Ontario's Fall Economic Statement
Published on: 18/11/2013
On November 7, Ontario Finance Minister Charles Sousa delivered his Fall economic statement and fiscal review, entitled Creating Jobs and Growing the Economy. In it, he forecasted an $11.7 billion deficit for 2013-14, which is a slight improvement over the previous forecast of $13.3 billion for this fiscal year. Typically, these updates are a mundane exercise in reviewing the Budget versus actual economic performance over the first half of the fiscal year; however, this year's installment had a much different look and feel.
Premier Kathleen Wynne appears to have launched an election-style economic platform, perhaps anticipating a Spring election around the presentation of her government's Budget 2014. The statement lays out a plan forward to jump start the provincial economy, focused on job creation and infrastructure investment, but without any accompany financial information. It does appear, though, that her government is prepared to abandon fiscal austerity in favor of spending its way out of the current trend of sluggish growth in the province, with new revenue streams from increased taxes, Green Bonds, and asset sales (LCBO headquarters, GM stock, and perhaps Ontario Power Generation building). Premier Wynne now has five months to push her message of why her economic plan will work before having to identify what type of financials are attached to this plan.
Creating Jobs and Growing the Economy, although light on specific detail, did provide insight into what Budget 2014 may include, including a focus on "modern infrastructure" development. The Wynne government appears poised to introduce the Infrastructure Plan Act, which would henceforth mandate government to produce a rolling 10-year infrastructure plan (though with no financial commitments). They also seem to be committed to continuing with the three-year rolling infrastructure budget, with similar economic values attached to it ($35 billion over three years has been the recent standard). Although this is certainly welcomed, it will mean that the infrastructure budget will have remained stagnant for a five year period, hovering around $11.7 billion per year.
The economic statement noted that it will reverse the McGuinty government's tightening of spending on health and education, so in order to pay for infrastructure, some innovative financing methods have been proposed, including the previously announced Green Bonds, as well as the creation of the Trillium Trust (funding infrastructure projects from the proceeds of government asset sales) and a significant expansion of the Alternative Finance and Procurement (AFP) project delivery model. On this note, there appears to be an upcoming adjustment to the AFP model, which is likely to include a mid-size cap on select projects, which will limit who can compete for the projects based on company size, amongst other details.
Additional highlights from the economic statement include:
• A potential uniform Business Education Tax rate across the province; as per recommendations made in the 2012 Drummond Report;
• A Permanent Municipal Infrastructure Fund, with details to be released in the 2014 Budget;
• Considerations to make the Rural Infrastructure Fund a permanent fixture of the Infrastructure budget;
• A tax incentive (up to $6800) for businesses to offer 4-6 month work placements to help new entrants into the workforce gain the necessary training and experience;
• A special corporate tax that may be eliminated or reduced by employer investment in new equipment, as well as a special tax eliminated if investments are made in corporate training;
• An initiative to connect Infrastructure Ontario with the province's international trade offices as a means of creating export opportunities for Ontario firms to bid on AFP projects in other countries.
Ultimately, the economic statement illustrates the Wynne government's willingness to maintain the course on infrastructure spending, while mandating that future government's implement a rolling long-term plan. The Finance Minister noted that the government is still moving towards a balanced budget in 2017-18, but did leave room for this date to be pushed back if economic performance did not hit forecaster's targets.
If you have any questions, please feel free to contact Patrick at OSWCA at 905-629-8819 or Patrick.firstname.lastname@example.org.
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