gross debt”.*** Period.
Fourth Rule: Be Honest With Your Shareholders—especially when times are tough
Big Boys have to disclose the financial health of their businesses in clear, unambiguous language. It’s the law. Failure to do so results in fines to the company and jail time for its executives.
Budget 2013 is a marvel of opacity. Instead of presenting one budget Mr Horner presented three: an operating budget, a capital budget and a savings budget. This obscures the total amount of the deficit and the only way to figure it out is to ask (good luck with that). The government says the all-in deficit is $2 billion. The opposition parties put it closer to $5 billion.
That’s a material difference and enough to invoke the ire of the securities commissions in the Big Boy world, but not in the world of politics.
A Transformational Budget
A truly transformational budget would have restructured the revenue model instead of saddling Albertans with billions in debt. It would have eliminated government waste and corporate welfare and made the Big Boys pay their fair share of taxes and royalties.
It would have provided a framework for fair negotiations with public servants instead of drawing a line in the sand and daring the doctors, nurses, and teachers to cross it.
It would have provided incentives to diversify our economy. It would have encouraged curiosity-driven education to underpin non-resource based businesses, instead of forcing universities and colleges to push a curriculum that feeds the oil and gas industry. Above all it would not put the interests of the oil and gas Big Boys over that of Albertans.
A transformational budget needs political courage—something this government sadly lacks.
Ottawa entrepreneur John Kelly said it best: “When the horse is dead. Dismount”. The PC horse is dead, luckily there are a number of horses waiting in the paddock—pick one and ride!
**Calgary Herald Mar 8, 2013, D1
***Calgary Herald, Mar 8, 2013, A3