National Post (National Edition)
Ontario’s COVID-19 fund substantial, but will it be enough?
By any reasonable measure, Ontario’s commitment to spend $17 billion fighting COVID-19 is a substantial plan to attack the crippling health and economic costs of the pandemic. The commitment represents about 10 per cent of the provincial budget, and will more than double the deficit, to just over $20 billion.
The frightening part is that the massive new spending is little more than an educated guess as to how much Ontario will really have to spend to overcome the virus and its accompanying economic devastation. The document Finance Minister Rod Phillips released Wednesday represents the government’s best estimate as to revenue and expense numbers for the coming year, but we are in the early days of the COVID-19 fight. No one can accurately predict what will happen next week, much less a year ahead.
Phillips has given the province a considerable buffer against uncertainty. The plan includes a $1-billion COVID-19 contingency fund, plus a $1.3-billion global uncertainty fund and a $2.5-billion general budget reserve.
In all, the government will boost health-care spending by $3.3 billion. Nearly $1 billion of that will go to hospitals and it’s a long overdue reinvestment in hospital capacity. For years, Ontario governments have kept hospital budgets extremely tight. One of the results is a system that runs near or over capacity in normal times, leaving little capability to respond to an unexpected health crisis like the one we face now.
The same government that has previously seen public health as an area ripe for consolidation and savings is now putting an extra $160 million into the sector that’s leading the fight against the virus. There is considerable new money for long-term care and front-line medical supplies as well.
The health-care boost is expensive, but it’s cheap compared to the costs of the drastic economic curtailment that is being used to fight the virus. The government will spend $3.7 billion on a long list of supports for people, including additional child-care money and cheaper power rates. There is lots of targeted help there, but the weakness of the approach is that it doesn’t quickly put money directly into the hands of people who are out of work.
In fairness, that’s an area where the federal government will lead, but its new benefit program will be challenging to implement quickly.
The $3.7 billion is not the biggest cost. A regime of tax deferrals and exemptions will cost $10 billion, although the government should recoup much of that money after the virus is brought under control.
The dollars are large, but they represent only the cost to government. The economic toll for businesses and workers is far more substantial.
Few will argue that the extra spending is unwarranted, but it significantly undermines the budgetary control that the PC government has spent the last two years trying to achieve. That progress has dented the government’s popularity with voters and now the payoff of a balanced budget around the time of the next election seems exceedingly unlikely. The government’s promised income tax cuts are less likely to happen, although the crisis provides limitless political cover for that.
The long-term effect of the costly pandemic fight is uncertain. While much of the health-care spending is being committed to deal with a one-time problem, expect the other political parties to decry any attempt to pare it back, post-pandemic. The wild card is the ultimate cost of the tax deferral and penalty forgiveness plan.
If there is a bright side for the PC government, it is that its response to this dual health and economic crisis creates the opportunity to reposition itself as a government able to handle complex, evolving problems. A few weeks ago, it was judged to be incapable of delivering new licence plates.
The virus response also changes the government’s focus from deficit elimination, a necessary but politically unpalatable task. Leading the campaign against the virus is no fun, but it will be better perceived than years of spending control.
The political considerations are for later, though. The province is taking a welcome break from hyper-partisanship and political sniping as Ontarians work together to minimize and deal with the virus.
Any provincial spending plan is an attempt to hit a moving and unpredictable target, but that challenge has never been greater. Phillips has done a commendable job in tough times.