Cost of Alberta separation could be up to $170B: report

An independent report into the possible separation of Alberta presents multiple outcomes, but ultimately determines the cost to leave Canada could cost up to $170 billion.

The report by the University of Calgary’s School of Public Policy was commissioned by the Alberta government and released Wednesday.

It found Albertans would face high costs in the short term with uncertain benefits in the long run, and whether talks with Canada are “smooth” or “difficult” would impact that future.

“If you’re kind of a very optimistic person — you think everyone will go well — there’s a scenario where that happens,” said Tim Sargent with the University of Calgary School of Public Policy.

“But there’s also a very big risk that thing could not go well and Alberta could pay a very big price.”

Two hypothetical scenarios are given to provide Albertans a look into the costs that come with separation.

A “smooth” scenario would see a quick, comprehensive and favourable deal with Canada that gives an orderly transition of the province to become a separate country.

The “difficult” path would see Canada and other countries be hostile and could result in a deal taking a much longer time if one is reached at all.

“It all depends on a lot of events that are outside the control of Alberta,” Sargent said.

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In either situation, the report said establishing a new country could range from $50 billion up to $170 billion in the first five years of separation, in addition to the impacts on economic growth and the province’s own fiscal position.

If Alberta experiences the “difficult” scenario though, the report paints a stark picture.

The GDP would see a loss within five years of 10.1 per cent, employment could drop by 10 per cent, a typical worker could earn almost $5,500 less than if the province had not separated, and the tax each person pays could increase up to $5,500 annually.

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After 20 years, the report suggests while unemployment would decline, many people would depart the workforce, leaving the unemployment rate at 4.7 per cent.

Annual wages for a typical worker could be almost $12,000 below what they could have been without separation and taxes per person would rise by $6,600. The province’s GDP would also fall by 16.2 per cent.

The government’s debt would hit $442.3 billion in this scenario, which includes its preexisting share of the federal debt plus the deficits that come with transition costs.

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Under the “smooth” path, the report could see the province maintain access to major trade markets, expand its resource development, and provide government services more efficiently.

But it also finds Alberta’s gross domestic product (GDP) could be lower by about 2.2 per cent within five years, with employment 0.7 per cent lower than it currently is, take-home pay could see a dip of more than $1,200 annually and each taxpayer would pay about $800 more.

After about 20 years, the report estimated the GDP would increase by 3.4 per cent, employment would go up by 0.7 per cent and the taxes Albertans pay would decrease by $1,100. Take-home pay for workers could also rise by more than $1,800 annually compared to what they would have been.

Even with these apparent benefits, Alberta’s debt would soar to $324.1 billion.

Independence supporter Keith Wilson say the report is inaccurate, adding Alberta’s resources give it leverage in any discussions with other provinces and nations.

“The overall theme of the report is to make worst-case assumptions about workers, about the buildings the federal government has, about how negotiations would go,” Wilson said.

Jeffrey Rath, one of the driving forces behind the separatism movement, said supporters of independence are already improving conditions for Alberta to become its own nation.

“That’s why we were flying to the United States to meet with the U.S. State Department in Washington,” Rath said. “I’m still in contact with them on a regular basis.

“The simple fact is, the United States would welcome a robust trading relationship with Alberta.”

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Those who worked on the report aren’t so sure.

“”Nobody can confidently say that they will know what will happen,” Sargent said.

An expert advisory panel was appointed to review the report and prepare an independent assessment.

“The panel concurs that separation results in short run economic costs for Alberta for uncertain net benefits in the longer run. However, we also stress that Canadians should be aware that Alberta’s separation will undoubtedly harm Canada as well,” said Jack Mintz, chair of the advisory panel.

Alberta assuming responsibility for federal programs, determining its monetary policy, building international trade relationships, and holding negotiations around Canadian debt were among the issues analyzed by the report.

According to the report, setting up a new country would also require “significant” transition costs, the purchase of office buildings, new IT systems and an added 70,000 public servants.

“The uncertainties do look significant, the risks look significant and the potential benefit is far from certain,” said Mount Royal University political scientist Lori Williams.

“Alberta is going to be worse-off for the short-term — however long that lasts — and more importantly, there’s no guarantee Alberta will be better off.”

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Treasury Board President and Finance Minister Jason Nixon said in a statement following the release of the report that it gives “important considerations” for Albertans as they prepare to vote in the upcoming Oct. 19 referendum.

He also said the advisory panel’s own insights will help Albertans interpret the report.

“The panel’s assessment emphasizes that both the scenarios outlined in the report highlight how costly it would be for Alberta to separate from Canada in the short term and also highlight the substantial amount of uncertainty Alberta would face in the long term,” Nixon said.

Albertans are set to vote in the Oct. 19 referendum, in which one question asks voters whether Alberta should stay in Canada or hold a second binding referendum to quit Confederation.

—with files from The Canadian Press and Karen Bartko, Global News