Alberta expecting another gusher in budget ahead of provincial election
Alberta is scheduled to introduce its budget Tuesday — the last before a spring provincial election — with political observers wondering what the province will do with all its billions of extra petrodollars.
“Any budget that’s leading into an election is always one that contains quite a few goodies,” said University of Calgary economist Trevor Tombe.
“Combine that with a government with significantly higher resource royalties than planned, and you have a lot of scope for big announcements.”
Finance Minister Travis Toews, in his four years in the post, has tabled budgets that began with multibillion-dollar deficits and recently spotlighted multibillion-dollar surpluses due to rebounding oil and gas revenues.
The province said in its mid-year forecast that it’s expected to finish the current fiscal year, which concludes at the end of March, with a $12.3-billion surplus on the strength of high oil prices and oilsands operations reaching the higher post-payout stage of production.
Tombe said if the benchmark West Texas Intermediate oil price stays robust at US$80 barrel in the coming years, the province could once again, by decade’s end, eradicate its $80-billion taxpayer-supported debt.
WTI is currently trading just under $80 a barrel.
“I suspect we’ll see less windfall (in the budget) because spending will almost surely grow,” said Tombe.
Premier Danielle Smith’s United Conservative Party government has already announced and begun implementing a $2.8 billion program of direct payments and tax cuts to help Albertans deal with inflation.
In recent days, Health Minister Jason Copping has promised $158 million in new spending to recruit health staff and $243 million to expand and improve primary care.
Smith said funding for mental health and addiction is to rise from $275 million, up from $87 million in 2019.
Toews also promised more money to fund growing student enrolment from kindergarten to Grade 12. And Advanced Education Minister Demetrios Nicolaides said there will be a two per cent cap on tuition starting in the 2024-25 school year.
Tombe said the key question to ask is what does Alberta do as it reaches yet another fork in the road on how it saves its bounty, given that past boom and bust cycles have seen the province spend heavily in good times then be forced to run staggeringly high deficits in bad times?
Economists, business groups and think tanks have suggested multiple options: recreate a buffer fund, put the money into the nest Heritage Savings Trust Fund, pay down the debt or use it to cover off more tax cuts to make Alberta more inviting to investors, potential newcomers and businesses.
Tombe, who favours debt paydown given current high interest rates, said there should be a plan, whatever the route taken.
“The last time we saw a detailed forward-looking plan for dealing with resource revenues was 2015 under (former premier) Jim Prentice,” he said.
“It will be interesting how detailed (this surplus plan) is,” said Tombe.
“It’s one thing to hand wave about using (surpluses) wisely. It’s another to actually have concrete, formula-driven approaches to handling resource revenues.”
Voters go to the polls May 29, and recent surveys suggest Smith’s UCP is in a tight race with Rachel Notley’s Opposition NDP.
Political scientist Lori Williams said she expects short-term inflation aid in the budget won’t be as important, because voters want to know which party can be trusted to look after families in the long-term while addressing core concerns over health care.
“Since the money is going to be there no matter who wins the next election, it may come down to a contest over vision and leadership,” said Williams, with Mount Royal University in Calgary.
“Money being spent (in the budget) doesn’t necessarily move the needle one way or the other.”
Williams noted the affordability programs and holidays on provincial tax at the gas pumps is set to end in the short term.
“I think a lot of people will be wondering what happens at the end of May?” she said.
“We can talk about diversification of the economy, we can talk about how well the economy is doing, but the reality is people are still struggling with inflation. The prices at the grocery store are shocking.”
This report by The Canadian Press was first published Feb. 26, 2023.
US President Biden, Israel PM Netanyahu trade words over protests
Biden tells Israel to ‘walk away’ from judicial reforms, Netanyahu responds saying Israel rejected ‘pressure from abroad’.
United States President Joe Biden has told Israel it “cannot continue” pushing ahead with deeply controversial judicial reforms — now on hold — that have prompted months of unrest — comments that led Israeli Prime Minister Benjamin Netanyahu to say he does not make decisions based on pressure from abroad.
Biden’s comments on Tuesday came as Netanyahu was being accused by opponents of riding roughshod over Israeli democracy in an attempt to strengthen his own power, leading to paralysing protests and strikes across Israel.
“Like many strong supporters of Israel I’m very concerned. … They cannot continue down this road, and I’ve sort of made that clear,” Biden told reporters during a visit to the state of North Carolina.
“Hopefully the prime minister [Netanyahu] will act in a way that he will try to work out some genuine compromise, but that remains to be seen,” Biden said, adding he was not considering inviting the Israeli leader to the White House, at least “not in the near term”.
Speaking later in Washington, DC, Biden called on Netanyahu’s administration to drop the controversial judiciary law.
“I hope they walk away from it,” he told reporters.
Netanyahu quickly issued a statement in response to Biden, the Reuters news agency reported.
“Israel is a sovereign country which makes its decisions by the will of its people and not based on pressures from abroad, including from the best of friends,” he said.
Netanyahu said his administration was striving to make reforms “via broad consensus”.
“I have known President Biden for over 40 years, and I appreciate his longstanding commitment to Israel,” Netanyahu said.
He said the Israel-US alliance is unbreakable “and always overcomes the occasional disagreements between us”.
On Monday, Israel’s President Isaac Herzog called on Netanyahu and the ruling coalition to halt its judicial changes plan, “for the sake of the unity of the people of Israel, for the sake of responsibility”.
The appeal on Monday by the head of state, who normally does not get involved in politics, underlines the alarm that the proposals have caused and comes after a dramatic night of protests across Israel on Sunday following the sacking of the country’s defence minister.
Tens of thousands of protesters took to the streets in cities across Israel in a spontaneous outburst of anger after Netanyahu fired his defence minister for challenging his judicial overhaul plan.
Fired Defence Minister Yoav Gallant had been the first senior member of the ruling Likud party to speak out against the reforms, saying the deep divisions were threatening to weaken Israel’s military.
Budget Politics: Why the federal budget matters so much to Liberal electorate fortunes.
On Tuesday, Finance Minister Chrystia Freeland will table the federal government’s budget, and the stakes could not be higher for the government.
Public assessments of the government’s performance and how they feel about the Prime Minister haven’t been much lower than they are today. Despite this, the Liberals and Conservatives are statistically tied in our latest measure of vote intention.
In our most recent national omnibus survey conducted from March 17 to 21, I asked 1,963 adults a few questions to gauge their economic outlook and how they feel about the government’s performance on a series of economic, fiscal, and pocketbook issues. The results suggest a very challenging opinion environment – one that I think the government and the Prime Minister desperately need to shift.
Here’s what I’m seeing:
The overall economic outlook isn’t that bad right now, but it’s not great either. When we ask Canadians to estimate whether the economy will improve, get worse, or stay about the same over the next 12 months, almost half think it is going to get worse but only 15% say it will get a lot worse. About 1 in 4 are optimistic things will improve over that time period.
Government Strengths and Weaknesses?
When we ask Canadians to evaluate the performance of the federal government and the Prime Minister in several areas, the government gets fairly good grades for its handling of Russia’s invasion of Ukraine, for representing the country internationally, and for working with the provinces. In each of those, half or more feel the government’s performance is at least acceptable.
It gets what I feel are middling grades for running an ethical government, managing the economy, and responding to the crisis in healthcare. On these, about 4 in 10 feel the government is doing at least an acceptable job.
But on two items in particular, the government is seen as severely underperforming – addressing the rising cost of living and making housing more affordable and accessible. On both, about 1 in 4 think the government is doing ok or better while two-thirds think it’s doing a poor or terrible job.
Even among 2021 Liberal voters, the cost of living and housing are challenging issues for the government. 4 in 10 past Liberal voters say the government isn’t doing even acceptably on those issues.
Part of the problem facing the government right now is its lack of narrative – especially an economic one. Case in point, when we ask Canadians whether they agree or disagree that “the federal government has a clear economic plan to grow the economy” only 23% agree, including 4% who strongly agree. In contrast, 42% disagree, 22% neither agree nor disagree and 13% are unsure.
I wish I had comparable data from previous years or previous governments, but these numbers feel low. If I was advising the Finance Minister, having only 1 in 4 people inclined to think you have a clear plan to grow the economy is a problem, and a serious liability, especially when people are feeling anxious and uncertain about the economy right now.
But the crosstabs provide even more concern. For example, those in vote-rich Ontario and Quebec are no more likely to think the government has a clear plan than those in other regions. And only 51% of Liberal supporters, those who say they would vote Liberal today, think the government has a clear economic plan.
But it gets worse for the Liberals…
When we ask all Canadians which party they feel will do best on several issues, the Liberals only have a slight advantage on one – dealing with climate change and the environment. Even when it comes to “making childcare affordable” – an issue that dominated the 2021 federal budget – the Liberals are basically tied with the NDP and only 7-points ahead of the Conservatives.
On EVERY economic and pocketbook issue, the Conservatives have a clear advantage over the Liberals. And a reminder, this is the same poll that found the Liberals only 2 points behind the Conservatives in voting intention.
The Conservatives are ahead of the Liberals by:
- 13 on managing the economy.
- 19 on keeping taxes low
- 15 on keeping interest rates as low as possible
- 11 on addressing the rising cost of living
- 7 on creating good-paying jobs
- 6 on protecting pensions and retirement security
These results underscore both the weakness of the Liberal government’s brand on economic issues and the opportunity it has in this budget to start to move these numbers.
One budget alone won’t fix the problem, but if the government uses it as an opportunity to start talking about pocketbook issues and the economy more, they may be able to reverse some of these numbers.
I think the problem is one of empathy and clarity. The federal government and its senior leaders aren’t connecting with people and empathizing with their day-to-day struggles. And there hasn’t been a clear economic narrative that people recall. With only 23% of Canadians believing the government has a clear economic plan, the budget presents an opportunity for the Liberal government to articulate its vision for economic growth and stability. Demonstrating a coherent strategy to address Canadians’ economic anxieties could help regain public trust.
Yes, the Conservatives have a natural advantage on economic issues. But it hasn’t always been that way. Tomorrow’s budget will either demonstrate a shift in strategy and approach, or it will reinforce what people already think.
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The survey was conducted with 1,963 Canadian adults from March 17 to 21, 2023. A random sample of panelists were invited to complete the survey from a set of partner panels based on the Lucid exchange platform. These partners are typically double opt-in survey panels, blended to manage out potential skews in the data from a single source.
The margin of error for a comparable probability-based random sample of the same size is +/- 2.3%, 19 times out of 20.
The data were weighted according to census data to ensure that the sample matched Canada’s population according to age, gender, educational attainment, and region. Totals may not add up to 100 due to rounding.
This survey was paid for by Abacus Data Inc.
Abacus Data follows the CRIC Public Opinion Research Standards and Disclosure Requirements that can be found here: https://canadianresearchinsightscouncil.ca/standards/
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Federal budget to announce $7-billion in savings on outsourcing and travel, source says
Finance Minister Chrystia Freeland’s 2023 budget will announce plans to save about $7-billion over five years through cuts to federal travel and reduced outsourcing, with a particular focus on using fewer management consultants, according to a senior government official.
The Globe is not identifying the official, because they were not authorized to be named when discussing the contents of the budget. The savings represent one side of what will be a challenging political balancing act for the government as it presents this year’s spending plan on Tuesday.
Ms. Freeland’s budget will aim to show that the government is focused on fiscal responsibility after posting massive deficits during the pandemic. At the same time, the plan will promote billions in increased spending in areas such as dental care, direct support for low-income Canadians, and a major package of new programs to boost the clean economy.
The government’s decision to cut back on outsourcing follows a series of reports by The Globe and Mail that highlighted how federal spending in this area – officially called professional and special services – has spiked under the Liberals, from $8.4-billion in 2015-16 to an estimated $21.4-billion this current fiscal year.
Parliamentary Budget Officer Yves Giroux recently reported that while federal spending on management consultants is only 5 per cent of that total, it is a category that has grown by 95 per cent under the Trudeau government.
Mr. Giroux has questioned why spending on outsourcing has increased while the size of the federal public service has jumped by 28 per cent since 2017.
The government operations committee is currently engaged in three separate studies of the growth in federal outsourcing, including one on management consulting firms such as McKinsey & Co. and another on the ArriveCan app, which is on pace to cost over $54-million and was built through extensive use of outside contractors.
The savings on outsourcing and travel will be worth about $7-billion over five years and $1.7-billion for each year after that, the official said. The plan is meant to show that Ottawa will exceed last year’s target of finding $6-billion in internal savings over five years.
Another item that will be in the budget, according to the official, is an announcement that the government will move ahead with reforms to the alternative minimum tax. The AMT, which is intended to prevent excessive use of deductions by providing an alternative way for wealthy taxpayers to calculate their obligations, has been in place since 1986. The 2021 Liberal campaign platform and 2022 fall economic statement both said it needs to be updated to ensure wealthy people can’t excessively lower their overall tax bills.
The budget will also announce a clean technology manufacturing tax credit worth more than $3-billion over five years.
Companies will be able to use the 30-per-cent tax credit to offset the cost of equipment for mining and processing critical minerals, which are in high demand as the global economy seeks to expand the use of renewable energy and electric vehicles.
The budget will also include an extension of the six-month increase to the GST rebate, which temporarily doubled the amount sent to recipients starting in the fall. The GST rebate is a payment targeted toward lower-income Canadians. It is meant to help offset the costs of paying sales taxes.
The government plans to promote the extension as a “grocery rebate,” even though many grocery items are exempt from sales tax. There will be no obligation on recipients to spend the money on groceries.
NDP Leader Jagmeet Singh, who is seeking support for lower-income Canadians in Tuesday’s budget, responded to the grocery-themed rebate plan after it was reported Monday by CBC News.
“It looks like one of the things we’ve asked for is going to be there,” he told reporters on Parliament Hill. “We still want to see confirmation of the dental-care expansion to include seniors, people living with disabilities, and kids 18 and under. We really want this budget to save money for people.”
In public comments over the past few weeks, Ms. Freeland, who is also Deputy Prime Minister, has clearly signalled the budget’s main elements.
The government will “invest aggressively” in various clean-energy programs, partly to compete with massive new tax breaks and other incentives that were announced last year in the United States through the Inflation Reduction Act and other policies. The budget will also lay out a detailed spending plan for increased health transfers to the provinces and territories, which were announced in February.
A third category of spending will be under the heading of affordability measures, partly in response to cost-of-living pressures driven by inflation. This will include the extension of the GST credit increase and an expanded dental-care plan, as called for by the NDP, which is supporting the minority Liberal government in exchange for action on a list of policy priorities.
Lana Payne, president of Unifor, which represents thousands of Canadian autoworkers, met with Prime Minister Justin Trudeau last week just ahead of the budget. She said in an interview that U.S. policies to encourage the manufacturing and purchasing of electric vehicles and other emission-reducing measures are a “game changer” that require a strong Canadian response.
“We are in a very important moment in time, I think, economically speaking,” she said. “We can’t lose track of things right now. Because we’ve had a decade or two in which we haven’t been doing that well in terms of attracting new manufacturing investment to Canada.”
Canadian Chamber of Commerce president Perrin Beatty said he hopes to see a budget with one clear theme.
“The thing that we believe the government needs to focus on is growth. Everything flows from that,” he said. “How do we create the conditions for private-sector-led economic growth in Canada? And that doesn’t mean bringing in massive new spending programs.”
On the tax front, outside experts are not expecting major changes on Tuesday. The government has already signalled that Canadians can expect more detail on tax changes that had been previously announced, but had not yet been launched or fully explained.
These include a proposed 2-per-cent tax on share buybacks for public companies, and the updated alternative minimum tax for high-net-worth individuals.
Last year’s budget said the minimum tax change is aimed at an “unfair” situation in which thousands of wealthy Canadians pay little to no personal income tax each year because of tax credits and deductions.
Brian Ernewein, a former Finance Department assistant deputy minister for tax legislation who is now a senior adviser with KPMG, said he’ll be watching to see if the proposal indirectly limits access to the capital gains exemption for some people.
Currently in Canada, only 50 per cent of a capital gain – such as the profit on a stock sale or an investment property – is taxable. There has long been a policy debate over whether that inclusion rate should be increased. Mr. Ernewein said a minimum tax could have an impact.
“There’s at least some reason I would think for speculating that effectively, maybe not directly, but effectively, they might be changing the tax burden on capital gains through the minimum tax,” he said.
While governments frequently signal a budget’s contents in advance, tax changes are generally closely guarded, given their potential to move markets.
Bruce Ball, vice-president of taxation with the Chartered Professional Accountants of Canada, said he is not expecting major changes to personal or corporate tax rates.
He does, however, expect to see a fair number of smaller tax announcements.
“The government does have a lot of unfinished business, things that they’ve talked about before,” he said, pointing to a promised reform of business tax incentives for scientific research and experimental development as an example.
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