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Ontario faces slow growth, reduced revenue
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The Canadian Press
Ontario Finance Minister Dwight Duncan gave a sobering view of the province's finances on Wednesday, predicting slow economic growth and dwindling revenues.
Ontario's deficit is now pegged at $16-billion — and wrestling it to the ground will take six or seven years, as well as a massive overhaul of government services.
In his annual economic forecast, Duncan said that with an uncertain global economy Canada's largest province is facing increased pressures.
"In some cases, that uncertainty comes from real, pressing challenges facing our trading partners," Duncan said in an advanced copy of the speech provided to reporters.
He said economic problems following the tsunami in Japan, a spike in oil prices and the slow recovery in the United States — the province's largest trading partner — are affecting growth in Ontario.
The Ministry of Finance said in a background note that real GDP is projected to grow by 1.8 per cent in 2012, 2.5 per cent in 2013 and 2.6 per cent in 2014.
The figure for 2012 is well below the 2.6 per cent predicted in last year's provincial budget and the 2.8 per cent growth forecast by the private sector.
"These are uncertain times," Duncan said.
And with slower than expected economic growth, the province's revenues appear ready to take a big hit.
"Our economy is still growing," the minister said, "but neither as quickly as earlier forecasts predicted, nor as quickly as we would like."
The ministry forecasts revenues for 2011-12 will be $443-million lower than projected in the 2011 budget.
That means if the Liberals can't find ways to trim spending, the deficit will increase.
Duncan said the 2011-12 deficit will be $16-billion. That's down from the $16.3-billion forecast in last year's budget, but $1-billion higher than the Liberals said it was just before the Oct. 8 provincial election.
Eliminating the deficit entirely, Duncan said, will require a "fundamental reform of the delivery of public services."
That "fundamental reform" will be laid out when former TD bank chief economist Don Drummond delivers his report on how to reform public services in early 2012.
The Liberals appear committed to attacking the deficit by following one of Drummond's early recommendations and holding spending increases to one per cent - except for health care and education.
"Any reforms we undertake will not compromise those services," said Duncan. Instead, they say they'll find savings in other areas,
A large part of the reduction will come from deep cuts to the Ontario public service.
The government has already said it will cut the public service by five per cent by March 2012 and a further two per cent by 2014. That will save taxpayers about $500-million.
Staffing cuts at other public agencies — like the Liquor Board, Ontario Power Generation and the Ontario Lottery and Gaming Corporation — will save another $200-million by 2014.
Duncan said the deficit is predicted to slow in the coming years: $15.2 billion in 2012-13 and $13.3 billion in 2013-14.
The Progressive Conservatives condemned the economic update for containing nothing new to rein in government spending and for delaying reforms until after Drummond issues his report in January.
"The finance minister chooses to put off those tough decisions to another day," said Opposition Leader Tim Hudak.
"He announces that a plan will come forward to consult, and then maybe find out some decisions will be made at some time down the road. That is no longer good enough. Families want action now."
The New Democrats encouraged the Liberals to look at the revenue side of the equation, not just spending, and said scrapping $600 million in planned corporate tax cuts would be a good start.
If revenues aren't increased, the Liberals will have to make cuts that would have made former Conservative premier Mike Harris blush, warned NDP finance critic Michael Prue.
"For all the Liberals' talk about the bad days of the Harris government you are going to do more and do it with the same force and effect that they did in those days," Prue told the legislature.
"Although you are not going to cut health care or education, the cuts that come to every other government department are going to be more severe than what happened in 1995 to 2003, much more severe."
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