Justifying economic development

Yesterday, in the House of Commons, Jack Layton gave everyone a quick laugh when he demanded that Stephen Harper stop the hundreds of millions of dollars in tax breaks for big oil and big ‘ass’.

As we have debated on these pages, not many Albertans know that they are among the largest providers of ‘corporate welfare’ of any province in Canada. Remember the indignant Calgarian who was so offended that RIM got a $10 million payroll rebate (which only kicks in after the company has made the investment and spent the labour cost) while at the very same moment large energy companies are getting $100s of millions in corporate tax rebates (which kick in after the company has made the investment) to develop the energy sector in Alberta.

But not to pick on Albertans and their blissful self image as Canada’s hotbed for the free market, my point here is related to justification.

It is a subject I write on periodically but one that is worth embedding in our collective thinking on this (whether we agree or not). Ultimately, any investment in economic development should be justifiable. Or what’s the point?

After Lord started systematically dismantling economic development in New Brunswick, I said he should have the guts to just disband the BNB department. What’s the point of spending $40 million a year and getting almost nothing in return?

Now, my BNB friends are going to be perturbed at my statement but I think it’s worth saying.

When governments look at the economic development department (BNB) as ‘just another spending line’ they are dead wrong.

Supply and services is a spending line. Health care is a spending line. Economic development must be an investment.

Forget the ‘KRAs’ (key results areas) and all the management processes. BNB over a 3-5 year cycle should be able to show substantial ROI on taxpayer dollars or it should be disbanded. Keeping a token economic development department “just because” is a waste of valuable tax payer dollars.

How do we measure ROI on economic development? For me it has to be direct and broadbased. Not broadbased as in BNB taking credit for the oil exports from the Saint John Refinery but broadbased as it summing up everything the department did, looking at the direct new taxes generated from that activity and measuring that against the cost.

So if BNB spends $40 million per year or $200 million over five years, the incremental taxes generated directly from their activities should well exceed $200 million. In fact, if Premier Graham is ever to meet his goals, it should be $600 million or more.

And don’t give me this crap about ‘jobs retained’. I like rentention. I think it’s a key area of economic development. But economic development agencies now use this as a neat little crutch. They give a company $10 bucks and then say they ‘retained’ 500 jobs.

For me the measurement must be new, incremental growth and to ensure it’s tied to a true ROI it has to be based on incremental taxes paid. This would put a further onus on BNB to attract higher quality jobs and companies that will actually pay taxes in the province.

Back to Alberta.

Not one Albertan complains about the tax breaks to oil companies. Okay, I take that back. There are a few. But the point is that Albertans (the ones that actually know about the tax breaks) draw a straight line between these types of tax breaks and the massive economic growth in the province.

Do New Brunswickers draw a straight line between the activities of BNB and the economic growth in New Brunswick?

Or do New Brunswickers draw a straight line between the activities of BNB and the fact that the economy is tanking?