THE BLOG
11/19/2018 15:27 EST | Updated 11/19/2018 15:31 EST

Doug Ford Is Taking The Long, Hard Road To A Balanced Budget

At this rate, the Ontario government will not get anywhere close to deficit elimination before the next election.

Ontario is starting down the long and difficult road of improving the province's finances and, like kids in the back seat on a family vacation, taxpayers will be demanding to know "When will we get there?"

Based on the recent Fall Economic Statement, unfortunately, the answer is: no time soon.

Andrew Francis Wallace via Getty Images
Ontario Finance Minister Vic Fedeli during question period at the Ontario Legislature.

The provincial deficit stands at a staggering $14.5 billion. This is down $500 million since Aug. 30, when the Independent Financial Commission of Inquiry issued its report.

This is a start, albeit a slow one.

Ford needs a better road map

The government proudly proclaimed it had saved $3.2 billion in program expenses since taking office in June. But the impact on the deficit has been smaller because of other policy changes that reduced revenue, including eliminating the cap-and-trade carbon tax.

Ending cap and trade is good for Ontario taxpayers. It was a carbon tax that was making life more expensive for regular Ontarians and it was damaging Ontario's small manufacturing sector. Ending it saves taxpayers $1.5 billion for the 2018-19 year and $7.2 billion over the next four years. These are both direct savings to taxpayers, and savings to businesses who will no longer pass the cost of cap and trade on to consumers.

Revenue will be further reduced by a tax break aimed at low-income workers. The newly announced low-income individuals and families tax credit is expected to save low-income workers about $495 million next year. This amounts to $850 in savings for individuals and $1,700 for families. But again, like cap and trade, it gives the government less general tax revenue to use to balance the budget.

Doug Ford can't afford to procrastinate.

Both of these policies are absolutely the right things to do. They make an expensive province a little more affordable and allow families to keep more of the money they work so hard to earn. It is also good news that the government is managing to slightly reduce the deficit while still pursuing policies that reduce taxes.

But, with a multi-billion-dollar deficit, reducing spending at about the same rate as reducing revenue is not a road map to a balanced budget. At this rate, the government will not get anywhere close to deficit elimination before the next election.

THE CANADIAN PRESS/Chris Young
Ontario Premier Doug Ford in the Queens Park on Oct. 30, 2018.

Serious action is needed. Premier Doug Ford can't afford to procrastinate and hope to get the hard work done in a second term that may never come. So far, the only timeline Finance Minister Victor Fedeli has provided for a balanced budget is that it will be balanced in a "reasonable, modest and pragmatic" way. And while today's challenges are daunting, any future dip in the economy could make them much bigger. The budget needs to be balanced quickly.

'Efficiencies' can only get Ontario so far

The government is relying heavily on efficiencies in their talking points on deficit elimination and has stated repeatedly that it does not intend to fire anyone in order to balance the budget.

Improved efficiency is good, but it will only get us so far. The government is already applying restrictions on discretionary spending, including travel, meals and hospitality, and has implemented a hiring freeze and executive compensation freeze. The first page of the fall economic statement even bragged that this year the government had saved $11,000 by printing fewer copies and opting not to print a glossy booklet with the minister's speech. This is charming, but frankly isn't enough.

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It is the nature of government to expand. Common-sense savings in the bureaucracy are often imposed at the beginning of a government's mandate and the rules slacken over time. We can't count on saving on paperclips and per diems alone to balance the budget.

The government needs to aggressively address spending and reconsider their trepidation over the optics of reducing the size and compensation of the bureaucracy. The road to balance is hard, but it is fairly straightforward. We can't get there without reduced spending. And by the next election, taxpayers shouldn't be left asking "are we there yet?"

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