Alberta separatists gather at the provincial legislature in Edmonton last month for a protest organized by the Alberta Prosperity Project.Amanda May Erickson/The Canadian Press
Abandoning Confederation and setting up a sovereign country would cost Alberta up to $170-billion over the first five years of independence and would devastate the economy of a shrunken Canada, a report commissioned by the provincial government estimates.
And even in the best-case scenario, the report says secession would provide only minimal economic gains for Alberta. In a more painful separation, wages would plummet, GDP would decline precipitously and government debt would balloon.
The province on Wednesday published the report, which was produced by an independent panel of experts at the University of Calgary’s School of Public Policy.
The report provides a wide range of estimated costs to separation, painting one relatively rosy scenario in which Ottawa co-operates in negotiations and gives the province a favourable deal, and another in which Alberta and Canada enter hostile, prolonged talks that bring the country’s economy to a standstill.
Alberta is currently in the midst of a heated campaign over provincial separation, with voters preparing to decide on Oct. 19 whether to remain in Canada or lay the legal groundwork for a second, binding referendum.
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Support for separation in Alberta, estimated to be between 25 and 30 per cent, has remained steady for years. The referendum arrives at a time of heightened concerns over national unity and threats to Canadian sovereignty in response to U.S. President Donald Trump’s trade war and annexation rhetoric.
Quebec voters, meanwhile, are roughly three weeks from a provincial election. The sovereigntist Parti Québécois has led in the polls for the better part of three years but currently seems unlikely to form a majority government. In June, the party published its 524-page Livre bleu – its latest blueprint for independence.
Martha Hall Findlay, director of the UofC’s School of Public Policy, wrote in the Alberta report that the document is non-partisan. It “neither advocates for, nor opposes, separation,” she wrote.
Tim Sargent, the report’s lead author, said in an interview that one of the biggest challenges during the exercise was finding real-world scenarios that could accurately inform the outcomes of a possible Alberta divorce from Canada.
Over the past year, numerous groups and voices in Alberta’s separatism debate have jockeyed to pin down the consequences of secession; the report is the first comprehensive analysis published by an academic institution.
“You’re really staring in the crystal ball,” Mr. Sargent said.
The report says that establishing a separate Alberta could cost between $50-billion and $170-billion in the first five years. It also says Alberta’s debt would hit roughly $324-billion in the best-case scenario and $442-billion if negotiations between the province and Canada aren’t friendly.
The rest of Canada, meanwhile, would be economically devastated by Alberta’s departure. The authors predict that Canada’s global economic standing would fall, its currency would weaken and that there would be major challenges to interprovincial and international trade routes.
The panel said its findings underline two key points: that separation would involve significant short-term costs, and that the long-term economic and fiscal consequences would be highly uncertain.
Alberta Finance Minister Jason Nixon pointed to that uncertainty in a Wednesday statement responding to 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,” he wrote.
NDP finance critic Court Ellingson said in a statement that the report demonstrates that separatism is a “terrible idea for Alberta’s economy and families” and shows that the Oct. 19 referendum is a “waste of money.”
Alberta’s path to secession would largely rest on Ottawa’s reaction and its negotiation strategy, the report says. A “smooth” departure would require the Canadian government – in this case, motivated by providing certainty and limiting the economic damage – to quickly conclude negotiations with Alberta.
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The “difficult” scenario, meanwhile, would likely see Ottawa limit its concessions to Alberta to discourage other provinces from leaving, which the authors say motivated the European Union’s approach when Britain voted to leave the bloc.
Prolonged negotiations would weigh on investment, interest rates and the exchange rate because investors would be hesitant to put money into Alberta and Canada until they had a clear picture of the future, the report says.
The vast range of potential outcomes is reflected in some of the estimates.
Under the “smooth” scenario, the authors expect that the Alberta government’s surplus over a 20-year horizon would be around $7.8-billion, while GDP would increase by about three per cent more than if Alberta had stayed in the country. The “difficult” scenario estimates that the province’s deficit would grow to $31-billion and GDP would contract by 16 per cent.
The report also ponders Alberta’s relationship with the U.S., things the new country would not need to spend money on – such as a Coast Guard – and how it would set up a military.
Alberta wouldn’t inherit assets such as fighter jets, which would “need to be acquired quickly,” the report says, and as a new country it would need to spend about $10-billion to meet NATO’s requirement that members spend 2 per cent of gross domestic product on defence. That would increase to $25-billion as NATO countries last year committed to investing 5 per cent of GDP annually on defence by 2035.
Keith Wilson, leader of the pro-independence group Let Alberta Decide, said he feels that the report is “unrealistically pessimistic” because it ignores the province’s leverage in negotiations with the rest of Canada. Even the best-case scenario dismisses the province’s economic levers, he said.
“Canada does not have that economic strength. Alberta holds the cards here,” said Mr. Wilson, who recently published his own economic projections under what he called the Alberta Transition Council.
The relatively minor benefits outlined in the “smooth” scenario are highly unlikely and underline the limited upside of separation, Adam Legge, president of the Business Council of Alberta, said in an interview.
“The highest probability is that we would be landing somewhere in negative economic territory,” said Mr. Legge, a member of the report’s advisory panel.
Mr. Legge added that the best-case scenario was included to “insulate” the report from criticism that it only looked at the negative consequences of separation.
“It was really about ensuring that we enabled the report to stand the test of a challenge and not being a predetermined conclusion.”