The government of Ontario, even before Doug Ford was elected Premier, already had the lowest per-capita spending of any Canadian province. Tenth out of 10. Back of the pack. Dead last.
Ontario, pre-Doug Ford, also had the lowest per-capita revenues of any province.
Those facts constrain whoever is in power at Queen’s Park, regardless of political stripe. They also explain why Premier Ford’s Progressive Conservative government, whose first budget was expected to rain down fire, brimstone and deep cuts, instead delivered something milder on Thursday.
What the Ford government was facing – thanks to recent changes in accounting rules that pumped up the deficit, last year’s Liberal profligacy and its own tax cuts, including scrapping nearly $2-billion a year in cap-and-trade revenue – was a budget shortfall in the year just ended of $11.7-billion.
Finance Minister Vic Fedeli’s response? Call it restrained restraint. Rather than deep austerity, it’s austerity-lite.
The most important budget metric, the debt-to-GDP ratio, will be allowed rise. It won’t start moving in the right direction for at least three years. And instead of a quick road to budget balance, Mr. Fedeli’s plan is to get there gradually, over five years.
This is a budget the previous Liberal administration could have delivered – and in many ways it’s what the Liberals did deliver. The Wynne government whittled down spending in key departments, even while claiming to be spending a lot more, ultimately balancing the budget in 2017. (Well, they sort of balanced it – depending on which accounting standards are used. It’s complicated.)
Then in 2018, the Liberals blew the doors off in a bid to spend their way to re-election. And here we are.
Mr. Fedeli calls his budget’s slow road to deficit reduction “thoughtful and measured.” After years of PC claims that Ontario’s budget shortfalls were a simple matter of out-of-control spending, a problem easily solved, Thursday was surprising, and sobering.
Mr. Fedeli was at pains to stress not how much he was cutting, but how much he was still spending.
He pitched deficit reduction as necessary for “protecting what matters most” – government funding for education and health care. Spending on the biggest department, health, which claims roughly 40 cents on every government dollar, is budgeted to rise by just 1.6 per cent a year over the next three years. That’s less than the rate of inflation, and only about half the rate of inflation plus population growth.
That is an effective cut to annual health spending, for three years in a row. That won’t be easy to pull off, given how much of that spending is salaries. Barring clever management, it’s a cut that will be felt by Ontarians. Remember that figure about Ontario being Canada’s lowest-spending province? It’s also the lowest per-capita spender on health care.
The government also plans to increase education spending by just 1.2 per cent a year over the next three years – while cutting post-secondary spending by 1 per cent a year and lowering spending on children and social services by 2.1 per cent a year. The PCs have drawn a line between sectors where they want to restrain their restraint, and other areas where they’re going to cut deeper.
The day before the budget, in an attempt to burnish its credentials as not just a cutter but also a spender, the Ford government announced what it’s pitching as “the largest capital contribution to new subway builds and extensions in Ontario history,” with $11.2-billion to fund transit construction.
It’s not clear how much of this is new money; what is clear is that the province is ripping up long-standing plans and replacing them with something half-baked. But big capital projects often feel free to governments, because capital spending is accounted for separately from operating costs – giving the PCs room for big announcements that boost debt but don’t have an immediate impact on the deficit.
The bottom line is that, although the Ford government is going slow on cuts, its plan to get to balance involves gradually ratcheting down the relative level of spending in what is already Confederation’s lowest-spending province. It won’t be easy.
And as the next election comes into view, the temptation to spend a lot more – or lure voters with big tax cuts – will only grow. We have seen this movie before.