Fraser Forum

Alberta NDP government’s spending trajectory mirrors that of Bob Rae’s in Ontario

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Alberta NDP government’s spending trajectory mirrors that of Bob Rae’s in Ontario

When Premier Notley’s NDP government took office in Alberta in 2015, it inherited a difficult fiscal situation. A sustained period of rapid spending growth under her predecessors, along with the fall in oil prices and resulting drop in provincial revenues, meant the Notley government faced a large budget deficit as soon as it walked in the door.

While Notley’s NDP government inherited a difficult fiscal situation, it was still an open question of how the government would attempt to address it. After all, Canadian history has seen newly elected NDP governments both clean up and worsen the fiscal mess of previous governments.

Shortly after Premier Notley took office, the Fraser Institute published a paper analyzing the fiscal records of two provincial NDP governments of the past—Bob Rae’s government in Ontario elected in 1990, and Roy Romanow’s government in Saskatchewan elected in 1991.

Like Notley’s government, both Rae and Romanow’s governments took office during times of economic difficulty, but they each exemplified markedly different approaches to fiscal management during their respective tenures. Rae responded by increasing program spending in Ontario by 16 percent during his first two years, while Romanow chose to cut his province’s program spending by approximately ten percent over three years.

When coming into power, the Notley government had a clear choice to make between these two models: Rae’s approach of substantial spending increases, or Romanow’s policy of prudent spending reductions.

Here we are two years later, and a new Fraser Institute study demonstrates that the Notley government is following the path of Premier Rae.

The Alberta NDP government’s chosen approach can most clearly be seen by comparing the spending records of the three governments. Like Rae’s government in the 1990s, the Notley government has overseen a substantial increase in program spending during in its first two years in office. From 2015/16 to the current fiscal year, program spending in Alberta will have increased by 11 per cent.

The figure below provides a visual comparison of the spending trajectories of the three governments. In order to facilitate a comparison across different provinces and time periods, program spending for each province has been indexed to 100 for the first year in which each government took office. So for example, a value of 110 represents 10 percent increase relative to spending in that government’s first year in office. For the Notley government, spending projections contained in this year’s Alberta budget are used.

Figure 1

As the above figure shows, the spending trajectory of the Notley government is clearly more in line with the trajectory followed by the Rae government in the early 1990s.  While Romanow’s government stands out as the only one of the three that actually reduced spending, both Rae and Notley implemented substantial spending increases during their first two years in office.

While the Rae government’s approach led to sustained budget deficits and a rapid run-up in debt, the Romanow government’s approach quickly eliminated Saskatchewan’s budget deficit and helped lay the foundation for future prosperity. Albertans should therefore be concerned that the Notley government has thus far rejected the successful Romanow NDP model in favour of the less successful example of Rae.