Ontario’s fall economic statement, tabled Monday by Finance Minister Peter Bethlenfalvy, puts government spending on a diet.
This fall economic statement sends the signal that with an economic recession looming, the government of Ontario under newly re-elected Premier Doug Ford is tightening its proverbial belt. The document sought to manage expectations, as the government struggles to balance fiscal restraint with ongoing challenges in some of its biggest files (including swamped hospitals and contract talks with teachers and education workers) amidst a cost-of-living crisis.
Here is what you need to know about the statement, what is in it, and how to engage a government in a time of fiscal restraint.
The Statement
With the cost of living top of mind for many Ontarians and increasing pressure on the government to respond to the health and labour crises, today’s statement contained few surprises and is, scaling back spending significantly from that announced in the spring budget. It is targeted and specific in its focus, laying the groundwork to manage expectations going into what is likely to be an unpredictable economic climate in 2023.
What is the FES?
The province’s fall economic statement outlines the Ministry of Finance’s economic projections for the coming months, while providing an update on the Ford government’s “Ontario’s Plan to Build” — the re-introduced budget, tabled shortly after the Ontario PC’s June 2022 re-election.
Bethlenfalvy’s announcement seeks to establish the Ford government as prudent fiscal managers with a plan they hope will support Ontarians struggling with the cost of living during a period of inflationary pressure, while also issuing a clear call to Ottawa to increase healthcare funding. It comes just over a week after the federal government’s Fall Economic Statement, which also signalled a move to tightening government spending. In the province’s response to the federal Fall Economic Statement, Ontario positioned managing labour shortages, addressing the housing crisis, and rebuilding the health care system as key intergovernmental policy priorities and called upon the feds to increase spending in these areas, particularly health care.
The Pressures
As the International Monetary Fund warns of widespread recessionary conditions and as the macroeconomic outlook worsens, Bethlenfalvy warned that uncertain times lay ahead. The Bank of Canada has been aggressively adjusting rates over the past months to get a handle on inflation, but rising rates have slowed the housing market and are creating a challenging environment for consumer and business confidence.
In recent weeks, the Ford government has also faced labour disruptions from public sector unions, who have withdrawn services over key bargaining issues like compensation. Today, the province repealed back-to-work legislation aimed at education support staff after nearly 55,000 CUPE union workers walked off the job. In addition to CUPE’s education support staff, the Ford government is currently in talks with striking Metrolinx workers, with many more contract negotiations forthcoming.
Despite the worsening macroeconomic outlook, the provincial government’s fiscal position is better than anticipated, building on Bethlenfalvy’s September announcement of a $2.1 billion budgetary surplus. The fall economic statement forecasts a deficit of $12.9 billion, nearly $7 billion lower than the outlook published in the 2022 Budget. It is expected that the Ford government will continue to leverage their budgetary surplus to service provincial debt to alleviate borrowing pressures and to fund spending targeted at relieving Ontarian’s pocketbooks.
The Spending
- In 2022–23, base program expense is projected to increase by $18.1 billion compared to 2021–22, with an increase of $5.6 billion for health and $3.6 billion for education.
Key initiatives in Today’s Announcement Include:
- Launching a voluntary clean energy credit registry to boost competitiveness, attract jobs and provide businesses with more choice in how they pursue their environmental and sustainability goals, as enabled by proposed legislation.
- Providing Ontario’s small businesses with $185 million in income tax relief over the next three years, benefiting about 5,500 small businesses through the proposed extension of the phase-out of the small business tax rate.
- Automatically matching property tax reductions for small businesses within all municipalities that adopt the small business property subclass.
- Making changes that would allow a person with a disability on the Ontario Disability Support Program (ODSP) to keep more of the money they earn by increasing the monthly earnings exemption from $200 to $1,000 per month. This would allow the approximately 25,000 individuals currently in the workforce to keep more of their earnings and could encourage as many as 25,000 more to participate in the workforce.
- Planning to adjust the maximum monthly amount for the Assistance for Children with Severe Disabilities program annually to inflation, beginning in July 2023.
- Helping to manage rising costs for low-income people with disabilities by planning to adjust core allowances under the ODSP to inflation annually, beginning in July 2023.
- Investing an additional $40 million in 2022–23, for a total of $145 million for the latest round of funding in the Skills Development Fund, which has already helped over 393,000 people take the next step in their careers in in-demand industries.
- Investing an additional $4.8 million over two years, beginning in 2023–24, to expand the Dual Credit program, encouraging more secondary school students to enter a career in the skilled trades or in early childhood education.
- Proposing to extend the cuts to the gas tax and fuel tax rates so that the rate of tax on gasoline and fuel (diesel) would remain at 9 cents per litre until December 31, 2023.
- Helping to manage costs for about 200,000 of Ontario’s lowest-income seniors by proposing to double the Guaranteed Annual Income System payment for all recipients for 12 months starting January 2023, a maximum increase of almost $1,000 per person in 2023.
- Proposing to expand eligible expenditures for the Ontario Production Services Tax Credit to include location fees to help attract domestic and foreign film and television production to the province and incentivize more on-location filming in communities across Ontario.
The Bottom Line
The government must carefully balance austerity and its budgetary surplus with the need to support Ontarians through targeted spending to provide relief to household budgets as well as modest wage increases for public sector workers. In the months ahead, we can expect fiscal restraint to continue as the province attempts to mitigate worsening macroeconomic conditions.
In an era where government is looking to rein in spending, McMillan Vantage is here to help you navigate Queen’s Park and keep your issues on the agenda. To find out more, contact us at info@mcmillanvantage.com.
