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According to a new report by the University of Calgary’s School of Public Policy, separation could cost Alberta between $50 billion and $170 billion over a five-year period, and an advisory panel appointed by the Smith government to review the report warns that “separation results in short run economic costs for Alberta for uncertain net benefits in the longer run.” But an equally important question is—what would Alberta separation cost the rest of Canada?
Since 2007/08, Albertans have contributed a projected $321.9 billion more in taxes and other payments to the federal government than they received back in federal spending. That’s nearly four times the net contribution of British Columbians ($87.8 billion) and more than five times the net contribution of Ontarians ($59.6 billion). The other seven provinces are net recipients, meaning Ottawa spent or transferred more money to those provinces than it collected.
Of course, the federal government redistributes this money through different programs (e.g. equalization) to help fund government programs and keep taxes lower than they otherwise would be in other provinces. In other words, without Alberta, governments would have to increase taxes in the rest of Canada to maintain current federal spending levels.
Albertans make this large contribution thanks to the province’s relatively strong economy and higher income levels, fuelled in large part by the province’s energy sector. That’s the irony. Bad federal policy hamstrings the very industry that helps fund the rest of the country. Indeed, despite a one-off deal between the Alberta government and Ottawa on a potential new west coast pipeline, the federal government has yet to fix the regulatory framework that severely restricts Alberta from reaching its full economic potential.
For instance, the Carney government has yet to repeal Bill C-69 (a.k.a. the “no pipelines act”), which imposes complex, time-consuming and subjective assessment criteria (including “gender implications”) for major energy projects, including pipelines, or undo the tanker ban off British Columbia’s northern coast (Bill C-48) that limits market access for Canadian oil and gas. But the government has introduced new strict methane regulations, costly carbon capture requirements, and will increase the industrial carbon tax. All of these policies increase the cost of production and make the province uncompetitive with other energy jurisdictions, which ultimately limits the prosperity of Albertans and all Canadians.
You can see why nearly half of Albertans believe they get a “raw deal”—that is, they give more than they get—being part of Canada. Or why nearly half of Albertans who plan to vote for a binding referendum this fall say they want to send a “message” to Ottawa, rather than actually separate and become an independent country.
The latest data suggest separation could cost Alberta, but what about the rest of Canada? Albertans make an outsized contribution to federal finances, which benefits Canadians across the country. If the rest of Canada understands this, and the federal government takes action to remedy the frustrations of Albertans, it could lead to a stronger country for all Canadians.
Tegan Hill is Director, Alberta Policy at the Fraser Institute. She holds a Bachelor of Economics and a Master’s Degree in Public Policy from the University of Calgary. Ms. Hill’s articles have appeared in major Canadian newspapers including the Globe and Mail, National Post, and Ottawa Citizen. She specializes in government spending, taxation, and debt.
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