Ontario launches business-friendly budget, opposition decries pandemic “white flag”

Ontario Premier Doug Ford’s Progressive Conservative government recently delivered its 2020 budget, including projections for deficits in the coming years. photo by Bruce Reeve, licenced under CC BY-SA 2.0

TORONTO – Following a delay of eight months due almost solely to the advent of the COVID-19 pandemic, the government of Ontario introduced a budget last Thursday that Premier Doug Ford touts as a “great, great news budget for the people of Ontario, the businesses of Ontario.”

The opposition, on the other hand, begs to disagree.

“What we are seeing is a government that has thrown in the towel when it comes to dealing with the pandemic,” said Algoma-Manitoulin MPP Mike Mantha. “There is no money for our desperately understaffed long-term care homes, no operational program for PSWs or other front-line workers. No investment in the public health system, no money for technology for expanding the testing for COVID-19.”

“My colleague and I introduced a private member’s bill that made it to second reading, the government has not allocated any money and pushed it to 2025.”

“There is nothing in this budget for small business,” continued Mr. Mantha. “There are many small businesses that are desperate for help. There is nothing here for our most vulnerable, but there are tax cuts for huge corporations that have made profits.”

Liberal leader Steven Del Duca was also dismissive of the government’s claims about the universality of the 2020 budget. “It’s a betrayal of seniors who will die in nursing homes today,” he said, “a betrayal of kids who have been packed into crowded classrooms and it’s a betrayal of parents who have been worried because their lives have been put at risk.”

The 2019/2020 budget proposes to hold the line on spending, despite the challenges of the pandemic. The deficit remains unchanged from the summer at $38.5 billion (with $2.5 billion held in reserve).

The Ford government’s 2020 budget does include a new tax credit for seniors to renovate their homes, more cash payouts for parents of young children (a $200 cheque similar to that paid out earlier in the year should arrive before Christmas for parents of children up to 12, $250 for those with dependent children up to age 21), as well as a raft of new tax cuts for business and a somewhat nebulous pledge to allow Ontarians to claim 20 percent of the cost of a vacation taken inside the province in 2021 in order to boost the hard-hit tourism sector.

The budget also includes $570 million more to fund hospitals, over and above what was announced in the fall. Mr. Mantha points out that the government’s claimed increase in health care funding was actually a reduction from what had been in place the year before they made cuts to the system in the fall.

The budget tallies around $187 billion in total spending this year, with the red ink coming in at $38.5 billion, but unlike what has become the norm in recent provincial budgets, it offers no path to balance—the government claims that will come in next year’s budget. 

The budget predicts that gross domestic product (GDP) will likely fall 6.5 percent this year and that employment at the end of September was 319,000 jobs lower than the peak enjoyed this past February. Of the spending listed in the budget, $12.5 billion will go to service interest charges on the province’s record debt.

Good news is that the Ministry of Finance predicts growth will rebound by 4.9 percent next year and rise 3.5 percent in 2022, but tempers that rosy outlook with the observation that economists remain at odds when it comes to charting an economic rebound.

The 2021/2022 deficit is anticipated to be in the range of $33.1 billion, which includes a contingency of $2 billion and the 2022/2023 deficit will tally at around $28.2 billion.

Some $2.65 billion still remains in the contingency poke for this fiscal year.

“I am comfortable with that because we are still five months left in this year—it’s important we have those dollars available so that we can adjust—we’re in the middle of a second wave,” the finance minister said. “Those dollars will get spent and deployed and will be there to ensure people have the resources they need; the health care resources, the educational resources.”

Major hydro users in the commercial and industrial sector are slated for $1.3 billion worth of rate reductions over the next three years in energy costs and the business education tax rate that most businesses pay will drop to 0.88 percent. The employer health tax payroll exemption will rise to $1 million. These moves combined are estimated to cost taxpayers around $810 million.

The budget reiterates a commitment to explore revenue-sharing of resource revenues with Indigenous and Northern communities, but did not reverse earlier cuts to First Nations programs. The budget states that Ontario will continue to advance resource revenue sharing opportunities and continue to explore revenue sharing from aggregates development including forestry and mining.

The aim of that program would be to improve the business climate for Northern and Indigenous communities by reducing investment risks for natural resources development. 

The budget continues the June commitment to provide up to $10 million in support to Indigenous-owned small and medium-sized businesses with loans of up to $50,000 provided to businesses ineligible for, or unable to access, existing COVID-19 response initiatives for small businesses. Half of each loan will be in the form of a grant with no interest due on the loan portion until December 31, 2022. Eligible businesses will be permitted to use the funds for payroll, rent, utilities or accommodating social distancing requirements.

Premier Ford defended tax cuts for businesses while not helping households claiming that businesses are fleeing to the US, saying that as businesses “were leaving out the door a while ago, they were saying ‘how can we be competitive with the electricity costs here in Ontario’.”

Hydro costs were a major albatross to the previous Liberal government, and the Ford government will spend $6.2 billion to subsidize hydro rates for people and businesses this year, that’s up from the $2.8 billion spent in 2018.

The new home renovation program will pay for 25 percent of home refits for seniors—up to a maximum of $10,000—a similar program ended by the Liberals in 2016 covered 15 percent of costs.

The tourism and cultural industry is also getting $125 million in new assistance, with a further boost in 2021, where the government has set aside $150 million for what it frames as the “Year of the Staycation in Ontario.” The program would see 20 percent of Ontarians’ eligible travel costs reimbursed by the province, so long as they take their vacation trip within Ontario.

Opposition leaders Ms. Horwath and Mr. Del Duca criticized the government for not including any cost details of the new promise to increase the standard of care in long-term care homes to four hours of care per day in the budget. 

The budget calls for an “emergency volunteer unit” to be formed to recruit people to help for future natural disasters or public health crises.

When it comes to revenue from some of the sin taxes, profit from the Ontario Lottery and Gaming Corporation fell more than 90 percent, from $2.3 billion to only $200 million this year, but on the high side cannabis sales are growing exponentially, rising from $67 million to $245 million by the end of this year and $565 million by 2022.

The budget is doubling down on the Black Youth Action Plan, adding $60 million in funding to that program over the next three years.

The bottom line over the next three years will rack up a whopping $100 billion of debt, largely attributed to the impact of the COVID-19 pandemic.