This week, Ontario Premier Dalton McGuinty gave a rather extraordinary speech.
A few too many observers got caught up in McGuinty’s fluent bilingualism, political skills, and the presence of Interim Liberal Leader Bob Rae. Reportage out of the event tended to ask the hypothetical question of a potential run for leader of the Liberal Party of Canada, rather than focusing on the content.
This is unfortunate, because the content is the first recent glimpse into the Premier’s thinking on the daunting fiscal crisis looming before all governments. The poetry of electioneering retreating for the prose of government, McGuinty was quite forthcoming about how he will handle the challenge.
Five principles will guide the government’s approach:
1. We will protect health care and education as the most important public services – there will be reforms but we won't compromise on quality.
This principle has two impacts. For one, it means that ever file outside of health and education is under severe pressure, because they will have to make up the difference in lessening the burden on those two major policy areas. Finance Minister Dwight Duncan said that holding education to 1 per cent and health to 3 per cent will mean cuts of up to 33 per cent in other departments.
Second, it means reforms in those two areas will likely have to come from reducing the overall cost of compensation to public-sector employees while maintaining service levels, a tough but not impossible task.
2. We reject across-the-board reductions because these would mean deep cuts to health care and education and we'd have to catch up later – Ontarians have seen that movie, and we're not making a sequel.
This is a very sophisticated argument and one that deserves some unpacking. McGuinty makes the point that short-term arbitrary cuts simply push off costs until down the road. There is considerable evidence that this was the case in the 1990s. Spending under Mike Harris was essentially flat for his first three years, and then exploded in his last three and into Ernie Eves’s time in office. I call these “trampoline cuts” because – while spending goes down for a short period – it comes back with a vengeance.
McGuinty is arguing that short-term cuts are just a shell game to allow revenues to catch up in a booming recovery. Since we clearly don’t have a booming economy thanks to sluggish US growth, something more fundamental is required. That means actually getting out of doing activities completely, or to fundamentally transform the way a service is provided that lowers the cost demands permanently.
3. Any reforms we adopt must help us get better value for money through improved efficiencies and greater productivity.
This is by far the most interesting of the five principles.
Productivity is a word you rarely hear in discussions of fiscal crises, so this is refreshing. When you “cut” a program, there is a complex series of actions that flow from that. Most of the cost of programs is staff, be it clerks or meat inspectors or porters in hospitals. So “cuts” usually means having fewer people doing the same thing, and thus a direct reduction in the amount of service available to the public. Productivity is about getting more service out of the same number of people.
It can be done with technology: having doctors call to follow up rather than have a face-to-face meeting that costs more and takes time out of everyone’s day. It can be done with process improvements: organizing inspectors into geographic territories that have them inspecting more and driving less. It can be done with changes in work rules: greater flexibility in how shifts are scheduled means needing fewer people to deliver the same service levels.
