TORONTO - A "happy marriage" between the Liberals and NDP that was solidified with a new tax on the rich allowed Ontario's minority government to survive a confidence vote on its budget Tuesday.
After weeks of negotiations between the Liberals and the New Democrats, Premier Dalton McGuinty finally agreed Monday to increase the tax on incomes over $500,000 in exchange for NDP support on the budget.
"The NDP were insistent on a tax on the rich and we were insistent on finding a way to accelerate our plan to eliminate the deficit, so we have a found a happy marriage," McGuinty told cheering Liberal members immediately after the crucial vote.
"By working with the NDP we have made a strong budget even stronger."
In the end, the New Democrats abstained from the budget vote, but that allowed the Liberals to outvote the Progressive Conservatives 52 to 37 and pass the motion, avoiding a second election in less than a year.
The NDP is still upset the budget calls for the privatization of Ontario Northland railway and removes subsidies from the horse racing industry, saying those moves will kill jobs, not create them.
They did not want to vote for a budget they still have problems with, but didn't want to force another election either, said NDP Leader Andrea Horwath.
"There are many things in that budget we don’t like," she said.
"It remains a Liberal budget, but what we were able to do is bring some fairness for Ontarians."
Finance Minister Dwight Duncan said the NDP were "trying to have their cake and eat it too" by negotiating a series of changes in the Liberals' budget and then refusing to vote in favour of the fiscal plan.
Duncan said he would have new figures Wednesday showing the deficit will be lower than expected this year because of the extra $470 million a year from what Horwath calls the "fairness tax."
The Liberals also agreed to increase welfare and disability support payments which had been frozen in the budget, put more money into child care and give one-time funding of $20 million to help rural and northern hospitals.
Horwath said her party did its duty to improve the budget without forcing an expensive and unnecessary election, and didn't feel the need to vote for the Liberal plan.
The NDP will continue to try and get more changes in the budget as it comes up for subsequent votes, she suggested.
"We’re going to continue to fight for the people of Ontario to get everything we can to make this budget a good one," Horwath told reporters after the vote.
"We wanted the HST off home heating, a fight that we’re still going to fight in this legislature."
If the NDP abstained because they didn't want to vote in favour of a budget that also includes plans to impose a two-year wage freeze on the public sector, they didn't help themselves, said Ontario Federation of Labour president Sid Ryan.
"They didn’t please anybody because the effect of abstaining has the same impact, the budget still goes through," said Ryan.
"You’d be better off standing by your convictions and say: 'This is what we negotiated. This is the best we could get and we’re going to vote in favour of it.'"
There was little doubt the budget motion would pass after McGuinty agreed to the NDP's demand to impose a two percentage point surtax on incomes over $500,000.
McGuinty said all of the revenues from what he calls "the NDP surtax" would go towards the $15.2-billion deficit, and promised the tax would be scrapped when the budget is balanced in 2017-18.
However, the Tories aren't convinced the Liberals will use the tax revenue to pay down the deficit, and predicted it would go towards new spending programs.
"I think this tax increase is simply going to pay for spending that they’ve already promised, the full-day kindergarten, the tuition tax rebate, the support for home renovations," said Progressive Conservative Leader Tim Hudak.
"There’s a long list of new spending programs they’ve brought forward that we can’t afford."
Hudak had vowed the Conservatives would vote against the budget as soon as it was introduced, complaining it did not reduce government spending or do anything to help create jobs.
The 2012 Ontario budget freezes pay for doctors, and extends a pay freeze for health care executives. The province will begin means-testing seniors' prescription drugs, paid for under the Ontario Drug Benefit Plan, effectively meaning that the 5 per cent wealthiest seniors covered by the plan will have to pay more into the plan. Seniors with incomes over $100,000 and senior couples with combined incomes above $160,000 will be affected. Increases in health care spending will be capped at 2.1 per cent per year.
The budget freezes pay for teachers. A pay freeze for educational executives, already in place, will be extended. School boards in low-population areas will be amalgamated, and "under-utilized" schools will be shut. Student transportation will be cut by $34 million.
The province will begin means-testing seniors' prescription drugs, paid for under the Ontario Drug Benefit Plan, effectively meaning that the 5 per cent wealthiest seniors covered by the plan will have to pay more into the plan. Seniors with incomes over $100,000 and senior couples with combined incomes above $160,000 will be affected.
Welfare rates will be frozen and planned increases to the Ontario Child Benefit will be delayed.
There are no tax hikes in the 2012 Ontario budget, but it does freeze the corporate tax rate at 11.5 per cent, foregoing planned reductions in the tax rate to 10 per cent. The freeze is expected to save $1.5 billion over three years.
Ontario will cap the 10 per cent hydro bill rebate at 3,000 kilowatt-hours, a limit high enough that most homes won't be affected, but businesses could be. Reducing the tax credit will save $470 million over three years.
On top of the four jails the province already plans to close, the budget adds two more to the closure list -- one in Brantford and one in Chatham. Overtime for jail guards and the Ontario Provincial Police will be reduced.
Ontario plans to reduce spending on business support programs by $250 million by merging a number of different programs.
The province aims to increase revenue by increasing the number of gambling facilities. [Details to come]