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Ontario Premier Dalton McGuinty is seen during the spring session at Queen's Park in Toronto. (Kevin Van Paassen/The Globe and Mail)
Ontario Premier Dalton McGuinty is seen during the spring session at Queen's Park in Toronto. (Kevin Van Paassen/The Globe and Mail)

All the parties will be hoping Ontario's 'consolidation' budget works Add to ...

Dalton McGuinty's Liberals insist they can eliminate Ontario's gaping budget deficit without really touching health care or education. Their opponents, despite all the government's scaremongering about their intentions, claim much the same thing.

With Tuesday's provincial budget, the Liberals began putting that belief to the test. And for anyone concerned by the future of core social services, it's well worth watching what happens next.

For years, we've been hearing predictions that governments will have to significantly narrow their scope if current spending and revenue patterns continue. The plan delivered by Finance Minister Dwight Duncan actively embraces that notion, effectively promising that government will scale back other functions so that it can continue to pour money into its two biggest social programs.

By Mr. Duncan's estimate, spending on health care and education will go up by 11 per cent and 9.5 per cent, respectively, over the next three years. Meanwhile, spending on everything else is forecast to go down by 8.1 per cent.

Part of that decline is because of stimulus spending coming to an end. Some of it comes from outright cutbacks or cancellation of previously announced investments - most notably the scrapping of a planned new courthouse, at a time when the justice system is badly backlogged.

But at the centre of the Liberals' plan is the belief that they can save billions of dollars through a modernization process that's supposed to make government leaner - greatly annoying much of the public sector, but in theory causing little pain to the rest of the province.

The flashiest part of this exercise is the appointment of Don Drummond, the former bank economist, to head up a commission looking at "long-term, fundamental changes to the way government works." But buried inside the budget are some relatively detailed hints of what the Liberals have in mind.

Most substantive, and most surprising in its range, is a section devoted to "consolidation." To reduce administrative costs, the government proposes to shrink the number of children's aid societies, to combine income-based benefits programs, to close underused prisons, and so on. And in what seems like a recipe for union unrest, public-sector pension plans and collective-bargaining units are to be merged to reduce administrative costs.

There are vaguer hints at more public-private partnerships, and at getting the province out of some of the things it could more efficiently contract out. Mr. Drummond insists that his review even includes some more creative delivery models in health care and education - though on those particular files, the government has already ruled out "privatization," and any efforts will be aimed at slowing the rate of funding increases rather than actually cutting costs.

The major caveat is that almost all of this is supposed to happen after the Oct. 6 election, and thus exists largely in the realm of the hypothetical. Still, it has the potential to test the trope that there are all kinds of efficiencies to be found within government, if only anyone bothered to look for them.

That raises a daunting prospect. What happens if the government keeps its nerve, hunts down every inefficiency it can find, and still doesn't find enough savings to avoid having to make more unpleasant decisions?

Past a certain point, there would be only two options. Either the government would have to dramatically increase taxes, which both the Liberals and (especially) their opponents are enormously reluctant to do. Or it would have little choice but to tackle those core services that for now are sacrosanct.

With a $16.7-billion provincial deficit, a debt-to-GDP ratio of 35.4 per cent and a rapidly aging population, something has to give. Whichever government is in office after Oct. 6 will be desperately hoping that the relatively painless stuff proposed by Mr. Duncan is enough to suffice.

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