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 they’ll introduce.
The $131.9-billion budget introduced Thursday 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 per cent this year, boosted by the low Canadian dollar, the recovering U.S. 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.
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 the’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 per cent 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 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, Thursday’s 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 nine per cent of this budget, though that’s lower than the government projected in the previous budget due to lower interest.
Highlights of the 2015 Ontario budget tabled Thursday
Here are the highlights of the Ontario budget introduced by Finance Minister Charles Sousa on Thursday:
- Ontario’s deficit will be reduced from $10.9 billion to $8.5 billion in 2015-16, falling to $4.8 billion in 2016-17 and return to balance by 2017-18.
- The $131.9-billion budget includes $120.5 billion in program spending plus $11.4 billion in interest on the province’s debt, which is projected to hit $298.9 billion next year.
- $11.9 billion in 2015-16 for infrastructure projects such as highway improvements in northern Ontario and rapid transit — part of a $130-billion, 10-year plan announced in last year’s budget.
- An additional $200 million for a 10-year jobs fund announced last year, with a total of $2.7 billion for the program that provides corporate grants in return for jobs.
- Insurance companies will be required to give drivers a discount for using winter tires on their vehicles. However, the standard duration of medical and rehabilitation benefits will be reduced from 10 years to five years for all claimants except children.
- $9 billion expected to be raised from the sale of 60 per cent of Hydro One, the giant electricity transmission utility, $4 billion of which will be devoted to public transit.
- $100 million a year will be raised with a new tax on all beer sold in Ontario as part of modernization plan that will allow some grocery stores to sell six-packs of beer.
- $50.8 billion for health care, the single largest government expenditure, which is projected to grow an average of 1.9 per cent a year over three years.
- $25.2 billion for education, which will grow by two per cent a year, while funding for post-secondary education and training will hold steady at $7.8 billion.
- All other areas will face average decreases of 5.5 per cent a year until the deficit is eliminated, but they represent only 16 per cent of government’s total program spending.