Ontario’s Finance Minister Peter Bethlenfalvy attends Question Period at the Queens Park Legislature, in Toronto, on Nov. 14.Chris Young/The Canadian Press
The Ontario government predicts that its books will improve over the next three years, even as growth in the province slows to a trickle, according to its fall economic statement.
Monday’s update, a kind of mini-budget typically released each November, projects a $12.9-billon deficit for 2022-23 – a number that is $6-billion lower than the government last forecasted just weeks ago.
The return to red ink follows the surprise $2.1-billion surplus Ontario posted in 2021-22, a dramatic improvement on a predicted deficit for that year of $13.5-billion. That change was due to steep increases in government tax revenues as the economy bounced back from COVID-19.
But Ontario Finance Minister Peter Bethlenfalvy’s new statement, relying on private-sector forecasts, now anticipates much slower growth. Ontario expects just a 0.5-per-cent increase in real gross domestic product in 2023, as the Bank of Canada and other central banks hike interest rates to cool inflation. Some warn a recession could result. Speaking to reporters, Mr. Bethlenfalvy would only say the outlook remained uncertain.
In 2023-24, Ontario expects to have a deficit of $8.1-billion, with just $0.7-billion in red ink in 2024-25. But disappearing deficits have become commonplace in Ontario and in other provinces, after massive pandemic shortfalls evaporated much more quickly than predicted.
Just last month, the province’s independent Financial Accountability Office predicted the province was on the cusp of several years of multi-billion-dollar surpluses. It even said Ontario could finish in the black even this year, with a small $100-million surplus.
Other than a pledge to extend the province’s temporary cuts to gas taxes at the pumps for another year, which Premier Doug Ford announced on Sunday at an Etobicoke gas station, there were few other significant changes in the fall economic update.
Opposition politicians seized on the fact that no additional funding was allotted to health care, even as the province’s Chief Medical Officer of Health on Monday urged Ontarians to wear masks again as intensive care units at pediatric hospitals were swamped with rising numbers of children suffering from respiratory viruses. Medical experts have warned a coming flu wave could also severely strain a health system still reeling from COVID-19.
Ontario NDP finance critic Catherine Fife said the government, which put last year’s $2.1-billion surplus toward reducing its debt, could have spent more to alleviate the crisis in hospitals or lifted its temporary 1-per-cent cap on public-sector compensation hikes.
“Instead of taking the opportunity to invest in our hospitals, they sit on billions,” Ms. Fife told the legislature, pointing to the unallocated money the government keeps in contingency funds.
Asked why no new money was spent on health care, Mr. Bethlenfalvy said the government is already spending billions in extra dollars on the system, including $5.6-billion added in its most recent full budget. (Mr. Ford, speaking to reporters on Sunday, said the health care system was not suffering from a “money issue.”)
“As you know, we inherited … a health care system that wasn’t prepared for the environment that we faced,” Mr. Bethlenfalvy, whose Progressive Conservative government was first elected in 2018, told reporters.
The few new initiatives outlined in the fall economic statement include a proposed expansion of a previous cut to the income-tax rate for small businesses. The rate was originally lowered for some to 3.2 per cent from 3.5 per cent in 2020. The latest change would allow larger enterprises, with up to $50-million in taxable capital employed in Canada, to receive some benefit. About 5,500 small businesses would see some tax relief, the government says, and the measure would cost Ontario $185-million in tax revenue over the next three years.
The government is also proposing temporary tax changes that would allow businesses to immediately expense up to $1.5-million a year for certain capital investments, such as new equipment. The move would save companies $675-million over three years, the government says. There are also proposed tax changes to encourage more local film and television production.
Another new measure is a proposed “clean energy credit registry” that the government says would be voluntary and allow business to purchase credits to show that their energy was generated from Ontario’s relatively clean power grid. Mr. Bethlenfalvy could not provide more details about the plan.
There are also some changes aimed at helping the province’s most vulnerable people. A provincial benefit for low-income seniors will be doubled for a year, starting in January, resulting in up to an extra $1,000 per person.
In addition to its previous move to increase social assistance for disabled people by 5 per cent and its pledge to peg future increases to inflation, the government is now proposing to allow people on the Ontario Disability Support Program who have jobs to keep more of what they earn. It is proposing to raise the monthly amount people on ODSP can earn before any benefits are clawed back to $1,000 from $200. (The Opposition NDP has called for a doubling of ODSP rates, which leave many people struggling and only offers just over $1,200 a month.)
The document also says the government will make other changes to ODSP to “enhance measures to deter and detect abuse of the system.”
With a report from Dustin Cook