For those who worshipped last winter at the temple of Don Drummond, the news is bleak.
Seven months after the release of the former bank economist's much-hyped report on how to fix Ontario's finances, Premier Dalton McGuinty – who commissioned the report and once acted as though it would provide all the answers to the province's woes – has clearly lost the faith.
Mr. McGuinty's Liberals never fully bought into some of the more controversial of the report's 362 recommendations, such as scrapping full-day kindergarten, and fair enough; it wasn't a checklist. But this week, as they announced a cap on the salaries of public-sector executives and a lengthy freeze of their pay-for-performance – aimed mostly at making it easier to freeze the salaries of unionized workers – it was obvious that the Liberals have rejected one of Mr. Drummond's central premises.
Central to his prescription was avoiding "short-term fixes" and "across-the-board cuts," which allow structural problems to fester. "We must be students of history and history shows that simple cost-cutting by governments too often generates fiscal improvements that peter out after a few years as pressures build," Mr. Drummond wrote in his introductory letter. "In the end, spending surges again and the result is more of the same, but at a higher cost."
No section of the report was more explicit on this front than the one on labour costs, which account for the bulk of government's expenditures. "Wage freezes are often followed by wage catch-up periods," the report says. "Such action, if undertaken in the current fiscal climate, would undermine our longer-term fiscal mandate and damage labour relations."
The government, Mr. Drummond argued, should instead pursue more thoughtful ways of improving public-sector productivity and efficiency. Among the mechanisms he highlighted was tying pay to performance, notably for senior executives.
Unlike the province's two opposition parties, the Liberals initially seemed to be on board with most of this. They rejected the Progressive Conservatives' call for a sweeping wage freeze for the reasons Mr. Drummond articulated, and privately mocked the NDP's populist demand for a crackdown on the earnings of people running hospitals or power utilities.
That was then. Now, the government is much closer to the opposition parties on these issues than it is to Mr. Drummond. The spin from the Liberals is that Mr. Drummond himself said that if some of his proposed cost-cutting measures weren't adopted, others had to replace them – so if they're going to keep full-day kindergarten and low primary-school class sizes, something had to give.
Considering that few people in government actually believe it's an exact science, with Mr. Drummond's suggestions adding up to the exact savings needed to get out of deficit, a more credible explanation is political pressure. In a minority legislature, the Liberals need opposition support to get stuff done; they also feel the need to show the public they're moving decisively. So grand gestures have a certain appeal.
There is perhaps something more fundamental as well. For all that its grim economic forecasts and deficit projections caused Mr. Drummond's report to be portrayed as apocalyptic, in another sense it was highly optimistic. It argued that if existing structures were challenged, if the right questions were asked about why things were done and if they could be done better, the public sector could be transformed in ways governments had long talked about but never achieved.
The reason they've never achieved it is that such transformation is really, really hard. For a brief time, Mr. McGuinty seemed to have a stomach for it, and in fairness some related measures were introduced in the spring budget. But in the current political climate, what are the odds of a nine-year-old government fighting for its survival having the discipline to play the long game?
Mr. Drummond's report still serves as a useful catalogue of cost-cutting options. Its brief time as the guiding orthodoxy at Queen's Park, however, has come and gone.