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A sign marks the future site of Vaughan's first hospital on March 20, 2012. (Kevin Van Paassen/The Globe and Mail/Kevin Van Paassen/The Globe and Mail)
A sign marks the future site of Vaughan's first hospital on March 20, 2012. (Kevin Van Paassen/The Globe and Mail/Kevin Van Paassen/The Globe and Mail)

Hospital projects under the axe in Ontario's austerity-themed budget Add to ...

Ontario’s government will backtrack on planned construction of new hospitals and upgrades to existing ones just months after Premier Dalton McGuinty promised them during a series of showy pre-election announcements.

Multiple sources have confirmed that the cuts to funding for previously announced hospital projects will be part of a broader scale-back of infrastructure spending that Finance Minister Dwight Duncan hinted at last week.

Part of an abrupt shift toward an austerity agenda as the deficit-plagued province tries to get its finances in order, the about-face to be revealed in next Tuesday’s budget is sure to raise questions about whether Mr. McGuinty made commitments he knew he couldn’t keep.

Hospital developments for which shovels are already in the ground will be spared. But the lengthy list of commitments still in the planning stage – which includes a new hospital in Vaughan, a tripling of the size of the hospital in the fast-growing city of Milton, major additions to the Mount Sinai and St. Michael’s hospitals in downtown Toronto, and a redevelopment of the general hospital in Brockville – will be subject to the belt-tightening.

While predicting that a couple of higher-profile projects will be reprieved, a source conceded that a “significant” number of others will be delayed or even cancelled outright.

Those decisions will be partly couched in the government’s increased efforts to shift some health services away from hospitals toward other, more specialized service providers. That new focus, aimed at both improving the quality of care and lowering costs, means that expanded hospital capacity might not be as urgently needed and could wind up underutilized.

But it’s little secret that cost control, both in the short-term and in the long-run, is the biggest consideration as Mr. Duncan tries to win the confidence of the markets for his budget.

Because most capital expenditures are amortized over the lifetime of the projects, their impact on the province’s $16-billion operating deficit will be limited. But the Liberals spent more than $70-billion on infrastructure since coming to office in 2003, and there’s some concern about the mounting accumulated debt – something that could add to the province’s financial woes if interest rates rise.

As a result, the nearly $11-billion that the province has borrowed for infrastructure in 2011-12 is unlikely to be matched or exceeded in the next couple of years, as had previously been planned.

The government is also mindful of operating expenditures once the projects are completed. With the Liberals under tremendous pressure to ratchet down program spending, largely by minimizing annual growth in health expenditures, sources suggest that they’re wary of the increased costs of staffing and maintaining new facilities.

With Ontario’s recovery from recession still fragile, the Liberals are likely to face questions about scaling back infrastructure spending – not just on hospitals, but also on investments such as roads and bridges – after they themselves touted the job-creation merits. But at the moment, their focus is heavily on avoiding a threatened downgrade in the province’s credit rating that could be both politically and financially devastating.

In fact, some Liberals appear almost to welcome the controversy that will ensue from putting off the hospital investments in particular. Along with other showy austerity measures, such as closing Ontario Place and a fight with their heretofore allies in the province’s teachers’ unions, they’re hoping it will send a message about their seriousness when it comes to getting the finances in order – one that they were evidently less eager to send last fall.

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