04 June 2012

Another call for an oil investment fund #nlpoli

In a column in the weekend Ottawa Citizen, Brian Lee Crowley of the Macdonald-Laurier Institute made a convincing argument for investing provincial government oil revenue in an investment fund:

Natural resource revenues, by contrast, gyrate wildly. The temptation, when prices are high, is to pretend those revenues will always exist, causing a cycle of booms and busts in public finances. Moreover if you acquire recurrent obligations on the basis of one-time asset sales, an inevitable day of reckoning comes. The natural resource is gone and you have a lot of public servants you can’t pay and a lot of people reliant on public services you can no longer afford.

This problem is resolved by using the money to pay off debt and then investing the rest and only spending the fund’s returns.

Ah yes, the temptation to spend irresponsibly – i.e. unsustainably - followed by the day of reckoning.

Sounds familiar.