POLICY OPTIONS: Looking back, was it necessary to divide the right in order to unite it? René Lévesque used to say that you have to break eggs in order to make an omelette.

PRESTON MANNING: I would say that the right was already divid- ed and collapsing, and that we picked up the pieces in western Canada. It is true, however, that the collapse of the old PC Party gave us and others an opportunity to recon- stitute and reconstruct the conserva- tive movement.

PO: Was the CF-18 contract a negative watershed event for the Progressive Conservative Party in the West?

MANNING: It was, symbolically, because it undermined the credibility of the government on its claim to be effectively safeguarding western regional interests. The slowness with which the government of the day dis- mantled the National Energy Program was another factor.

PO: Was the problem with Reform, and later the Canadian Alliance, that it was a regional brand, seen as a party of western grievance that stopped at the Ontario border?

MANNING: We were labelled early on by our opponents as a strictly regional party and that hurt. But our own declared intention was to build a truly national party on the basic posi- tions of fiscal responsibility, social concerns, democratic accountability and constitutional reform " positions for which we believed there was sup- port in all regions of the country.

PO: Do you feel sometimes like the prophet who didn’t get to see the promised land?

MANNING: I don’t dwell on that. There’s a large number of Conservative MPs in Ottawa on the government side of the House who got there by the Reform/Alliance route. They constitute a principled alternative to the Liberals, and that’s the important thing.

PO: In a recent speech you elabo- rated on your vision of ”œa renewed fed- eration.”

MANNING: I was speaking mainly to a group of western Canadians in Calgary who were discussing the need for a ”œrenewed national vision.” My caution was that if your vision only reflects the aspirations of your own region, then it’s not big enough to qualify as a ”œnational vision.” The aim should be to ”œdream big.” If Albertans want to help fashion a renewed national vision, it must be on a scale commensurate with the size and potential of the country. Albertans are capable of thinking on that scale, for example when they discuss continen- tal energy policy.

PO: You and Mike Harris have put out a paper entitled Rebalanced and Revitalized, on federalism and the Canadian federation. And you wrote of what you called ”œthe yawning mis- match between the responsibilities and resources of the federal and provincial governments.” This notion of rebalancing the federation seems to have resonance.

MANNING: In a federal system with its different levels of government, it is essential to ascertain what is the right balance between the various lev- els of government that will optimize service delivery and economic per- formance. There is no absolute answer to it, but it is the right question, and it is better to frame the debate in terms of ”œrebalancing” rather than the ”œcen- tralizing/decentralizing” paradigm. Decentralization versus centralization only stresses the differences in each region’s interpretation of the role of the federal and provincial govern- ments. ”œRebalancing” is a better term because it recognizes the need to strengthen both levels of government, but in their respective areas. It also allows you to discuss the balance between the levels of government in every region of the country without being misleading. Stephen Harper and I did a lot of thinking about this rebal- ancing issue at the time of the Quebec secession referendum (he was our con- stitutional critic then), but it got little publicity or attention.

PO: Now to the Progressive Conservative leadership campaign in Alberta. The Conservative Party has now been 35 years in office; Mr. Klein has been in for 14 of those. Clearly this is a party in need of renewal. What do you see as the main challenges facing the next premier of Alberta?

MANNING: There are at least five big questions that the new leadership and Albertans themselves need to think through. Which candidate Albertans decide to support should be largely dependent on how they respond to these questions. First is the issue of health care, which is still very important to Albertans. Is the next premier of Alberta prepared to lead on health care reform, since the cur- rent system is unsustainable?

Second, are they prepared to lead on the issue of democratic accounta- bility and transparency in govern- ment? Alberta has been quite critical of the federal institutions, but there is work to be done here at home on the issue of democratic accountability. When you have got as much money floating around as is the case in Alberta right now, how you handle lobbyists, how you treat transparency and how you improve democratic accountability are critical issues.

A third issue, in fact I would put it right near the top, is the question of how Alberta is going to balance a genuine commitment to environmental conservation with its market-driven approach to economic development " not just at the conceptual level but at the practical level " addressing issues such as water shortages and greenhouse gas emissions.

Fourth, is Alberta going to play a leadership role on the national stage? Is Alberta going to assume a bigger leadership role in negotiating more memo- randums of understand- ing [MOU] with other provinces such as the free trade MOU with British Columbia?

Fifth, there is the ”œspending, sav- ings and investment” issue. What pro- portion of our resource revenues are we going to save, and what proportion are we going to spend? This then raises the question of fiscal discipline and the leadership necessary to save, the tax regime most conducive to future eco- nomic prosperity, and the opportuni- ties for investing in necessary social infrastruc- ture, the education and training of the next genera- tion of Albertans, and renewable energy resource development.

PO: Your father was premier of Alberta for 25 years, from even before the discovery of oil at Leduc in 1947 until 1968. What would he make of an Alberta debt-free, with surpluses in the billions of dollars?

MANNING: Well, he lived until 1996, so he saw a lot of this prosperity. But like many of the people who went through the Depression he had also seen Alberta flat on her back. When he was first elected to the legislature, Alberta was $160 million in debt, with annual revenues of $15 million, over half of it going to debt service. Alberta defaulted on that debt in 1938; it couldn’t borrow, it had no credit. That is how Alberta’s ”œpay as you go” policy originated. And to recover from that position to the position Alberta is in today would strike his generation as utterly miraculous.

PO: Alberta also has the biggest increases in program spending in the country, and still can’t spend down the surplus.

MANNING: On program spend- ing, I remember the night that Alberta brought down its first billion-dollar budget. This was 1970; my father had left the legislature, and Andy Aalborg was provincial treasurer. I made the mistake of saying to Andy, who had also lived through the Depression, ”œYou fellows must be fairly happy. Once you were flat broke, but tonight you’re bringing down a billion-dollar budget with a surplus.” He got quite angry and said, ”œYou young guys think that the graphs always go up … but I tell you, they can go down.” Like many people of that generation, he could never feel that the province was ”œeconomically secure,” even with a bil- lion in revenue.

PO: And about Alberta’s role in the federation, you have spoken of the need to become more independent from Ottawa while creating stronger ties in the rest of Canada.

MANNING: Many Albertans, including some of the candidates for the premiership, talk about ”œgreater inde- pendence from Ottawa.” I tell them that it would be wiser (if they believe it) to say, ”œLet’s be more independent from Ottawa, but build stronger ties with the rest of the country.” It is important that Alberta use its growing influence and wealth to make friends and allies in the rest of the country, for the benefit of the country as a whole and so that in the future if some federal government takes a run at Alberta’s resource revenues, the rest of the country will not go along.

PO: Perhaps you are talking about a kinder, gentler Alberta.

MANNING: I would use the phrase ”œbuilding bridges.” Alberta has got to build bridges and alliances with, not barriers against, the rest of the country. There are good mechanisms for doing that in memo- randums of understanding between the provinces and in the Council of the Federation. But these mechanisms must be aggressively used.

PO: What are your thoughts on the vertical fiscal imbalance between Ottawa and the provinces? And there is some discussion about a horizontal imbalance between Alberta and some of the other provinces.

MANNING: On both of these questions, what would really help the discussion is a clear presentation of the real fiscal balances and how petro-wealth is already distributed across the country. You can’t have every province saying that the federal government takes more out of that province than it puts in. Mathematically, that cannot be. So something is wrong with some- body’s figures. I think that debate needs to be clarified.

On the horizontal imbalance, the same thing applies. People should be given a clearer picture of what the actu- al distribution is, across the country, of revenues generated by the petroleum industry. The media focuses almost exclusively on the 20 percent of the revenue barrel that is highly visible, the portion of resource revenue that goes into the treasury of the government of Alberta and the Alberta Heritage Savings Trust Fund. But where is the other 80 percent of the revenue barrel going, and how is that distributed?

A big chunk of that money is going to Ottawa, not Edmonton. In fact, the current projection on rev- enues from oil sands development to 2020 indicates that the federal govern- ment will collect $51 billion in rev- enues, more than any other government including Alberta.

PO: A lot of those redistributions are in payouts in income trusts in the energy sector.

MANNING: Yes, the energy indus- try itself is organized much differently today than it was in 1980, with a large number of energy companies organ- ized into royalty and income trusts. These distribute their revenues very broadly to unitholders across the country and the world. When Ralph Goodale as Liberal finance minister mused briefly about tinkering with the rules for those income trusts, where did the loudest howls come from?

They didn’t come from Calgary. They came from the big pension and insur- ance funds on Bay Street. So before people say that Ottawa should ”œinter- vene” to redistribute petrodollars, those people should take a hard look at how those dollars are being distributed now. I would argue that the current distribution is far broader in terms of tax revenues, job creation and profits than most people realize.

PO: The federal government recently announced a surplus of $13 billion for the last fiscal year, or $5 bil- lion over the fiscal forecast. Quite apart from historically bad financial forecasting, would the main reason for such a big miss be larger, than expect- ed energy revenues?

MANNING: That would be one of the reasons. The more important point to make with Conservatives is that the main objective in balancing the budget was not to run up surpluses but to leave more money in the hands of con- sumers and businesses via tax relief.

PO: On the environment, a subject close to your heart. Mr. Harper and his new government have successfully changed the conversation, or the frame at least, from Kyoto to climate change.

MANNING: I have said many times that I never believed the Chrétien government was really sincere about Kyoto. If they had been, they would have known that it couldn’t be implemented without the cooperation of the provinces and the private sector. The fact that the Chrétien government at the highest level made no effort to secure that kind of cooperation told me that they never intended to implement it in the first place. Rather, the intention was to go to Kyoto, get the photo ops as good green fellows and come back home to much applause. And then when they couldn’t comply, to blame the provinces and the private sector. Stephen Harper observed all this as an MP so it is understandable that he would want to find another approach. I think that he is on the right track by searching for another approach. The challenge will be to change the focus to clean air, to make some progress quick- ly, to get the provinces on side and to rely less on direct government regula- tion and more on marketplace mecha- nisms to get results.

PO: You have gone from being the man in the arena to a public intellec- tual. Are you happy with the transition in your life?

MANNING: Yes, and by establish- ing the Manning Centre for Building Democracy we hope to provide some practical training to young people who are going to get into the political arena and also generate a bigger supply of intellectual capital for politicians, especially on the conservative side.

PO: What is the role of the Manning Centre?

MANNING: If I had a diagram here it would be kind of a pyramid. Think of the top third of that pyramid as being the people who will actually enter the political arena " the candidates, the party members, the elected people. For them to be successful, there is a need for a lot of foundational blocks and infrastructure underneath. You need people to invest money in the political process for the long term, not just the next election campaign. You need intellectual capital and think tanks (not just a few of them, dozens of them) and solid links with academia, because the parties don’t generate intellectual capital. You need education and training for everyone from poll workers to constituency executives to campaign managers to cabinet minis- ters to chiefs of staff. You need increased communications capacity because most parties only communi- cate during election campaigns. There is a need for what we call ”œdemocratic infrastructure” to allow the political players to play the game better. What we are aiming to do through this cen- tre is to build up that infrastructure, not necessarily by doing it ourselves, but by supporting individuals and organizations that are already trying to do these things without sufficient resources or encouragement. You can find out more about this by visiting www.manningcentre.ca.

PO: The Liberals by virtue of being a dynastic party have a built-in farm system. It sounds like you are talking about that kind of infrastructure.

MANNING: What the Liberals did is finance a lot of their political infra- structure with public money. As gov- ernment, they could fund think tanks and buy consulting studies and send all sorts of people to training courses using taxpayers’ dollars. But now that they are out of office, they don’t have access to that public money and we are seeing how bare their cupboard really is. The Conservatives have learned the hard way that if you don’t have the infra- structure below and around the party, you cannot be politically successful in the long run. We hope to take this les- son to heart and build that necessary infrastructure, if it takes 10 years.