Ontario fiscal update reveals $14.5B deficit, tax exemption for low-income earners

Ontario’s way out of a deep “fiscal hole” won’t be easy, the Progressive Conservative government warned Thursday as it announced plans to eliminate three independent legislative watchdogs, end subsidies to political parties and halt the development of a French-language university, among other measures.

The cuts laid out in the government’s Fall Economic Statement for 2018-2019 – its first major fiscal update since taking power in June – helped the Tories shave $500 million off the province’s $15-billion deficit.

The government did not, however, have a timeline for when it would get back to balance, though it maintained its promise to do so.

“The fiscal hole is deep,” said Finance Minister Vic Fedeli. “The road ahead is not an easy one and will require difficult decisions. Everyone across the province will be required to make sacrifices.”

The Tories concluded earlier this year that they were left with a $15-billion deficit by the former Liberal government. The figure has been disputed by critics who say it includes spending promised by the Liberals but cancelled by the current regime.

Fedeli argued, however, that the figure had not been inflated.

“It’s a real deficit,” he said. “The challenge ahead of us is real.”

The government said it had made progress on chipping away at the deficit by finding $3.2 billion in efficiencies in operations. But it also said it was taking in $2.7 billion less in revenue in the fiscal year – including $1.5 billion attributed to the cancellation of cap and trade, and $308 million attributed to cancelling planned tax increases.

Among the belt-tightening measures it laid out, the government said it would be rolling the positions of three independent officers – the environmental commissioner, the child and youth advocate and the French language services commissioner – into the offices of the auditor general or the provincial ombudsman.

Fedeli could not say what will happen to those working in the eliminated offices, but Premier Doug Ford has consistently promised that no jobs would be lost as a result of his cost-cutting.

Ontario’s Provincial Advocate for Children and Youth, Irwin Elman, said he was shocked to discover the government’s plan to cut his office with no official notice. He called the plan “dangerous” and asked the province to reconsider.

Plans for a French-language university have also been cancelled, though the government could not immediately say how much money the move would save.

The government is also maintaining a public service hiring freeze and ending taxpayer subsidies provided to political parties in Ontario, a measure created by the Liberals after they cracked down on the rules around political fundraising.

The fiscal update carried welcome news for low-income earners, promising to eliminate provincial income tax for those earning less than $30,000 a year.

The government said the measure – expected to cost $495 million a year in lost revenue – offsets its decision to scrap a planned increase of the province’s minimum wage that was set to take effect next year.

Critics, however, have said raising the minimum wage to $15 an hour as the Liberals had planned would give low-income workers more money than the income tax cut would save. An independent financial analysis came to a similar conclusion.

The government also said it will exempt new housing units from rent controls as a way to spur construction of new units. In 2017, the Liberals closed a loophole in rent controls that exempted any buildings constructed after 1991. Prior to that, landlords could raise rent by any amount on those units.

The fiscal update further pledged to expand hours of operation at Beer Store and LCBO outlets, allowing them to open seven days a week until 11 p.m.

NDP Leader Andrea Horwath said the Ford government was making life harder for many in the province, and criticized the rent control move in particular.

“Doug Ford and his government actually tell Ontarians that they have to quote ‘tighten their belts,”‘ she said. “Ontarians already have their belts tightened. That is the message they have been sending us for a very long time.”

Green party Leader Mike Schreiner said the fiscal update was more about consolidating power than saving money.

“Premier Ford’s attack on the checks and balances that hold government accountable are outrageous,” he said. “It is bad for people and democracy”

One observer said the fiscal plan suggests the government is putting off making some of the “hard choices” about where it can cut costs.

“We have a government that still hasn’t really come out with its decision about how it’s going to balance its desire to balance the budget … with a desire to cut taxes and at the same time a desire to spend new money in a number of different areas,” said Peter Graefe, a political science professor at McMaster University in Hamilton.

Consolidating several independent oversight offices could be “a lot of theatre” that won’t save much, he said.

“It’s supposed to signal that it’s a government that wants to cut things, although it hasn’t decided the really hard things yet,” Graefe said. “Secondly, I think it’s consistent with a view that there shouldn’t be any kind of institutions between what the people voted for in terms of the government and that government’s capacity to do things.”