I guess you can scratch Calgary....
Stop-gap thinking guides Flaherty
By: Deborah Yedlin, Calgary Herald
Published: Thursday, July 17, 2008
It's taken more than two and half years since he burst the income trust bubble, but Federal Finance Minister Jim Flaherty finally showed his face in Calgary on Wednesday, speaking at a packed Chamber of Commerce event at the Westin Hotel.
His speech followed an hour-long roundtable session with various industry leaders who described the discussion as polite and cordial but not necessarily collegial.
Flaherty, of course, was responsible for whacking the income trust sector in October 2006 when he announced a plan to begin taxing the sector. It was a decision that subtracted more than $30 billion in market value and one that continues to raise the hackles of Calgary's business community -- especially the oilpatch.
It was surprising, then, that he was introduced by Jim Kinnear, the founder, president and chief executive of Pengrowth. Kinnear, in his usual tongue-in-cheek fashion, made reference in his introduction to the "differences" between Flaherty's position on the income trusts and his own.
But anyone hoping for grand insights on economic and fiscal policies in the context of today's global uncertainty -- or how the government is going to address the divergence of fortunes between East and West -- left the Westin audience disappointed.
Instead, Flaherty launched into a speech that came across as a Pollyanna pre-election pitch. There was plenty of air time on Canada's economic position relative to other countries; that we are the envy of the G-7 because of our balanced budgets and pulling out statistics on metrics such as job creation and tax cuts.
Of course, there was no acknowledgement that cutting the GST by another percentage point, to five per cent, took away an element of flexibility for the government in the event it needs to step in and introduce stimulative measures for the economy. It and the tax-free savings plan that Flaherty was quite stoked about stand as measures aimed at a certain segment of this country's population -- and it isn't the working poor.
"The government seems to be more concerned about the reaction by the general population to its policies than it is about the economic soundness of those policies," said one executive in the audience, referring to the GST cut.
Flaherty also had much to say about his government's economic plan called Advantage Canada (anyone heard of it?) which he called "the prism through which we look to see if policy fits with long-term economic policy." Too bad one of the five cornerstones of the plan appears not to include post-secondary education -- especially the post-graduate variety.
Nor did he talk about the declining productivity of the Canadian economy. It was addressed in the recently tabled competition review report submitted by Red Wilson and his committee, but Flaherty didn't go near the subject, though he referred to the report and one of its participants, Murray Edwards, at least twice during his talk.
"The speech was notable for what it didn't deal with, than what it did," said one business type.
Canada's resource wealth was also on Flaherty's laundry list, though he didn't go as far as to highlight how much of Alberta's energy exports account for the federal government's surpluses or overall economic growth. He did make reference to Canada as an energy superpower, adding that if the value of all of Canada's natural resource wealth was tallied up, it would amount of $1.5 trillion.
Still, when queried in a scrum following his speech as to why the federal government has not been quick to stand to Alberta's defence when the very resource vaulting the country into energy superpower status -- the oilsands -- is under attack as being dirty, Flaherty responded by talking about his government's climate change plan.
What seems to frustrate the business community in Calgary is that the federal government is quite happy to have the fruits of the energy sector to buoy the economy and balance the federal budget, but appears oblivious to the fact that killing the income trust structure and taking 20 months to come out with draft legislation has not been helpful for the affected companies to formulate sound strategic plans.
The only good news is that the word on the draft legislation for income trusts looking at converting back to corporate status that was tabled this week gets a passing grade, even though there was no dialogue between Calgary and Ottawa; submissions by industry, including legal firms, were invited, but that's as far as it got.
"It looks like they got it right," said one industry observer, "anyone hoping for a tax-deferred rollover got what they wanted."
That's small consolation in the scheme of things.
Finally, there was nary a mention of the elephant in the room -- the environment and the current carbon tax proposal currently being trotted across the country by Liberal Leader Stephane Dion. One industry insider made the observation that the federal government is missing a golden opportunity to transform the country into a leader on the environmental technology front; instead, the approach seems to be more about political expediency than tough decisions.
The irony is that Flaherty ended his remarks with a quote from Sir John A.
MacDonald: "look a little ahead, my friends." For a government that makes decisions based on political expediency and not sound economic policy, Flaherty would do well to heed those words, as would our own premier.
© The Calgary Herald 2008
Thursday, July 17, 2008
Posted by Fillibluster at 8:49 AM