Liberal budget backflip risky
The political pas de deux between big labour and Premier Dalton Mcguinty goes way back.
You help us at election time. We’ll help you at negotiation time.
You scratch our back. We’ll watch yours.
Even in hard times, labour could count on a soft touch from the governing Liberals. Back in his 2010 budget, despite strong deficit pressures, Finance Minister Dwight Duncan ruled out legislated freezes for public sector unions — opting instead for voluntary restraint.
Now, with money running out, the jig is up. And a belated Liberal backflip carries big political risks.
In his new spring budget, Duncan has undone two years of government policy by threatening what he once vowed to avoid: Legislation forcing public servants to accept the pay freezes they have long resisted.
Balancing the budget is always a political high wire act in the threering circus that is minority government. But if the Liberals want to tame the deficit, they must restrain workers while pacifying the New Democrats who hold the balance of power.
Watching the NDP agonize over whether to back the budget or risk an election, it’s easy to lose sight of Mcguinty’s own delicate calculations. The Liberals have courted unions assiduously ever since big labour’s alienation from the 199095 NDP government, and its sub- sequent wars with the Mike Harris Tories.
The 2010 promise to avoid wage controls was always timed for the 2011 electoral calendar, with the Liberals keen to avoid any picket lines on the campaign trail. Duncan did make some modest headway: public sector settlements tracked below the private sector last year (an average of 1.6 per cent versus 1.9 per cent); but the numbers never came close to the zero per cent Queen’s Park had budgeted for.
All the while, the Liberals cited a 2007 Supreme Court decision that collective bargaining couldn’t be arbitrarily trampled on by governments. But they used the Supreme Court as a legal fig leaf when, in fact, the ruling merely required governments to negotiate in good faith — not foreswear their right to legislate. Now, the province’s stubbornly high deficit has forced its hand. For Duncan, the fact that Ontario dipped into negative growth for one quarter last summer was a wake-up call. (The outlook for 2012 is an uninspiring 1.7 per cent economic growth, onethird of what had been predicted for this time a year ago). When bond rating agency Moody’s put Ontario on a “negative outlook” last December, it focused minds in the treasury building. Another factor: strong arguments from Peter Wallace, a longtime deputy minister of finance, who reminded his political masters that the budget is largely made up of three pieces: compensation, entitlements (social services) and delivery. With wages taking up 55 per cent of government spending, you can’t rein in spending without restraining salaries, he argued internally. Wallace’s influence over Duncan carried over to Mcguinty when the premier made him his own deputy (promoting him to become the province’s top civil servant in the new year). Mcguinty, who has been more closely involved in this budget than any other, came to see the issue of compensation as an either/or choice between paying higher compensation to public servants, or leaving more money available for programs and results. “He wanted to land on results,” said one aide. That’s why Mcguinty made the case for keeping full-day kindergarten and teacher staffing levels as a quid pro quo for holding the line on salaries. His personal intervention with the teachers underscores that 2012 is a heavy negotiating season — with more than $20 billion at stake in contract talks with educators, doctors and others. Another challenge: many public sector workers are entitled to arbitration, which rarely arrives at zero. Hence the budget’s call to reform arbitration with “additional tools . . . to live within their funding envelopes.” It’s an unprecedented about-face. But when you’re face to face with low growth gloom, high stakes negotiations and credit downgrades, reality has a way of revising your outlook. Martin Regg Cohn’s provincial affairs column appears Tuesday, Thursday and Sunday. mcohn@thestar.ca, twitter.com/reggcohn.