Alberta Premier Danielle Smith speaks to business leaders at the Global Business Forum in Banff, Alta., on Sept. 22.Jeff McIntosh/The Canadian Press
Duane Bratt is a political science professor in the department of economics, justice and policy studies at Mount Royal University in Calgary.
On Thursday, the Alberta government released a commissioned report from Lifeworks on pulling out of the Canada Pension Plan and creating an Alberta Pension Plan. This included a news conference with Premier Danielle Smith, Finance Minister Nate Horner and Jim Dinning (a former finance minister from the 1990s) who will chair an engagement panel. While the report and news conference emphasized the economic benefits of a new APP to Albertans, this is really a political exercise. A political exercise that, at its core, is about inflicting pain on the federal government.
The APP report paints a very rosy picture. It asserts that Albertans will pay substantially less in contributions and will receive more in retirement benefits than they would in the CPP. The report estimates annual savings for Albertans of $5-billion. In addition, by controlling hundreds of billions of dollars ($334-billion in 2027), it would energize the financial services sector and have massive economic spinoffs for the province.
However, this analysis is all based on a fundamental flaw of the report. It asserts, based on an “alternative interpretation” of the law, that Alberta would receive 53 per cent of the CPP’s assets. This is despite providing only 16 per cent of the contributions.
The logic fails on even a superficial examination. If Ontario also pulled out, using the same calculations, it would receive 63 per cent of CPP assets. Obviously, there cannot be more than 100 per cent of an asset. Moreover, it would mean that the other provinces would receive nothing, and would owe the CPP additional billions.
In any divorce, which is an excellent analogy after participating in the CPP for almost 60 years, there are disputes over assets. But those disputes are usually about tens or even hundreds of thousands of dollars. In this case, it is hundreds of billions.
Already CPP Investments has claimed that the Alberta government’s interpretation is “based on an invented formula.” If Alberta does pursue an APP, this dispute over allocating CPP assets will end up in the Supreme Court in a battle between Alberta, the federal government and the other provinces. It is tough to take the economic projections that the report makes seriously when the starting point is so contentious.
Given the fundamental error of the APP report’s economic calculations, it is important to recognize that this is about politics and not economics. This can be explained in numerous ways.
First, the idea of creating an APP has circulated among Alberta conservative intellectuals for decades. However, it only emerges publicly when the Liberals are in office federally. For example, the infamous “firewall letter,” which advocated for an APP, among other items, was written by Stephen Harper, Ted Morton, Tom Flanagan and others the year after the re-election of Jean Chrétien in 2000.
Likewise, when then-Alberta premier Jason Kenney created the Fair Deal Panel in 2019 to examine an APP and other initiatives, it was after Justin Trudeau was re-elected. The Smith government is pursuing an APP now because it is deeply upset with the Trudeau government’s proposed net-zero requirements for electricity generation and emissions reductions. When the Liberals are in office in Ottawa, and the Conservatives are in office in Edmonton, suddenly an APP is an attractive idea.
Second, the report, news conference and subsequent consultation process are about political messaging. Every poll that has been done on pulling out of the CPP and creating an APP has shown that it is unpopular in Alberta. The Fair Deal Panel’s own polling showed that just 42 per cent of respondents were in favour of an APP.
The Smith government is fully aware that the idea is unpopular, therefore it wants to change public opinion. Commissioning a report that puts the most positive spin on the numbers is designed to appeal to Albertans of all ages. People in their 30s and 40s will be attracted by lower contribution rates, and those in their 50s and 60s will be excited by higher retirement benefits. If, through the engagement panel, the government sees a shift toward an APP, then a referendum will be held.
It is notable that Ms. Smith spoke a lot about an APP during her United Conservative Party leadership race in the summer of 2022, but did not talk about it during the recent provincial election. In fact, she referred to the NDP as fearmongers for bringing up changes to the CPP. But now that she has been elected Premier with her own mandate, albeit losing 14 seats, she has brought the APP back off the shelf.
Third, some of Ms. Smith’s closest political advisers have advocated pulling out of the CPP. Rob Anderson, the executive director of the Premier’s Office, co-wrote the Free Alberta Strategy that argued for creating an APP. His co-author, University of Calgary political scientist Barry Cooper, maintained that part of the reason why he wants an APP is because “it would hurt the rest of the country. And to be clear, that is precisely the idea: to inflict a little pain on Canada, and especially on Ottawa.”
It is unfortunate that the CPP is being used as a pinata by the Alberta government. It is one of the best examples of co-operative federalism that we have in Canada. In the 1960s, all the provinces – including Quebec – and the federal government were able to create a national pension plan.
Over the decades, the CPP has provided a stable source of retirement funding, it has been sustainable, its investments have a high rate of return, it’s portable and it is well-managed. While there are major fights in other countries over pensions, we have not seen that in Canada. Until now. And the fight is not really about the functioning of the CPP, but about a political agenda around other issues aimed at the federal government.
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