The Top Line
The Liberal Government of Ontario unveiled its Budget 2017 today.
In three budgets since Election 2014, Premier Wynne’s Government has touted an “activist centre” agenda, centred on investments in social services and major infrastructure projects, while also pledging to balance the provincial books by 2017/18. Budget 2017 is another edition in that series of budgets – delivering on the Government’s balanced budget pledge one year ahead of schedule and continuing broad investments in infrastructure, childcare, and other social services.
For stakeholders looking to understand the big picture of current Ontario politics, Budget 2017 cannot be looked at in isolation. In recent weeks, Premier Wynne and her team have initiated a near-election pace of major announcements. The previous announcements of a basic income pilot project, an increase in childcare spaces and subsidization, and measures to defuse the Toronto housing market all culminated in today’s Budget – which can be considered the unofficial start of campaign season for Election 2018.
The spending initiatives found in Budget 2017, which include those mentioned above and a new Provincial Pharmacare Program, are aimed at bolstering the Wynne Liberals’ pitch to voters that Government can be a force for good in everyday life. In that light, Budget 2017 also introduces measures to cool the housing market and continue reducing hydro prices. The fact that the Government has made those investments while balancing the Budget will be highly touted by the Liberal Party. In tabling this Budget, the Liberal Party is inviting voters to compare and contrast the Liberals’ fiscal and spending plan with that of a potential Patrick Brown-led Progressive Conservative Government.
Looking forward, the Liberal Government faces some major challenges, including the threat of reduced free trade with the United States and the fact that 40% of the Province’s heavy debt load comes due within the next five years. Budget 2017 presents a plan to address those challenges, but, with all eyes at Queen’s Park now on Election 2018, the race is on to see if the Liberal Party will be in power to fully implement it.
Budget Highlights
Economic Highlights
Budget 2017 is projected to be Ontario’s first balanced budget in 10 years. Current estimates indicate that the Government is on track to table balanced budgets in the next two fiscal years as well.
Ontario’s real GDP growth has outpaced all G7 countries over the last three years. As a result, Ontario’s unemployment rate is at 6.4%, which is below the national average for the 24th consecutive month.
Measures Affecting Business
Jobs Creation and Industry
In recent budgets, the Wynne Government has created a suite of programs that aim to help Ontario businesses grow and simplify the Province’s business practices.
Budget 2017 expands the already-existing Business Growth Initiative (BGI) by creating a Scale-Up Voucher Program, to launch in Spring 2017, that will allocate $32.4 million over four years to provide “high-impact firms” access to business development tools and services. The previously announced Ontario Investment Office (a one-window concierge service for businesses looking to invest and expand in Ontario) and the Small Business Innovation Challenge (a $28.8-million pilot project to help Ontario Small and Medium Enterprises (SME) provide innovative technological solutions to problems identified by the Government) will also fall under the BGI.
Meanwhile, the Budget allocates nearly $190 million over three years to a new Career Kick-Start Strategy that promises to create 40,000 new professional opportunities for students and recent graduates.
Ontario-U.S. Trade Relations
Sensitive to the currently volatile trade dynamics in North America and Ontario’s economic reliance on trade with the U.S., Budget 2017 contains content dedicated to Ontario-U.S. trade relations. The Budget states that the Government of Ontario will seek a “positive dialogue” with U.S. partners. To support the Government’s trade engagement efforts, the Government has hired an “international trade expert” to act as a Provincial Trade Advisor.
Research and Innovation
Creating a shared theme with Federal Budget 2017, the Ontario Government will invest in several innovation initiatives, including the new Vector Institute for artificial intelligence; an Autonomous Vehicle Innovation Network; and a cybersecurity pilot project to reduce risks, strengthen the Province’s private financial institutions, and create jobs.
Hydro Rates
In recent months, hydro rates have come to be a political lightning rod and a challenging issue for the Wynne Government. Budget 2017 formalizes the previously-announced Fair Hydro Plan that will attempt to address consumer and SME hydro prices by:
- Reducing electricity bills by 25% on average for eligible households, including approximately 500,000 small businesses and farms. Low‐income Ontarians and those living in eligible rural, remote, or on‐reserve First Nation communities will receive even higher rate reductions; and
- A hold on rate increases over the next four years to the rate of inflation.
Budget 2017 also proposes to expand the Industrial Conservation Initiative program by reducing the eligibility threshold from one megawatt to 500 kilowatts for targeted manufacturing and industrial sectors.
Other Key Initiatives
Housing
The Toronto housing market is increasingly viewed as overheated and representative of a Canadian housing market that has become very expensive. Reflecting its consumer-oriented and activist viewpoint, the Wynne Government used Budget 2017 to initiate two major policies designed to reduce home prices and increase available housing stock. A non-resident speculation tax of 15% will be imposed on the price of homes in the Greater Golden Horseshoe purchased by non-Canadian citizens, non-permanent residents, and non-Canadian corporations buying properties that contain at least one and not more than six single-family residences. Concurrently, the Government is proposing to grant Toronto broad authority to levy an additional property tax on vacant homes, designed to encourage property owners to sell unoccupied units or make them available to be rented.
Social Programs
A first-of-its-kind program in Canada, Budget 2017 launches OHIP+: Children and Youth Pharmacare, a new drug benefit program that will cover the full cost of prescription medications (those eligible under the Ontario Drug Benefit Program) for everyone aged 24 and under, regardless of family income.
Free tuition will be provided to over 200,000 students from low-income backgrounds and 24,000 more childcare spaces will be created this year.
Infrastructure and Transit
The Ontario Liberal Government has prioritized infrastructure investments in recent budgets. Counting from 2014/15, Budget 2017 indicates that the Government will spend a total of $190 billion on major infrastructure projects in 13 years – an increase of $30 billion over the planned expenditure in Budget 2016. Budget 2017 also pledges the publication of a long-term infrastructure plan by the end of 2017.
A key element in funding the planned infrastructure projects is maximizing the income that the Government collects from publicly-owned assets. In March 2017, the Government credited the Trillium Trust with an additional $538 million in net revenue gains from the sale of Hydro One shares in 2016. The Government remains on track to meet its target to dedicate $5.7 billion in total to the Trillium Trust, drawing on not only the sale of Hydro One shares, but also the divestment of other public assets and properties deemed to be surplus to the Province’s needs.
On the infrastructure use side, a new Ontario Seniors’ Public Transit Tax Credit for all Ontarians aged 65 or older will cover eligible public transit costs as of July 1, 2017.
Opposition Reaction
Both Opposition Parties were swift to attack the Budget. Progressive Conservative Leader Patrick Brown said that the Liberals are “cooking the books to look good in an election year”. Brown’s approach to criticizing the Budget focussed on questioning the Government’s economic fundamentals. Meanwhile the NDP struck a more populist tone, seeking to undermine the Government’s credentials as an activist, progressive force. The NDP said that the Liberals have been in power for 14 years without enacting change that impacts Ontarians, and are now scrambling to win an election rather than truly address “the realities of life”.
What Comes Next
Budget 2017 is the culmination of a fiscal plan that the Ontario Liberal Party has pursued since Election 2014. It is also the pivot point that marks the unofficial start of campaign season for Election 2018. Stakeholders should watch for more details on the initiatives announced in Budget 2017, as the Government tables the Act to implement the Budget in the Legislative Assembly and rolls out new programs over the course of 2017. As the Liberal Party takes those actions, expect them to position their spending in Budget 2017 as essential public benefits – and benefits that will be at risk under a Progressive Conservative Government led by Patrick Brown.
