Capping off a week in which it was downgraded by one leading credit-rating agency and placed on “negative watch” by a second, Ontario’s government took another shot to its fiscal credibility on Friday – this time from the federal Finance Minister.
In a meeting with The Globe and Mail’s editorial board, Jim Flaherty questioned the will of Dalton McGuinty’s Liberals to follow through on their plan to eliminate the province’s nearly $15-billion deficit by 2017-18.
“They’ve said this sort of thing before,” he said of the promise to dramatically rein in spending, “and then it hasn’t come to pass.”
Mr. Flaherty’s musings are likely to further shake confidence in the stability of Ontario’s finances, at a time when Mr. McGuinty's government is trying to play down the relevance of the credit-rating reactions.
His concern appears similar to the ones expressed this week by Moody’s Investors Services and by Standard & Poor’s: that the province’s austerity agenda is too back-loaded and could be hampered by political considerations in the years when the heaviest lifting is supposed to be done. While the agencies cited uncertainty posed by a minority legislature, Mr. Flaherty – who previously served as a provincial minister for the Progressive Conservatives, which is currently the Official Opposition – expressed doubt about the Liberals’ “conviction in seeing it through.”
He was particularly skeptical of the Liberals’ ability to cap health spending increases at just 2.1 per cent annually, which he acknowledged is an aggressively low target.
“One has to be capable of implementing that,” he said. “I think that’s the kind of thing the credit agencies look at. I look at it and say, ‘Is this capable of being accomplished?’ And that’s a question mark.”
Mr. Flaherty’s comments will likely cause further tension in an already chilly relationship between Ottawa and Queen’s Park. Provincial officials were already displeased with his public criticism of their budget in the days after it was tabled, arguing his words could contribute to the sorts of negative credit-rating reactions that materialized this week.