Plus: Ivison,
Ontario has already factored in asset sales
Abillion here, a billion there and pretty soon you’re talking real money.
The Ontario government is awash in so much red ink, a $2-billion hole in the budget may hardly matter (the deficit is forecast at $12.5-billion this year; $8.9-billion next; $5.3-billion in 2016-17, before the books are balanced in 2017-18.).
But the recommendation of a blue-ribbon panel on selling Ontario’s publicly owned assets looks to have jammed a stick between Kathleen Wynne’s spokes.
The re-elected Liberals were hopeful of a windfall to get them out of the fiscal hole they’ve dug for themselves.
Yet Ed Clark, the outgoing head of TD Bank, and his advisory council on government assets said the province should not sell the LCBO, OPG or any other of the alphabet soup of what are officially known as Government Business Enterprises.
Too bad that Charles Sousa, the province’s finance minister, had already fluffed the books for this year and next with net revenue gains from “asset optimization” totalling $2-billion.
You’d have a hard time finding the details in the 2014 budget — the asset sales are jammed into the “other nontax revenue” fiscal performance table. But there, on page 232, the budget spells out that the government expects to realize net revenue gains of nearly $2-billion over the next two years — $900-million in the current year and $1-billion next. The Ontario finance department says another $1-billion will be sold off in the subsequent three-year period.
So the proceeds for $3-billion in asset sales have been booked and built into the provincial government’s deficit-reduction plan, long before the actual assets are sold.
Perhaps Mr. Sousa expected Mr. Clark to recommend sale of the LCBO, Ontario Power Generation or Hydro One. He did not. In fact, he said the current retailing system for alcohol “does a pretty good job in keeping prices low for Ontarians.”
The advisory council did suggest selling off $2-billion to $3-billion of Hydro One’s distribution assets, which would reduce government revenues by around $200-million a year. That shortfall would be met by efficiencies at the various operating entities, mainly the LCBO. But, crucially, the proceeds from the privatization would “be invested in transit and transportation infrastructure, without increasing the overall debt or deficit,” said Mr. Clark.
This is in keeping with the government’s own pronouncements that it would not sell public assets to balance the books but they would be used “to fund the building of a new generation of public infrastructure.”
Yet the asset sales are clearly included as part of the government’s operating revenues, in apparent violation of their commitment.
Quite apart from that, we are seven months into this fiscal year and there are no signs of any action to hit this year’s $900-million figure.
Even if the government did sell something big, the auditor-general would likely require the proceeds to be amortized over a much longer period than two years.
Susie Heath, Mr. Sousa’s spokesperson, said there are multiple ways to achieve the asset-sale targets, aside from Mr. Clark’s recommendations — the GM shares the province still owns (worth around $1-billion); the sale of the LCBO and OPG head offices; or, the sale of lands in Pickering or along the shore of Lake Ontario. Ms. Heath said the request for proposals on the LCBO headquarters sale has already been posted. But there’s no way that sale will be done this fiscal year.
The temptation is to assume that there never was an “asset optimization” plan and the whole scheme was designed simply to make the books look that little bit better.
The Wynne government committed itself to increasing program expenses in each of the next three years to fund its election promises.
Moody’s, the debt rating agency, has already expressed concerns about the Liberal government’s ability to slay the deficit in three years, changing its outlook from “stable” to “negative.”
The Conference Board of Canada says Ontario can’t live up to its pledge to balance the books by 2017-18 without spending cuts or tax hikes.
Mr. Sousa’s office boasts that in each of the past five years, the Liberal government’s “prudent approach” has led to lower-than-projected deficits.
This year, the Liberals were able to use the unused $1-billion reserve to bring in a deficit of a still whopping $10.5-billion. Net debt as a percentage of GDP will top 40% this year — about the same as Ukraine. A “prudent approach”? Dear Prudence, I have news — your name is being taken in vain.