Arctic Yearbook 2014 - Page 212

212 Arctic Yearbook 2014 Figure 3: Getting it right from the beginning to maximize the success of the Heritage Fund. Fund Objectives: Savings, Spending and Fiscal Stabilization The current objective of the fund outlined in the Northwest Territories Heritage Fund Act is vague. The Act describes the fund’s purpose as “to ensure that future generations of people of the Northwest Territories benefit from on-going economic development, including the development of nonrenewable resources,” (2012: 3). The fund’s objective needs to be clarified, as the investment strategy and rules all flow from clear fund objectives. These objectives could address one or several of the following: a) Expenditure stabilization: To prevent “booms and busts” in the medium term. b) Saving for future generations: Savings will smooth the increase in spending when there is a mineral boom until there is enough capacity to spend effectively, thus preventing waste and inflation. Savings will further provide an endowment for future generations, though it is important to keep in mind that investment in education and infrastructure also provides an endowment for future generations. Precautionary savings further makes the NWT less dependent on the Federal Government. c) Earmarking mineral revenues for development: Resource revenues can be allocated to specific strategic projects, provided that the fund itself doesn’t spend the money directly but that the outflows go into the budget. d) Protecting mineral revenues from mismanagement: By putting the money in a fund, and subjecting it to a high degree of transparency and oversight, the money can be protected from mismanagement. A fund objective must be clear. This will guide all other aspects of managing the fund, supporting sound revenue management to ensure that the correct balance is struck between saving natural resource revenues for future generations, and spending current revenues on projects with longterm benefits. A Question of Future Prosperity