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CANADIAN INDUSTRY ONLINE - MAY 2013
CHAMBER NEWS
OCC Rapid Policy Update: What the
2013
Ontario Budget means for busi-
ness
On May 2nd, the Government of On-
tario tabled its 2013 Budget. What fol-
lows is a summary of key highlights
from a business perspective.
Overall, the Budget is a mixed bag.
Some measures will improve our over-
all competitiveness. These measures
include:
holding the line on Corporate Income
Tax rates;
extending the Capital Cost Allowance
for Manufacturers;
making progress on Pooled Registered
Pension Plans (PRPPs); and,
implementing new investments in
transportation infrastructure.
Some measures are disappointing:
there is still no clear plan on how gov-
ernment will cut costs and meet rising
demand for services;
government is interfering in auto in-
surance;
and, nothing addresses the govern-
ment’s exposure to an inevitable hike
in interest rates.
The bottom line? The plan for long-
term transformation and spending
constraint is unclear.
1)
THE DEFICIT
The deficit is projected at $9.8 billion
for 2012-13. Total net debt is project-
ed at $268 billion or approximately
$20,000 per person. The debt to GDP
ratio is project at 37.5 percent.
The government retains its target of
eliminating the deficit by 2017-18 and
then reducing the net debt-to-GDP ra-
tio of 27 percent. According to Budget,
“
eliminating the deficit is the single
most important thing that government
can do to secure Ontario’s prosperity.”
Note that while the deficit is projected
to grow next year to $11.7 billion, gov-
ernment has a history of overstating
the projected deficit.
OCC ANALYSIS
The deficit and debt announcements
are of no surprise. In a context of weak
economic growth, a balanced ap-
proached to eliminating the deficit is
probably justified. Too much austerity
too fast-particularly in a context of re-
duced federal spending-could further
dampen economic growth.
However, the projected increase in the
deficit for next year is concerning, and
likely reflects government’s tendency
to overstate the assumption for politi-
cal reasons.
A second concern is the absence of
a plan on how to constrain costs in
the future. Government has already
tackled the low hanging fruit when it
comes to spending reductions, such as
wage and hiring freezes. Where’s the
long-term plan for transformation?
2)
SPENDING AND GOVERNMENT
TRANSFORMATION
Government program spending con-
tinues to grow. It has increased by 49
percent since 2004-05 and 23 percent
since 2007-08.
The three biggest spending items in
the budget are health $48.9 billion (38.3
percent), education $24.1 billion (18.9
percent), and $10.6 billion for interest
on the debt servicing (8.3 percent).
Public sector wages account for 50 per-
cent of all program spending. Average
wage settlements across the public sec-
tor have averaged at around 0.1 per-
cent. Executive pay has been frozen.
However, little progress has been
made on public sector pensions, which
have been, according to the Drum-
mond Commission, “responsible for
much of the total increase in program
spending.”
The government notes that it is or will
be acting on 60 percent of the Drum-
mond Report recommendations.
OCC ANALYSIS
Ontario spends the least on a per cap-
ita basis of any provincial government
CHAMBER NEWS
