Think tank proposes aggressive cuts followed by new tax in Alberta

Premier Jason Kenney speaks about budget priorities at the Alberta Urban Municipalities Association’s convention at the Edmonton Convention Centre on Friday, Sept. 27, 2019. Ian Kucerak / Postmedia

Aggressively cutting per-capita expenditures on health and education to balance the provincial budget, followed by the introduction of a three per cent consumption tax, could help “correct the province’s fiscal course,” a proposed shadow budget released by the C.D. Howe Institute said on Thursday.

The upcoming provincial budget, to be introduced by the UCP on Oct. 24, is a “once-in-a-generation” opportunity for the UCP said Grant Bishop, associate director of the Toronto-based think tank in the report entitled “Decision Time.”

“The Shadow Budget illustrates that, by careful spending restraint and restructuring of its revenues, Alberta could move to saving resource revenues and increasing investment income for future generations,” wrote Bishop. “But long-term fiscal sustainability will require near-term measures to restore Alberta’s budget balance and then sustain surpluses.”

Bishop recommends a top-line spending freeze of the province’s purse, among aggressive real per capita spending cuts — 11 per cent to education and 13.6 per cent to health care — over the next four years in order to balance the provincial budget by 2022-23.

Once the budget is balanced, he argues, a three per cent consumption tax can be introduced and paid into the Alberta Heritage Savings Trust Fund in order to share current extractive resource benefits to allow “Alberta to save for a sustainable fiscal future.”

The shadow budget comes on the heels of a Blue Ribbon panel report led by former Saskatchewan finance minister Janice McKinnon, which recommends sweeping cuts to spending across justice, health, education and other big-ticket expenditures.

These cuts could be achieved, Bishop said, by slashing physician and nurse salaries — which are significantly higher than in other provinces — as well as increasing class sizes in the education system, which are already at the brink in many areas.

While the UCP pledged in its platform not to reduce spending on health or education, Premier Jason Kenney has stated his government’s first budget will be one of restraint.

While Bishop’s budget recommends lower corporate taxes and reducing the marginal tax rate for the lowest income bracket, NDP Leader Rachel Notley argued the UCP’s $4.5 billion corporate tax cut earlier this year will force essential social services to weather the pressure put on the province’s finances.

Kenney has also vowed the budget will be nothing like the deep cuts made in former Progressive Conservative premier Ralph Klein’s first budget in 1993.

“The key point is that we cannot balance the budget, we cannot prevent a fiscal crisis in this province unless we begin restraining spending now,” Kenney said.

— With files from Postmedia