Ontario Budget Watch 2014: What we’re looking for

This week’s 2014 Ontario budget won’t contain many surprises – much of what will be in the budget has already been announced – but it should contain core principles to guide the province toward greater shared prosperity.

Here are 5 guiding principles we at the CCPA-Ontario office will be watching for in the budget:

1. End austerity

Austerity is a poor policy choice during a period of recovery. Following the discovery of a spreadsheet error in the mathematical model which led governments the world over down the path of austerity, a wide range of organizations and academics, including the International Monetary Fund, performed an about face and proclaimed that austerity in the wake of the 2008-9 global recession had done more harm than good.  It is now largely accepted that austerity has actually been a drag on economic growth.

In this case, Ontario is no exception.  Budget 2012 launched the province into an austerity agenda that saw the loss of 13,000 net public sector jobs and the quality of our public services erode.

Budget 2013, though softer in its language, continued down the path of austerity and got the province about 60 per cent of the way through implementing the Drummond report’s 362 spending cut recommendations.  With that budget, the government made it clear that it was relying on consumers and business, not the government itself, to drive economic growth.

Our own CCPA research has pointed to how austerity has done more harm than good in Ontario.

In a rare bright spot, Finance Minister Charles Sousa’s Fall 2013 Economic Statement promised an end to austerity budgets.

What we’re looking for: Budget 2014 provides the Ontario government with an opportunity to recommit to investing in Ontario.  Everything ­– from roads and bridges, social assistance rates and supports for low-income Ontarians – should be on the table to restore the quality and effectiveness of Ontario’s public services.

2. Restore revenue health

For more than 15 years, the tax-cutting political agenda has jeopardized Ontario’s ability to withstand economic downturns like the one that struck in 2008.  This agenda essentially forced the province into what amounts today to an estimated $11.3 billion fiscal deficit. And the loss of revenue from those tax cuts is preventing the province from investing in programs and services to improve everything from public transit to education.

Cumulatively, tax cuts in Ontario since the mid 1990’s have resulted in $19 Billion in foregone public revenue annually – revenue the government could be putting to good use.

With 2014 shaping up to be a potential election year, all political parties are promising new spending and investment – particularly in the area of public transit – but their plans for how to pay for these investments are fairly feeble.  Sure, closing a loophole here or there may raise a few million dollars, but that is peanuts compared to the size of the investments needed to ensure transit isn’t paid for at the expense of other valuable public services.

What we’re looking for: Budget 2014 could begin to restore the health of Ontario’s revenue-generating tools by implementing a suite of options put forward by my colleague Hugh Mackenzie in a previous blog post.  Options include (but are certainly not limited to): adjusting the gas tax for inflation, eliminating the exemptions to the employer health tax and/or rolling back the corporate income tax to the 2009 rate.

Without a commitment to suite of tax increases, the political promises you hear on the hustings will come at some other price post-election – likely more public service cuts.

3. Advance a responsible model for transit and transportation investments.

Many of Ontario’s cities – most notably the Greater Toronto Area and Hamilton – are in desperate need of investments in transit and transportation infrastructure to break through gridlock.  All political parties have gone on record acknowledging this to be true but remain mired in another form of gridlock – political gridlock – when it comes to addressing which investments will come first and, again, how these investment will be paid for.

What we’re looking for: Expect Budget 2014 to propose a mix of funding tools including green bonds, asset sales and P3s (Public Private Partnerships) that give the illusion of providing free money, but are really just a way of borrowing now to pay later ­– gifting the private sector with an opportunity to make a tidy profit in the process.  These types of investments often look like easy money in the short run, but there is a growing body of evidence that they end up costing the public purse more in the long run. The alternative? A suite of options Hugh Mackenzie laid out in this report, or those laid out by Metrolinx or the government’s own appointed commission on the subject, as the CCPA’s Trish Hennessy wrote in this blog post.

4. Take steps to reduce income inequality.

Ontario has seen a steady increase in income inequality over the past four decades.

At the same time, Ontario’s labour market is undergoing a seismic shift that is leaving in its wake high unemployment, high long-term unemployment, increasing levels of involuntary part-time work and a youth jobless rate that promises to have long-term adverse effects on the lives of young Ontarians.

This shift has also been accompanied by a polarizing income distribution where middle income jobs are being squeezed out by a few higher income jobs and many more lower paying, precarious jobs with little promise of security or a chance to get ahead.

Mitigating income inequality should be high on the list of priorities for any government.

What we’re looking for: Budget 2014 should address the reality of the province’s sluggish labour market, starting with real supports for the long-term unemployed – those who lost big during the seismic shift from manufacturing to service sector jobs. The budget should also feature a job creation plan that addresses the needs of vulnerable groups facing an underperforming labour market – including youth, women, immigrants, temporary foreign workers, racialized Ontarians and Aboriginal people.

To address shrinking income at the bottom end of the pay scale, Budget 2014 should include measures to raise the minimum wage – because $11 an hour still leaves a full-time, full-year worker a member of the working poor – and to commit to living wage policies for government contractors as well as extended health benefits for workers who do not have employer sponsored benefit plans.

Any measures to promote a return to a more progressive tax system – where those with more contribute more – would make a contribution to mitigate market income inequality and would be a welcome change in this budget.

Budget 2014 is anticipated to feature the province’s plan for phase two of its poverty reduction strategy. We’re looking for real budget line commitments to help Ontario’s families with children but also adults who are living in poverty.

5. Implement a solid made-in-Ontario pension plan.

The Wynne government appears set to reveal its made-in-Ontario solution to the problem of declining retirement savings experienced by virtually every pensionless worker in the province.

What we’re looking for: An Ontario pension plan that mirrors the best principles of the CPP, including mandatory contributions and defined benefits (which are really traditional pensions), would be a good start.

 

Rumour has it that this budget will cause the liberal government to miss their deficit target for the year.  Given all of the cutting that has taken place recently – on both the tax and services sides of the equation – a reprieve is welcome news and far better than the alternatives.

Kaylie Tiessen is an economist with the Canadian Centre for Policy Alternatives’ Ontario Office (CCPA Ontario). Follow her on Twitter @kaylietiessen.

One comment

  1. Interesting article. However, I strongly disagree with the economic assertions except for #5.

    Ontario Pension Plan is a great idea. However, this is not a good time to implement such an initiative.

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