Separation could cost Alberta up to $170B: independent report

A provincially commissioned report on separation pegs the transition cost as high at $170 billion. CTV News Edmonton's Chelan Skulski reports.

A new independent report suggests it would cost Alberta between $50 billion to $170 billion to separate from Canada.

The report was released by the University of Calgary’s school of public policy on Wednesday morning.

It looked at two different separation scenarios: a “smooth” scenario involving “quick and favourable” negotiations with Canada, and a “difficult” scenario arising from more “hostile” reactions from Canada and other countries.

Either way, the report said the “short-term term impacts of potential separation would result in significant economic disruption and costs for Albertans.”

“The cost of establishing a new country could range from $50 billion to $170 billion in the first five years following separation,” said a media release on the report.

“Even in the simplest of scenarios, where every aspect of the process goes smoothly, establishing a new, separate Alberta would be a complicated, lengthy and contentious exercise,” the report itself said.

Factors considered in the report include the costs of replacing federal programs, as well as monetary policy, negotiations around Canadian debt and assets, labour mobility and international trade relationships.

It said, while Alberta could save money on equalization payments and improving public service delivery, the province would take on “major spending,” including:

• creating and supplying a new military;
• building and staffing a new public service sector;
• taking over Old Age Security, Employment Insurance and a new pension plan;
• new immigration and passport services; and
• creating a new constitution and legal system.

The ‘smooth’ scenario

Due to the complexity of required negotiations with Canada and Indigenous communities – such as those concerning Treaty rights, pipelines, borders, assets and debt – the report said it would take years for Alberta to separate.

The “smooth” scenario in the report revolved around Alberta maintaining access to major trade markets, improving delivery of some government services, and expanding resource development.

It would require cooperation and help from Canada, as well as speedy international recognition and successful negotiation of international treaties and trade relationships.

Long-term, the report suggests an amicable separation could benefit Alberta in higher gross domestic product (GDP), lower taxes and a modest annual wage increase of about $1,851 for Albertans – but it would take 20 years to see those benefits.

“For the totally smooth transition, there are potential upsides years down the road,” explained Martha Hall Findlay, director of the university’s school of public policy. “But, and there is a but … It’s not a huge upside and there’s some really significant pain up front.”

“The chaotic scenario … it’s pretty painful for a seriously long period of time, partly because of things that would be outside of Alberta’s control.”

The ‘difficult’ scenario

According to the report, a “hostile” reaction from Canada could see negotiations drag out and future benefits disappear.

“If Canada doesn’t rush to recognize Alberta, it would be pretty hard for Alberta to get international recognition. And without international recognition, what are you going to do about trade deals?” Hall Findlay said.

The “difficult” scenario included factors like higher interest rates and trade costs – including the U.S. leveraging Alberta’s lack of options to pay less for oil exports.

Its outcome was a long-term reduction in GDP, higher unemployment and taxes, and the loss of almost $12,000 in annual income for Albertans.

“Even after 20 years, employment could be nearly five per cent lower and Alberta’s economy more than 16 per cent smaller than if the province remained in Canada,” the report read.

The report said a chaotic transition would hurt Canada too, with impacts including:

• a fall in Canada’s global economic standing, as Alberta contributes a “disproportionately large share” of Canada’s GDP;
• higher taxes, spending cuts or increased deficits in Canada, due to Alberta contributing more taxes than in spent on services or transfers; and
• a trade deficit and a weakened Canadian dollar, brought on by loss of Alberta as an exporter.

‘The risk is too much’

Minister of Finance Jason Nixon said the report didn’t surprise him or Premier Danielle Smith.

“This is what we expected,” Nixon said. “The premier has been making it very clear that there is significant risk to Albertans if we were to leave Confederation.”

Nixon said he understands the concerns of Albertans, but that separation is not the answer. He encouraged Albertans to read the report before heading to the polls.

“At the end of the day, this is about people. We want to protect everybody in Alberta, and the risk is just too much,” he said.

Jared Wesley, political scientist at the University of Alberta, said the report is unlikely to change many minds, with polling suggesting upwards of eight in 10 Albertans will vote to stay.

However, he added, the numbers could sway some “flirting” with using the vote to send Ottawa a message.

“Separatists have placed a lot of emphasis on gaining leverage with the rest of Canada through this first referendum,” Wesley said.

“Seeing reports that suggest, in the short and long term, the prosperity that separatists are promising is uncertain, if not unlikely, will likely turn them away from supporting option two on Oct. 19.”

The full report can be found on the Government of Alberta website.

With files from CTV News Edmonton’s Chelan Skulski