New Ontario premier faces headwinds in delivering promises
TORONTO Doug Ford has plans for Ontario’s economy. But he’ll have his work cut out for him.
Ontario’s premier-designate, who promised lower taxes and less government waste while leading his Progressive Conservatives to a majority mandate in Thursday’s provincial election, will be taking over a province that is facing some economic headwinds and a projected $325-billion net debt.
Not only is Ontario’s growth expected to slow this year, but NAFTA renegotiations and the tariff standoff between Canada and the United States are also hanging over the manufacturing-heavy region.
Yet Ford, a businessman and former Toronto city councillor, used his victory speech Thursday night to make at least one of his priorities plain. “Tonight,” he said, “we have sent a clear message to the world: Ontario is open for business.”
The PC platform provides some clues as to just how Premier Ford will try to achieve that.
“Government doesn’t create sustainable jobs on its own,” it says. “What Government can do, however, is create the conditions that make it easier to start a business, grow a business or invest in Ontario — and to build an economy that allows more Ontario workers to find a job right here at home.”
But the PC plan was not fully costed. Furthermore, interest rates (and therefore, borrowing costs) have risen, and the economy may not co-operate with the incoming Ford regime.
“Ontario’s new government faces a number of ongoing credit pressures given the expectation of slower revenue growth stemming from an economy facing headwinds,” Michael Yake, vicepresident and senior analyst at Moody ’s, said in a statement. “The challenges include those from the ongoing NAFTA renegotiations, and reduced fiscal flexibility due to high household debt.”
There is the possibility that Ontario’s growth could get a boost from Ford’s proposal to cut the corporate tax rate to 10.5 per cent from 11.5 per cent, and to bring the small business tax rate down to 3.2 per cent from 3.5 per cent.
“Ontario already has the lowest corporate tax rate among all of the provinces and it could get lower,” noted Royce Mendes and Katherine Judge of CIBC World Markets. “Given the risks posed by U.S. trade policy, tariffs, tax reform and regulatory rollbacks, these policies are targeted at stimulating business investment in a time of uncertainty.”
On the energy file, the PC platform says the party will “stabilize industrial hydro rates through a package of aggressive reforms,” although what those specific reforms actually will be is not spelled out.
Ford’s plan also calls for an end to Ontario’s cap-and-trade system, which has added a price on carbon emissions for some of the province’s biggest companies. It has provided a source of revenue for the province as well to be spent on green investments aimed at reducing emissions. The most recent auction for carbon permits generated an estimated $467 million for the province, paid for by companies on a list of qualified bidders that included the likes of Imperial Oil Ltd., Royal Bank of Canada and others.
There are other considerations too, as Ontario linked its cap-andtrade system with ones already operating in California and Quebec. Their deal does allow for one of the parties to withdraw, but the terms dictate that the province “shall endeavour” to give 12 months’ notice of their intent to do so.
If the federal government tries to force a carbon tax on Ontario, the PC platform says the province would fight the attempt all the way to the Supreme Court of Canada.
“The major restructuring proposed by the Conservatives for Ontario’s power sector and its climate change strategy represents extended adjustments,” said Scotiabank Economics’ Mary Webb in a note. “This process and the Conservatives’ decisions on the pace and prioritization of capital spending will be key, alongside the deficit reduction plan, in the path to stabilizing the Province’s net debt burden, once again.”
Ousting the entire board of Hydro One, as well as the utility’s CEO, presents a different challenge. It can be done, but the process would not be exactly as straightforward as Ford puts it, and the prospect of a big severance payout looms over the plan.
“In short, Ford under his majority (government) can effectively remove and have significant influence on the choice of new Directors,” said Dr. Richard Leblanc, a professor of governance, law and ethics at York University, in an email. “These new Directors would then fire and replace the CEO of Hydro One.”
Moreover, the government-as-shareholder can “unilaterally remove” the board’s chair, Leblanc noted. “If Ford is successful, there would likely be much greater accountability by the Board of Hydro One to the Government of Ontario as its major almost-50 per cent shareholder,” he added.
Whatever the policy, the PCs controlled 76 of Ontario’s 124 ridings after Thursday ’s election, giving them a relatively painless path to enacting their agenda.
“Coming into election night, uncertainty had been running high surrounding the possibilities and permutations of a potential minority government, and what it would mean for policy,” Mendes and Judge said. “But, given the majority, the PCs can now embark on implementing the plans outlined during the campaign.”