Last week I discussed the Norwegian model of financing their pension plan with resource royalties. While I think it works great for Norway, I had some reservations about whether it could work in Canada. The main reason is because Canada is a federation where pensions are a federal responsibility while resource revenues are a provincial right. This begs the question, could Canadian provinces adopt the Norwegian model? More interestingly, would it be possible to go beyond the provincial level and focus pension benefits at specific regions? Let's look at B.C. for an example.
B.C. does not have significant resource revenues at the moment. However, if LNG develops even close to its potential, there will be large royalties flowing from that activity. Further down the road, but just as likely, are renewable resource royalties from those who develop B.C.'s wind, water, and geothermal assets. At the same time, B.C. will feel the pension issue more acutely than other provinces due to B.C. having the oldest demographic in the country. This has already become an issue with health care funding where B.C. has argued it needs above average federal funding due to our older population.
So if B.C. were to use its natural resource revenues to fund a provincial pension plan, not only would we be preserving the natural resource wealth for generations to come, but we would also be directing the value at a demographic that is particularly important to B.C. In a sense, we would be killing two birds with one stone.
There is another tangential benefit that I suspect would be of interest to most British Columbians. In Norway, where they control the largest pension plan in the world, (they apparently own 1 per cent of all publicly traded equity worldwide), they are activist shareholders and have used their influence to effect Norwegian values on some of the largest multinationals. In areas such as climate change and local working conditions, the small country of Norway has been able to leverage its influence to achieve major social change worldwide. A resource funded B.C. pension plan would give British Columbians similar influence on the global stage.
Most of B.C.'s resource wealth will come from northern B.C. How about targeting this resource wealth at the pensions of northerners? Given the low population of northern B.C. compared to the rest of the province, it would not be fiscally straining to substantially increase the pension benefits of those who have worked in the north. Furthermore, the lure of significantly better pension benefits would have an immediate impact by attracting permanent residents to the north. This would be a unique government policy tool to address our current labour shortage.
Pensions are a long term issue in Canada, especially in B.C. Similarly, future resource revenue is an opportunity in Canada, especially in B.C. Norway provides a model of how we can match these two issues. It would be interesting to see a made in (northern) B.C. solution.
