Head of Think-Tank Decries Subsidized Hydro Rates

Climate Change, Crown Corporations, Environment, Frontier Centre, Manitoba, Media Appearances, Role of Government, Taxation, Uncategorized

How does this sound to you? The provincial government will triple your electricity bill, but in exchange cut your income tax by 56 per cent.

Don’t like that deal? How about the same hydro increase, but instead the government eliminates the school portion of your property taxes and doubles the amount of money it spends on roads and highways?

Sound good?

It certainly does to Peter Holle, the president of the Frontier Centre for Public Policy, a registered charitable organization and “think-tank” based in Winnipeg.

Holle spoke in Brandon yesterday, arguing for a massive shift in our province’s economic policies in order to encourage more growth.

And getting rid of Manitoba Hydro’s subsidized rates was just one of his ideas to help rid our province of its “have-not” status.

“We are basically leaving $1.2 billion a year on the table by having (subsidized hydro rates),” Holle told a crowd of about 250 people at a Brandon Chamber of Commerce luncheon.

“What if we said: Let’s price our electricity at market rates, capture the $1.2 billion and then let’s go and look at things we might eliminate or cut in terms of taxation.”

As a third alternative to the two scenarios outlined above, Holle said market-value hydro rates would enable the province to end the payroll, capital and corporate taxes plus get rid of the school portion of property taxes.

The net income to government coffers would remain the same, he said, but the result would be an economic climate suited to faster growth and more private investment.

Manitoba already has the lowest level of private investment per capita, according to Statistics Canada, and Holle said that means we’re being left in the dust relative to the rest of the country.

Since 1961, he said Manitoba’s share of Canada’s population has dropped by 28.5 per cent, while our share of the national GDP has dropped even more, by 34.2 per cent.

“Our economy is becoming less important in the big picture of Canada,” he said.

The solution, according to Holle, is a major redesign of our economic policies to reduce the government’s role and boost private-sector involvement.

He said about 50 per cent of Manitoba’s GDP currently comes from the public sector, above the national average of about 40 per cent and well above the “optimum size” identified by economists of 20 to 30 per cent.

As a case in point, he pointed to the privatization of MTS.

A decade after the government gave up ownership of the phone company, Holle said it has twice the revenue, three times the assets and 20 per cent more employees than its comparable neighbour to the west, SaskTel, which remains a Crown corporation.

And despite public opposition to the idea, Holle said it would be an economic boon for the province to open Manitoba Hydro up to private investment as well.

But he said there is one big barrier to significant economic policy reforms in Manitoba — the government has become dependent on transfer payments from Ottawa.

“We think that Manitoba is essentially trapped in a have-not province box,” he said.

“It’s got lots of potential, it’s got smart people, it’s got hydro wealth, it’s got all sorts of things. But the way the policy landscape is, if a politician were to start making dramatic changes and cutting spending and so on, what would happen is equalization payments would get cut. So why would you bother?” Holle warned, though, that “storm clouds” are approaching that may force Manitoba to wean itself from transfer payments in the near future.

He said “have” provinces like Ontario are growing increasingly frustrated with subsidizing “have-not” provinces like ours and may soon move to reduce what they pay into the national equalization fund.

“I predict that in Ontario, you’re going to see them saying ‘we’ve had enough of this’ and Manitoba is essentially going to have its equalization cut by outside parties,” Holle said. “So this will force the political leadership to do something.”

The Frontier Centre for Public Policy’s stated mission is to “popularize policy choices that will help Canada’s Prairie region live up to its vast but unrealized economic potential.”

It was registered as a charity in 1999 and receives its funding from non-governmental sources.