Hyndman Papers- Budget 1982-83

In the following remarkable document from former Provincial Treasurer Lou Hyndman, he succinctly summarizes the quintessential fiscal policy questions his predecessors and successors have grappled with.

These questions relate to: the Alberta public’s  “rising expectations;” use of Heritage Fund savings and investment income for general operating purposes; the scope for tax increases; how to cope with resource revenue uncertainty; and the sustainability of government expenditures. All these questions are pertinent today.

Undated from Lou Hyndman- presumably to caucus or to Treasury Board/Cabinet

Key questions

The  following are some of the key questions to consider in setting the 1982-83 target expenditure level.

1. How should rising public expectations be reconciled with limited financial resources?
2. What is the scope to use the investment income of the Heritage Fund, the resource revenue transfers to the Fund and its accumulated savings to supplement the budgetary position?
3. What is the scope for increasing revenues by raising tax rates or phasing out existing tax subsidy programmes?
4. What is the best strategy to deal with the significant uncertainty regarding future resource revenues?
5. What expanded expenditure level is sustainable over the long term given available revenues?

In the following memorandum to Premier Lougheed, Hyndman sets out a collation of policy ideas designed to assist Alberta’s ailing economy. As with

previous economic cycles, during a downturn in economic activity, the word “diversification” is frequently heard.  The key, in Hyndman’s mind, was to “to provide a climate of confidence and a stable, predicted climate for business expansion, risk-taking and investment in the 80’s in Alberta.”  Below is the genesis of Vencap Equities which was seeded by a $200-million loan from the Heritage Fund in 1983  with  equity and debt from private investors. Vencap’s mandate was essentially to invest outside the oil and gas sector. This corporation was eventually liquidated by the Klein government in a sale to Onex Corporation in October 1995. 

Other pitches included an investor tax credit, a small business development corporation (Alberta Opportunity Company had been set up in 1972), and a :Native Development Corporation.  None of these ideas has been especially enduring and successful – a cautionary tale to those who think diversification is easy to achieve in practice through government programs. Of course, all these “assists” pale in comparison to the generous royalty regimes put in place, tax policies aiding the energy industry (particularly accelerated capital cost allowances), infrastructure spending, and a hands-off regulator. 

FROM: Lou Hyndman

            Provincial Treasurer

TO:      Honourable P. Lougheed                         DATE: February 17, 1982

           Premier 

          Room 307 Legislature Building

SUBJECT: INVESTMENT/BUSINESS DEVELOPMENT INCENTIVES 1982/83

               FOUR DEPARTMENTS

An interesting “package” of proposals in this area could be developed over the next ten months:

1. Alberta Venture Development Corporation-Planche – approved as to general concept by Cabinet Economic Planning Committee on February 17th, 1982 and on Cabinet Agenda as “Report” for February 23, 1982. RFD-A4-82 (just in) -provides details –  for large venture capital opportunities over a million dollars.

   

2. Small Business Development Corporation approach- Adair- a detailed proposal from that department will be forthcoming within the next four months, I understand. This would be similar to the Ontario/U.S.  approach.
3. Business Tax Incentive Plan- Hyndman- as I recently indicated, we could make specific announcements or pass legislation this Fall, effective January 1, 1983.
4. Native Venture Development Corporation- MacCrimmon-  I don’t know where this project now stands, but it could be part of the package.

You will want to consider the timing of such a possible package over the months ahead. As I see it, all four topics could be put together into an interesting broad policy statement to provide a climate of confidence and a stable, predicted climate for business expansion, risk-taking and investment in the 80’s in Alberta. 

LDM/kaz

Atts.

Source: Provincial Archives of Alberta. PR1986.0245, “Hyndman papers,” File # 639

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