It was a strikingly severe prediction.
In the middle of Ontario’s provincial election, former Bank of Canada governor David Dodge offered a sweeping assessment of the three main candidates vying for the job of Ontario premier.
“Whoever wins will be seen to have lied to the public,” he recently told The Globe and Mail, creating a buzz in the provincial campaign.
A certain degree of cynicism is always in order when politicians hit the hustings, but Mr. Dodge’s comments go beyond that. The man who served as Canada’s deputy minister of finance during the federal spending cuts of the mid-1990s asserts that all three parties are promoting “impossible” economic plans.
In the face of such cynicism, Progressive Conservative Leader Tim Hudak and Liberal Leader Dalton McGuinty sent written pledges to Elections Ontario vowing that their platforms can be implemented without raising taxes. NDP Leader Andrea Horwath wrote a similar letter, noting that her plan includes higher corporate taxes.
But all three party platforms are largely based on assumptions in Ontario’s 2011 May budget. That’s where future trouble lies.
In a pre-election assessment of the province’s books, Ontario Auditor-General Jim McCarter shot big holes in the government’s numbers. Counting on sharp restraint in the growth of health spending and public-sector salaries is “optimistic and aggressive rather than cautious,” he said.
Since the writ dropped, all three parties have built new promises onto that foundation while promising to balance the books by 2017-2018.
Economist Michael Decter, a former Ontario deputy minister of health who now heads the LDIC investment firm, said the Liberal and Conservative platforms are similar in terms of their overall budgetary plan. Yet with slowing growth, whoever wins will need to make hard decisions that aren’t outlined in any platform.
The new government will need to cut spending, he said, “and that’s not being telegraphed very hard.”
The pledge: The NDP’s tax focus is on so-called pocketbook issues. That means a 1-per-cent HST cut on gasoline (a $500-million pledge) and removing the HST from home heating (at a cost of $350-million). There’s also a $90-million cut to the small-business tax rate.
The challenge: The NDP plans to ultimately raise $1.8-billion in new revenue by raising the corporate tax rate to 14 per cent. The rate is currently 11.5 per cent and on track to drop to 10 per cent by July 1, 2013. At a time of weakness in the Ontario economy, the NDP plan runs counter to the federal Conservative government’s efforts to sell Canada as a low-tax destination for international investment.
The pledge: A $1.3-billion-a-year personal income tax cut, focused on the first $75,000 of taxable income. Further tax cuts are promised via a $730-million-a-year “income splitting” plan and a $1.4-billion cut on consumer energy bills. His party insists the plan can be achieved even with the Auditor-General’s warnings of higher government costs on the horizon.
The challenge: The Tories say they will protect health and education spending and find $2.3-billion in savings elsewhere. The party doesn’t detail where these “reasonable” savings will be found, but offers up examples such as cutting boards and agencies like the Ontario Power Authority and Local Health Integration networks. References to arbitration reform offer a hint of battles to come with Ontario’s public-sector unions.
The pledge: The incumbent is promising new services without raising taxes. The platform includes a sprinkling of tax incentives such as a $12-million credit for employers who hire recent immigrants. Further reductions to the corporate tax rate are planned.
The challenge: Having already raised eyebrows in the Auditor-General’s office, the Liberal budget plan now must accommodate 45 new campaign pledges. Slower growth in Ontario will further strain resources. Politically, Liberals are on the defensive for approving a $3-billion Ontario Health Premium and the HST after previous campaign pledges not to raise taxes.