Ontario Economic Outlook and Fiscal Update

The Top Line

Earlier today, the Government of Ontario released its 2018 Ontario Economic Outlook and Fiscal Review, often referred to as the Fall Economic Statement. This year’s statement presented a significant opportunity for Premier Doug Ford and his Progressive Conservative Government to change the course of Provincial spending from the prior Liberal Government.

Prior to today’s Statement, the Government commissioned an Independent Financial Commission of Inquiry and a line-by-line review of Government spending. Based on reports from those initiatives, the Ford Government calculated a provincial deficit of $15 billion.

Reducing that deficit formed the backbone of today’s Economic Statement. To that end, the statement focussed on deficit reduction, transparency on Provincial spending, and a variety of measures to improve business competitiveness and reduce red tape.

Spending reductions announced today will eliminate $3.2 billion in program expenditures – 2% of current Provincial spending. The Government claimed those savings were achieved while avoiding major cut-backs to front-line services and public service employment, though that will be disputed by the opposition parties.

The Government promised to develop a long-term debt reduction strategy, but did not commit today to a firm date for eliminating the deficit.

Overall, the Economic Statement signals strongly that a period of belt-tightening, extending at least through this government’s first budget, expected in spring 2019, is ahead. Additionally, the Ford government will continue to present its small government approach – particularly a fierce opposition to carbon pricing – as a foil to the Federal Liberal Government.

Economic and Fiscal Outlook

The economy is expected to continue to grow from 2019 to 2021, with real GDP growth forecast to be 1.8% and growth in employment projected at 1.2% in 2019.

Through today’s statement, the Government has instituted $3.2 billion in savings and $2.7 billion in tax relief. Combined, those measures will reduce the deficit by $500 million, to $14.5 billion, in 2018/19. Projected government revenues for 2018/19 are $148.2 billion, with projected expenses of $161.8 billion.  The Government is developing a long-term strategy for reducing the debt-to-GDP ratio.

Highlights – Business Sector

Red Tape Reduction and Support for Businesses

The Government will review all existing business support programs for cost and efficiency, and is developing a new ‘Open for Business Action Plan’ aimed at lowering costs, reducing regulatory burden, and supporting competitiveness for businesses. The Action Plan is targeting a 25% reduction of regulatory burden by 2022. Additionally, the Government committed to introducing one regulatory reduction bill each Fall and Spring throughout its mandate.

The Government will proactively champion international trade agreements, freer inter-provincial trade, and joint Federal-Provincial tax measures to make Ontario’s business environment more competitive with that of the United States.

Energy and Electricity

The Government is launching a public review of current electricity pricing for industrial users and will encourage more consolidation and private sector investment in electricity distribution.

As expected, the Statement reiterated the Ford Government’s opposition to pricing carbon and to the Federal pollution pricing ‘backstop’ specifically. The Government announced that it is developing measures to publish the Federal carbon price as an independent line item on natural gas bills, gas pumps, and gas receipts.

Mining and Resource Development

The Government strongly supports developing Northern Ontario’s Ring of Fire, and will push for a more robust mining sector in general, including by establishing a mining working group mandated to speed up regulatory approvals and attract new investments.

The Government will advocate for increased pipeline development across Canada, and would not oppose an oil pipeline running through Ontario to the East Coast.  The Government will also continue to enable private-sector investment in Ontario’s natural gas infrastructure.

Illegal Tobacco

The Government will launch a publicity campaign aimed at reducing the distribution and sale of contraband tobacco, and will increase law enforcement measures against contraband sales, which have an estimated worth of $750 million annually in the black market.

Highlights – Consumers and Taxation

 Low-income Tax Credit

The Government will legislate a Low-income Individuals and Families Tax (LIFT) Credit to exempt those making less than $30,000 a year from paying provincial income tax, starting in 2019. The credit is estimated to apply to 1.1 million Ontarians.

Expanded Alcohol Retail Hours

The Government will permit authorized alcohol retailers to operate from 9 a.m. to 11 p.m., seven days a week, and is also developing a plan to further expand private retail of beer and wine, including a consultation on alcohol sales.

Election Finances

The Government will legislate to reduce the allowances (per vote subsidy) to registered political parties and constituency associations in 2021, and will fully eliminate the allowances in 2022.

Opposition Reaction

The Official Opposition NDP criticized the Government for making $3.2 billion in cuts that it says will hurt everyday people, including cuts to social services.  The NDP warned against future cuts in areas like universal health care.  The NDP also criticized the Government for cutting taxes on the wealthy and “returning to cash-for-access politics”.

Interim Liberal Party Leader John Fraser said that the Government’s numbers “don’t add up” and criticized the elimination of three Legislative Oversight Officers.

What this Means to You

As the Government moves forward with eliminating the deficit, stakeholders should not expect many new spending initiatives. The Finance Minister has made clear his government’s preference for low-cost measures to encourage job growth, like reducing regulatory burdens, rather than the large-scale investments preferred by the prior Liberal Government.

Moving forward, expect the Government to restrain public spending and take measures to reduce costs to businesses.  More details on these measures will come through the legislation to enact today’s promises and the Spring 2019 Budget.