Alberta already tried Carney-style budgeting—it backfired

When Mark Carney tables his first budget on Nov. 4, he’ll introduce a model of accounting borrowed from city halls across the country, which is to split day-to-day spending (operational) from long-term investments (capital). But if Alberta’s experience is any indication, this system rarely scales effectively beyond the local level. Those who lived through the Alison Redford years have seen how quickly a split budget can run afoul. In 2013, Alberta’s then Progressive Conservative government rolled out a provincial budget that divided spending into three buckets: operating, capital, and savings. The government projected a $450-million deficit on the operating side but set out to borrow more than $4 billion for infrastructure, insisting that debt shouldn’t count against the deficit because new assets would appear on the books instead. Redford and her then-finance minister Doug Horner argued this was the same logic municipalities used to finance water plants or LRT lines. Opposition parties on either end of the political spectrum lambasted the budget, agreeing essentially that the government had made it impossible for Albertans to understand the figures or compare them with previous years. The experiment barely lasted two years. Alberta’s auditor general accused the government of obscuring the province’s true financial position, saying its presentation of operational and capital accounts was overly complicated and failed to meet the basic standards of public-sector accounting. By 2015, the province had reverted to a single, consolidated budget. Gone too was Redford herself—undone by a series of scandals that all pointed to a similar lack of respect for transparency and the public purse. It all contributed to the Progressive Conservatives’ eventual downfall. Not that voters turfed the PCs because of their morphing budget style, but because the episode simply reinforced a broader perception that the party had grown entitled and out of touch with everyday Albertans. And now, Carney’s Liberals think they can pull off a similar smoke-and-mirrors trick. Much like Redford’s Alberta in 2013, Ottawa today is trying to reconcile competing fiscal pressures. The federal government faces its own version of an infrastructure deficit, especially in the form of aging defence assets. At the same time, social spending and the public sector have ballooned after a decade of Trudeau rule. Like Redford, Carney wants it both ways. The Parliamentary Budget Officer, for his part, welcomes certain elements of the federal government’s new approach to budgeting. Notably, the budget drops in the fall, which allows Parliamentarians to plan ahead to the new fiscal year. But the PBO also flags serious concerns, saying the definition of “capital investment” is “overly expansive and exceeds international practice.” Under the Carney framework, almost anything that enables economic activity could qualify. Highways and ports—yes—but also tax credits, production subsidies, and housing incentives that don’t materialize as public assets, particularly federally-owned ones. At the municipal level, the logic of a split budget is simple. Cities can’t run operating deficits and can only borrow for hard assets with clear lifespans. Their books are smaller, and their projects more tangible. Following this line of argument, it would actually make more sense for the provinces to use this form of accounting than the federal government. For Ottawa, if “investments” can mean anything from tanks to tax breaks, the temptation to stretch definitions can turn irresistible. Who knows what squishy ideas could fall under digital infrastructure, for example. The federal deficit is already projected to edge toward triple-digit billions. Many voters may have been conditioned to believe none of it matters, but few fiscal hawks will be fooled. Ironically, by splitting spending into separate buckets, the government is practically inviting skeptics to comb through the budget line by line, like CRA auditors, searching for what’s been hidden or renamed. Programs that once looked reasonable may now appear suspicious. Alberta’s experience should remind Ottawa that you can’t restore credibility through clever math. A government that wants to be trusted has to do more than rearrange the columns.