Ontario won’t ‘slash and burn’ to balance
Budget depends on targeted savings and a dependence on a steady economic growth.
TORONTO — Ontario’s path back into the black won’t include slashing and burning as the Liberal government believes it can eliminate its $10.9-billion deficit with a scalpel rather than a hatchet – a penny a beer bottle the only new tax to be introduced.
The $131.9-billion budget introduced April 23 by Finance Minister Charles Sousa pledges to balance the books through a combination of targeted savings and a dependence on a steady economic growth.
It contains no major spending cuts and no new personal or corporate tax increases, which is what many experts had predicted.
Ontario’s economy is expected to grow by 2.7% this year, boosted by the low Canadian dollar, the recovering US economy and lower oil prices, Sousa said. But he insisted the deficit elimination is not relying too heavily on external factors.
“It’s about controlling our spending and being very pragmatic in the things we do,” he said. “We did not control spending by slashing and burning, as some would do. We did it by closely examining programs.”
But in the budget itself the government notes that unexpected changes in global economic conditions could lead to changes in its overall fiscal forecast.
The deficit will drop to $8.5 billion in 2015-16, falling further to $4.8 billion in 2016-17 before returning to balance the following year, the budget forecasts.
Analysts and credit rating agencies have long been skeptical that the Liberal government can balance the books by its self-imposed deadline of 2017-18.
“I guess it’s possible,” Matthew Stewart, associate director of economics with the Conference Board of Canada, said after reading the budget.
“It’s pretty difficult with the plan they have. Every year it gets more and more difficult.”
The Ontario Chamber of Commerce was also skeptical, writing in a news release that the budget appears to “push much of the heavy lifting down the road.”
Mike Moffatt, an economics professor at Ivey Business School, said many were expecting more aggressive cuts or tax increases, but this slow and steady approach of deficit elimination is “going to be difficult, but potentially manageable.”
“There’s only so much that any government can control so you’re always dependent on outside factors…but I think overall the Ontario government has gone out of their way to make very conservative projections, so if they’re likely to be wrong, they’re likely to be underestimating the economic situation,” he said.
“I think on their economic projections they’ve set themselves up to underpromise and overdeliver, so I think politically that makes a great deal of sense.”
Spending in major sectors such as health, education, children’s and social services and justice is projected to see minor increases, and cuts of 5.5% in other sectors leave average program spending growth more or less stagnant until 2017-18.
The province’s official Opposition does not believe the government will balance the books by 2017-18, nor that the nominal increase in health-care spending won’t lead to job losses across the sector.
“The amount spent on the interest on the debt is the highest-growth rate of any other spending sector, including health and education,” Interim PC Leader Jim Wilson said.
The Ontario Health Coalition said hospitals will suffer budget cuts because the increase in the health budget doesn’t keep pace with inflation.
The budget savings mostly come from a series of relatively minor measures, such as $100 million in cuts to business tax credits and $500 million in “program review savings,” including changes to the Ontario Drug Benefit Program and consolidating schools.
NDP Leader Andrea Horwath said the budget does nothing to deal with the “increasing unaffordability” of everyday life.
“Today we have a document full of cuts to services that Ontarians rely on, full of added burdens to household budgets and more handouts to those who need them the least,” she said. “It leaves middle-class and struggling Ontarians further behind.”
With major initiatives such as $130 billion over 10 years in infrastructure spending, changes to beer distribution and the sale of a majority stake in Hydro One previously announced, the budget contained few goodies.
For drivers, all insurers will be required to offer a discount for the use of winter tires. For students, the loan limit will be indexed annually to inflation, which means they can qualify for more per year.
Ontario is still grappling with its own debt, projected to be $298.9 billion in 2015-16. Debt interest payments of $11.4 billion alone account for nearly 9% of this budget, though that’s lower than the government projected in the previous budget due to lower interest.
© 2015 The Canadian Press