The Top Line

Today, the Government of Ontario released its 2016 Fall Economic Statement (FES).  A standard item on the Government’s fall agenda, the FES sets the stage for the next budget, and offers a public assessment of the Government’s progress on fiscal issues.

The Ontario Liberal Party is now just past the halfway points of its four-year mandate.  In that context, the 2016 FES was used as a strategic opportunity for the Government to once again promote its agenda of “building Ontario up” – a program of large-scale and wide-ranging public investments and infrastructure spending that the Government first introduced in Budget 2014.  Premier Wynne and her team continue to believe that such Government-led investments and interventions in the economy are a fundamental responsibility of Government and an essential tool for creating a robust economy.  Finance Minister Charles Sousa thus touted the Government’s investments in transportation infrastructure, new daycare spots and post-secondary education funding, hospitals, clean technology, and business sector supports – with a few new spending announcements targeted at supporting business growth, improving consumer protections, and reducing household expenses.

Notably, Finance Minister Sousa said that balancing the budget next year and thereafter is an important element in affording Government services and programs.  Unlike its federal cousins then, the Ontario Liberal Party remains committed to balanced budgets as a key fiscal driver in the near term.

Highlights

Economic and Fiscal Outlook

For many stakeholders, the Ontario Liberal Party will be judged on its ability to balance the provincial budget, especially given the Government’s own promise to do so amid continued skepticism from provincial watchdogs and several major credit rating agencies.

In that context, the Ontario Government is forecasting a budget deficit of $4.3 billion in 2016-17, which is in line with the original Budget 2016 forecast.  Moving forward, the Government is forecasting balanced budgets in the coming two fiscal years.

Meanwhile, several key economic indicators continue to look positive for Ontario.  For the first half of 2016, Ontario’s GDP grew at a faster rate than that of Canada, the G7 as a whole, and the United States.  Exports and household incomes are also trending upwards, while the unemployment rate has dropped.

Business Sector

The FES included a pointed pledge, given the results of the U.S. Presidential election, that the Liberal Party is committed to free trade and open borders, even while “others” may oppose that approach.

The Government continues to see a role for itself in supporting businesses and key sectors with Government initiatives.  With that in mind, from a business sector perspective, the major announcements in the 2016 FES were:

• The allocation of $32.4 million over four years, under the pre-existing scale-up voucher program, for small and medium-sized enterprises to grow into larger, export-oriented firms; and
• A focus on jobs and education, including a new Ontario Student Grant that will make post-secondary education free or very low-cost for students from low-income families, and the creation of a new Highly-Skilled Workforce Strategy.

Meanwhile, Ontario is abandoning its plans for an Ontario Retirement Pension Plan in 2017, in light of the recent expansion of the Canada Pension Plan.

Consumer Sector

Facing growing criticism for focussing too much on high-level issues and not enough on pocketbook and everyday concerns, the Liberal Government included several consumer-oriented initiatives in the FES, including:

• The creation of a Financial Services Regulatory Authority, tasked with modernizing and improving the regulation of the financial services and pension sectors, with a focus on greater consumer and beneficiary protections;
• Effective January 1, 2017, the doubling of the maximum Land Transfer Tax refund for eligible first-time homebuyers to $4,000; and
• Confirmation of the previously-announced Hydro credit that, effective January 1, 2017, will refund consumers and small businesses the 8% provincial HST on their electricity bills.

Opposition Reaction

In response to the FES, both Opposition Parties are allocated up to five minutes for an immediate response in the Legislature.  The Finance Critics for each of the Opposition Parties spoke on behalf of their respective Parties this year.

Progressive Conservative (PC) Party Critic Vic Fedeli said that Ontario remains in a dire fiscal state, and that the Government continues to spend and borrow money at a high rate.  To bolster his argument, he highlighted a recent Financial Accountability Office of Ontario analysis which found that Budget 2017 will not be balanced absent further initiatives to raise revenue or reduce expense, and that Budget 2017 is currently on track to post a $2.6 billion deficit.  The PC Party believes that the Government is improperly using the one-time asset sale of Hydro One shares to balance the budget in the near term.

Ontario New Democratic Party Critic Catherine Fife criticized the FES for not containing enough progressive announcements, and stressed that electricity prices are still too high.  The NDP continues to be opposed to the sale of Hydro One shares.

What This Means to You

The 2016 FES may be viewed as the Government’s largest volley so far in the battle to frame the issues of Election 2018, and an opportunity for the Government to underline accomplishments and milestones during a period of fierce Opposition Party criticism and diminished public popularity.  An early indicator of the public’s reaction to the Government’s approach will be this week’s by-elections in Ottawa-Vanier and Niagara West-Glanbrook.

With TSA’s in-depth understanding of the Ontario Liberal Government and its decision makers, our firm is your ideal government relations service provider for the dynamic political environment in Ontario.  Please contact us if you have any questions.