Spending growth slowest in 30 years under Ontario Tories: Watchdog
FAO says rising interest rates, high household debt, trade uncertainty could negatively impact government plans.
TORONTO — Program spending under Ontario’s Progressive Conservatives, which will drop to its lowest level in 30 years, could contribute to weaker economic growth at a time when fiscal clouds are gathering, the province’s budget watchdog said.
The Financial Accountability Office warned that factors like increasing interest rates, high household debt and trade uncertainty could negatively impact the government’s plans as it works to eliminate a multibillion-dollar deficit.
“That’s a significant change,” financial accountability officer Peter Weltman said of the constrained spending.
Weltman warned that the Tory fiscal plan takes place in an environment of “elevated economic risks” and relies heavily on success in limiting spending growth.
“If the economy underperforms or the planned spending restraint proves unachievable it is unlikely the government would be able to … still balance the budget by 2023-24,” he said.
Premier Doug Ford’s government has said it doesn’t expect to balance the budget until one year past their mandate – in 2023-24 – and has been announcing a slew of cuts as it chips away at the $11.7-billion deficit.
The FAO said the government’s plans will see it hold program spending growth to 1% on average over the next five years – meaning spending on public services would be reduced by $1,100 per person during that time.
Such a level of restraint hasn’t been seen since the mid-1990s, when former Tory premier Mike Harris was in office, the FAO said.
At that time, from 1992-93 to 1998-99, spending growth was constricted to 0.3%. Harris’s years in office were marked by an agenda of cuts, service reforms and municipal amalgamations in order to reduce the province’s deficit and lower taxes.
Spending growth was at its highest during Bob Rae’s NDP government from 1989-90 to 1992-93 – at 10.2% – as that government grappled with a deep recession.
The previous Liberal government held spending growth to 1.4% in the period after the last recession from 2010-11 to 2016-17. But spending growth jumped to 6.8% during the final two years of former Liberal premier Kathleen Wynne’s term in 2016-17 to 2018-19.
The FAO also said the government’s fiscal plans include lower tax revenue projections, suggesting the government has plans for “unannounced measures” related to tax policy change.
The Tories pledged during last spring’s election to cut income taxes for the middle class but have not yet fulfilled that promise.
Finance Minister Vic Fedeli said the FAO’s report shows the government’s plan to address the deficit is working.
“(The FAO) confirmed that our government’s measured, thoughtful and responsible path to balance is credible and the plan laid out in Budget 2019 will put the province on a sustainable footing,” he said in a statement.
But NDP finance critic Sandy Shaw said the watchdog’s report shows that the restrained provincial spending will hurt Ontario residents.
“It’s clear that Doug Ford’s deep cuts are already costing us,” she said. “We’ve seen this already and clearly with this report things are only going to get worse for Ontario.”
Green party Leader Mike Schreiner said the report shows the Ford government needs to re-evaluate its spending priorities and should not be planning to hand out a pre-election tax cut at the same time that it constrains program spending.