Alberta review panel recommends boosting competitiveness alongside $600 million cut, no new spending

Alberta

Alberta’s Blue Ribbon panel on the province’s finances has publicly released its findings and a set of recommendations. While the report stated a desire to balance Alberta’s budget by the fiscal year 2022/23 and recommended no new spending, it also made several proposals pertaining to Alberta’s technology and innovation ecosystem.

“Alberta used to be known as the most entrepreneurial place in Canada. We used to believe that if there was a good place to invest.”
 

Along with recommending no new spending, the report also proposed a reduction in operating costs by at least $600 million, as well as “substantial” cuts to capital spending.

This report was released after the United Conservative Party (UCP) commissioned a review of Alberta’s spending, in order to inform a new budget. The panel found that investment growth in Alberta lags behind other provinces, specifically with regards to “high-value innovation and technology.” The report argued the province needs a clear economic development and investment attraction strategy to help increase competitiveness and bridge the gap between Alberta and other jurisdictions.

RELATED: Alberta tech sector holds its breath as province pauses innovation programs

“Alberta faces a critical financial situation that demands decisive action,” the report reads. “At the same time, this is an opportunity for the province to look beyond just short-term quick fixes to reduce spending. It is a time to dig deeper, explore new approaches and alternatives for delivering public services, improve Alberta’s competitive position, and focus on achieving a sustainable financial situation and long-term results for Albertans, all at a reasonable cost to taxpayers.”

A strategy to increase competitiveness

One of the panel’s most detailed recommendations was on the creation of an investment attraction and economic development strategy, and subsequently a long-term labour market forecast, to ensure the province has a skilled workforce to fill incoming jobs.

The report found Alberta rated poor in the growth of non-resource exports per capita, research and development (R&D) expenditures, authorization of credit for small-and-medium-sized enterprises (SMEs), as well as graduate student rates. The panel said Alberta also received weak ratings for factors such as business investment in R&D, time required to start a business, costs to start a business, bachelor degree completion, VC investment, and the number of VC deals.

“Alberta used to be known as the most entrepreneurial place in Canada. We used to believe that if there was a good place to invest, to start and grow a business, it was Alberta,” the report said. “Through its research and conversations, the panel has learned that Alberta no longer has that reputation.”

The panel proposed that the Government of Alberta create a strategy that involves steps to make competitiveness and attraction a top priority, work with industry and post-secondary institutions to develop a high-skilled workforce, and set clear targets to improve competitiveness. The panel also advocated for regular reports to be shared publicly to facilitate consultations with industry stakeholders and economic development organizations to provide the basis for any policy changes.

“The government should work with industry and Albertans to set a compelling vision for Alberta’s economic future combined with a deliberate strategy to foster an economy that creates jobs and wealth while rebuilding Alberta’s reputation as the best and most responsible place to do business,” the report said.

Corporate tax cuts

In May, Alberta opted to lower the corporate tax rate from 12 to 11 percent this year, with a goal of getting the rate to 8 percent by the year 2022. It argued this move would increase competitiveness and make Alberta’s corporate tax rate the lowest in Canada and among the lowest in North America.

The panel stated in its report that while the government’s plan to reduce corporate tax rates would result in “short-term costs,” it will provide long-term value. The report argued that many of Alberta’s current economic challenges are due to a lack of investment, with private investment still well below 2014 levels. It also argued that corporate tax cuts have been shown to boost investment, employment, and earnings for workers.

Despite the panel’s recommendations to reduce barriers to investment, the UCP government paused two of its investment tax credits over the summer. These credits include the Alberta Investor Tax Credit, which grants a rebate on the amount of equity capital invested in an eligible Alberta small business working in the research, development, or commercialization of new technology. It also froze the Capital Investment Tax Credit, a different government program providing businesses in certain sectors with a tax credit of up to $5 million. The newly released report made no mention of either tax credits.

The opposition party is currently levying heavy criticism over the panel’s recommendations on corporate taxes, arguing against the suggestion of giving corporations tax cuts at the same time as reducing funding to social programs. The former premier, Rachel Notley, called out Premier Jason Kenney over the corporate taxes in light of the report’s statement that the Alberta government will have to cut operating spending by at least $600 million and substantially reducing spending in healthcare and education.

Procurement policy should be refreshed

The report also addressed the issue of procurement in the province, specifically areas related to transparency, complexity, and bias in awarding contracts. The panel encouraged the government to explore new opportunities for partnerships, form a procurement council “to examine innovation and efficiency in the government’s procurement methods,” and update its policy on major procurements.

“Alberta needs to send a clear signal to the world that it aspires to be a powerful engine of ingenuity, engagement, and accountability, a place where people and businesses succeed,” the report said. “Alberta needs to put out the welcome mat to ethical, responsible wealth creators who will respect our province and who want to deploy Alberta’s well-educated and entrepreneurial people to drive their success.”

Innovation programs still in limbo

The report made no mention of specific innovation programs, which had been previously paused or in limbo over the summer, in light of the review. These include a $100 million commitment from the previous government to Alberta’s artificial intelligence (AI) sector, which the current government stated needed to be examined to see if it was a good use of tax dollars. Alberta Innovates, which had paused entrepreneurship programming, had previously stated that it is “in a holding pattern until the budget is delivered.”

“We know there is still much work to do in order for the government to be able to table a budget that works best for the needs of Albertans,” Spencer Murray, a spokesperson for Alberta Machine Intelligence Institute (one of the organizations set to receive the $100 million AI commitment), told BetaKit. “We’re confident that Amii and our programs align well with the priorities and mandate of the government. We will await the province’s decisions around the report’s recommendations.”

Alberta Innovates added that it is also still waiting to see how the panel recommendations will affect its own funding. “The budget will provide some certainty and we look forward to seeing what it includes,” a spokesperson for the organization told Betakit.

Read the full report here

Isabelle Kirkwood

Isabelle Kirkwood

Writer, globetrotter, drone pilot & David Attenborough enthusiast