Four more years of restraint,
The proposed Ontario provincial budget lays the groundwork for four more years of restraint, using cautious revenue projections and flat spending through 2017, economists said.
The goal is to eliminate the $11.7billion budget deficit in four years.
“Our government believes eliminating the deficit is the single most important step we can take to grow the economy and create jobs,” Finance Minister Charles Sousa said in his speech.
The proposal unveiled at Queen’s Park on Thursday is a continuation of last year’s plan, economists said.
“The first year of the austerity plan seems to have been quite successful and certainly lays the groundwork for moving forward,” said Scotiabank economist Mary Webb.
“A lot of this skepticism should at least transition to wait and see.”
The Progressive Conservatives slammed the spending and deficit projections in the document. “A spending problem that was bad last year is worse this year,” PC finance critic Peter Shurman told reporters.
It does not give enough detail on how the deficit will be eliminated by 2017, he added, calling it “just silly numbers instead of hash marks plugged in for the final years.”
PC Leader Tim Hudak said the budget does not address debt reduction. “Ontario’s massive debt payments are threatening our ability to afford important investments we need in our schools, hospitals, subways, our highways,” he said. “We can do a lot better than this.” NDP Leader Andrew Horwath told reporters that the proposal does not include any of the political party’s cost-cutting recommendations, such as capping hospital CEO salaries and implementing a prudent health-care purchasing policy. The government expects the economy to grow by 1.5 per cent for 2013, a bit lower than the 1.6-per -cent forecast by private sector economists, according to the proposed budget.
Total revenue is expected to grow to $134.4 billion in fiscal 2017-18, compared with $116.8 billion this year, the government said. That reflects an average annual growth rate of 3 per cent.
Over that time, annual average increases to spending on health, education, children’s and post-secondary, justice and other programs will be limited to 1.5 per cent, according to the proposed budget.
Total spending, which includes interest on the debt, is expected to increase to $132.4 billion from $127.6 billion, for an average annual growth rate of 1.8 per cent. “Overall I have no quibbles with the framework. It has served them well in the last few years,” said Derek Burleton, deputy chief economist at TD Economics. “Revenues came in above plan last year and spending came in below. I think they’ve shown a track record of conservative assumptions.” The deficit stands at $11.7 billion for this year. That’s about $1.1billion lower than previous projections, and it’s expected to fall to $10.1 billion next year, $7.2 billion in 201516, and $3.5 billion in 2016. The end result will be a budget surplus of $500 million in 2017-18, the government said. Five years after the start of the Great Recession, the global economy is still sputtering. But that holds benefits for Ontario. For instance, this time last year, many private sector economists expected the Canadian dollar to be as high as $1.05 (U.S.). A soaring loonie makes exporters’ products more expensive for foreign customers. As well, interest rates are still low. For Ontario, that means debt ser- vicing costs that were expected to top $16 billion per year by 2017 will come in closer to $14 billion, according to the forecast. However, that’s an increase from the $10.6-billion cost today. Interest costs will rise as rates move up. Program spending stands at $117 billion this year. It would jump to $118.3 billion next year and to $118.8 billion in 2015, where it is projected to hold steady through 2017. “The government has gone through three years of restraint and they’ve got four more built into the system. That would be seven years of restraint, which is the most prolonged we’ve seen in the post-war period in Ontario,” Burleton said. In contrast to the deep, shortterm spending cuts that were instituted by the Conservative Mike Harris government in the mid-’90s, “this government is trying to find a balance between protecting growth and lowering the deficit,” he said. The proposed fiscal plan also includes contingency funds of $600 million this year. That reserve would increase to $1.2 billion in 2015 and $1.7 billion in 2017.