Chapter 1: Confronting the Challenge
Confronting the Challenge
Introduction
The McGuinty government is helping Ontarians through the global recession by keeping them working. Skills and training programs have been created for workers who are transitioning to new careers. Assistance for the most vulnerable Ontarians has also been readily available. Finally, the McGuinty government has invested in long-term economic growth. Some major initiatives include:
- Infrastructure investments of $32.5 billion over two years to stimulate economic growth and help preserve and create jobs across the province.
- Retaining jobs in the auto sector and maintaining the sector's major contribution to the economy and to communities throughout Ontario.
- Skills and training initiatives that are helping unemployed workers retrain for new careers and creating summer jobs for young people.
- Helping those most vulnerable to a downturn by accelerating the Ontario Child Benefit phase-in and increasing social assistance rates.
- Investing through the Green Energy and Green Economy Act to help create green economic opportunities for Ontario businesses.
- Enhancing tax credits available to the entertainment and creative industries to attract investment and create jobs.
To build and strengthen Ontario's economy for the future, the McGuinty government is proposing to modernize Ontario's tax system by cutting income taxes for people and business, and by replacing the retail sales tax with a more modern, value-added tax combined with the federal Goods and Services Tax (GST).
Infrastructure Investments
For six years, the McGuinty government has been investing in Ontario's schools, hospitals, roads and public transit. In the 2009 Budget, the government allocated $32.5 billion for infrastructure investments over two years to stimulate economic growth, create short- and long-term jobs, and help Ontario families both now and in the future.
These investments build on the government's $30 billion ReNew Ontario infrastructure investment plan, which was completed in 2008-09, a full year ahead of schedule. The ReNew Ontario investments supported more than 85,000 jobs in 2007-08 and preserved and created more than 100,000 jobs in 2008-09. The government's infrastructure investments are renewing and modernizing aging infrastructure and helping to address the infrastructure deficit that had built up over the three decades prior to 2003.
Ontario has moved quickly to allocate the stimulus funding announced in the 2009 Budget. The government received a tremendous response to its infrastructure programs. Project applications were carefully reviewed by both the federal and provincial governments and assessed against funding criteria, including construction readiness.
In the seven months since the 2009 Budget, the government has approved over 2,600 new federal-provincial infrastructure projects. Approximately 30 per cent of projects reporting are already under construction. Virtually all contribution agreements are either signed or in the hands of recipients for signature.
Investments are taking place in key sectors with highways, roads and transit projects accounting for just over half of the total. These projects will help to improve public transit, reduce commute times and lower business transportation costs.
| Central |
|---|
| University of Toronto at Mississauga Laboratory Centre |
| Weston Road Resurfacing in York Region |
| Winston Churchill Blvd - Road Rehabilitation in Mississauga |
| Revitalization of Hanes Road in Huntsville |
| East |
| Southwest Transitway Extension in Ottawa |
| La Cité Collégiale Emergency Services Training Centre 911 Institute in Ottawa |
| Water Master Plan Implementation — Front Road in Kingston |
| Rehabilitation of Thomas Street in Greater Napanee |
| North |
| Highway 17 Gateway Rehabilitation Project in Kenora |
| Reconstructing and Upgrading Third Line in Sault Ste. Marie |
| Replacement of Barbers Bay Bridge in Timmins |
| Refurbishment of Public Works Garage/Fire Hall in Rainy River |
| West |
| Preston Auditorium Rehabilitation in Cambridge |
| Victoria Street Sewer Separation in Amherstburg |
| Calton Line Rehabilitation in Elgin County |
| Niagara College Applied Health Institute in Welland |
These investments are keeping Ontarians working in communities across Ontario. Projects are now under construction that will enhance Ontario's long-term competitiveness by raising productivity, while improving the quality of life of Ontarians.
In the 2009 Budget, the McGuinty government also committed to modernizing facilities and boosting the province's long-term research and skills training capacity by providing $780 million in capital funding for Ontario's colleges and universities. Every public college and university in the province has received funding and many projects are already under construction.
As a result of the government's commitment, Ontario colleges and universities plan to create over 36,000 new spaces by 2011, including 2,300 new apprenticeship spaces. New classroom spaces will help to keep up with the growing demand for postsecondary education in Ontario while preparing the highly educated and skilled workforce the province needs to compete in the new economy.
Additional infrastructure investments are being made in all key sectors — including water and environmental projects, health, education, culture, tourism, sports and recreation, and social and affordable housing. These investments are laying the foundation for economic growth.
Supporting the Auto Sector
The Ontario government has invested in the auto industry to help achieve long-term viability and competitiveness, while also supporting workers and communities. For example:
- Brampton — the Chrysler plant was saved and continues to operate, producing the Charger;
- Ingersoll — the CAMI joint venture between GM and Suzuki produces the Chevrolet Equinox;
- Windsor — in July, Chrysler Canada announced it would maintain 1,200 jobs at its Windsor minivan plant;
- Oshawa — new products are being manufactured.
The investments will be used for manufacturing, research and development, and capital expenditure, and will help drive auto-sector manufacturing in the province. By partnering with the Canadian and U.S. governments, Ontario is the only subnational jurisdiction in North America to make these investments, which are critical to the economic health of communities where the auto sector is the major employer. With key automakers and more than 400 parts manufacturers in Ontario, this crucial sector directly accounted for 3.7 per cent of Ontario's gross domestic product (GDP) in 2008 and directly and indirectly supports hundreds of thousands of workers, or about one in twenty working Ontarians. Auto exports to the United States are one of Ontario's key trade drivers.
An innovative and competitive auto industry in Ontario will lead to the creation and retention of high-value jobs in a new global marketplace for green auto-parts manufacturing. The latest data indicate that Ontario's motor vehicle manufacturing sales were $3.0 billion in August, double the $1.5 billion in sales in January. Auto assembly and auto-parts output were up strongly over the summer months, reflecting the ramping up of auto production following earlier widespread shutdowns. Ontario continues to build more cars than any other state or province in North America.
"The emergence from bankruptcy of Chrysler and GM early this summer with most of their productive capacity in the province still left standing — thanks in no small part to unprecedented government rescue efforts and workers' concessions — and the recent revival of motor vehicle sales in North America have essentially put worst-case scenarios for Ontario to rest."
RBC Economics, September 2009
"Demand will rebound for the auto industry, and Canada will be a big winner so long as the parties can work together to keep jobs here through the downturn."
Dennis DesRosiers, The Globe and Mail, March 11, 2009
Training and Skills Investment
Ontario's highly educated and skilled workforce is a significant economic and competitive advantage. The Province is building on this advantage through investments in the skills of Ontarians. It has laid a solid foundation for future prosperity through: the $6.2 billion Reaching Higher Plan for postsecondary education, over $1 billion in annual Employment Ontario training investments, and additional investments under the Skills to Jobs Action Plan announced in the 2008 Budget.
In the 2009 Budget, the government announced further investments worth more than $750 million over two years for new skills and enhanced training and literacy initiatives, supported by enhancements to Canada-Ontario labour market agreements. These investments are already having the desired impact, including more than 104,000 employment opportunities for students this past summer.
As part of Employment Ontario, the Second Career program, along with the Rapid Re-employment and Training Service (RRTS), were designed to provide $355 million over three years to help 20,000 laid-off workers access the extensive training they need to succeed in new jobs. The Second Career program has already exceeded its three-year target in just 16 months, helping nearly 21,000 people receive training.
Ontario offers a number of other training and employment services to help unemployed workers meet the economic challenges facing them. For example, since April 2008, over 27,000 Ontarians have participated in the Ontario Skills Development program that provides short-term training and return-to-employment assistance for unemployed workers. The RRTS Service has provided timely counselling assistance to over 110,000 workers affected by layoffs and plant closures since the program began in 2007.
| Selected Programs | Clients Served | Time Period1 |
|---|---|---|
| Second Career Program | 20,939 | Since June 2008 |
| Summer Jobs and Services | 104,140 | April 1 to August 31, 2009 |
| Rapid Re-employment and Training Services | 110,000 | Since January 2007 |
| Ontario Skills Development Program | 27,291 | Since April 2008 |
| Literacy and Basic Skills | 83,984 | Since April 2008 |
| Apprenticeship Registration | 40,900 | Since April 2008 |
| Employment Assistance Services2 | 299,305 | Since April 2008 |
| Job Creation Partnership2 | 1,712 | Since April 2008 |
| Job Connect2 | 426,714 | Since April 2008 |
| Self-Employment Benefit | 5,178 | Since April 2008 |
| Targeted Wage Subsidy2 | 4,091 | Since April 2008 |
- 1 Based on the most recent data available.
- 2 Employment Assistance Services and Job Connect help clients prepare for, find, get and keep jobs. Ontario Job Creation Partnership provides work experience through local employers and community groups. Ontario Targeted Wage Subsidies are used to encourage employers to permanently hire eligible unemployed workers.
- Source: Ontario Ministry of Training, Colleges and Universities.
The 2009 Budget also announced support for the postsecondary education sector, including capital funding. In May 2009, the Governments of Ontario and Canada announced approximately $1.5 billion in joint funding for 49 capital projects at colleges and universities. The Province also announced an additional $115 million for facilities renewal and eight strategic projects at institutions (see Table 3).
These investments are providing an immediate economic stimulus for Ontario's economy and will create jobs in construction, and for engineers, architects, other tradespeople and technicians. They will also help improve teaching facilities and build the infrastructure needed to keep Ontario's colleges and universities at the forefront of scientific advancement.
| Institutions/Programs | No. of Major Projects |
Provincial Contribution |
Federal Contribution |
Institution/ Other Contribution |
Total Cost | |
|---|---|---|---|---|---|---|
| Joint Federal–Provincial Knowledge Infrastructure Program Investments1 | ||||||
| Colleges | 25 | 402.9 | 291.8 | 98.6 | 793.3 | |
| Universities | 24 | 578.0 | 487.2 | 257.5 | 1,322.7 | |
| Federal–Provincial Investment Subtotal | 49 | 980.9 | 779.0 | 356.1 | 2,116.0 | |
| Other Provincial Postsecondary Education Stimulus Investments | ||||||
| Strategic Capital Infrastructure Program | 7 | 55.0 | – | – | – | |
| Facilities Renewal Program2 | 40.0 | – | – | – | ||
| Mohawk College Investment | 1 | 20.0 | – | – | – | |
| Other Provincial Investment Subtotal | 8 | 115.0 | – | – | – | |
| Postsecondary Stimulus Investments Total |
57 | 1,095.9 | 779.0 | 356.1 | 2,116.0 | |
- 1 Includes previous provincial investments of $299 million towards projects under the Knowledge Infrastructure Program. Federal Contribution does not include program administration fee of $962,000.
- 2 The Facilities Renewal Program will support a number of small scale renewal projects at all Ontario institutions.
Reducing Poverty
The Ontario government is committed to reducing poverty and increasing Ontario's economic potential. In 2008, the McGuinty government announced a comprehensive and long-term Poverty Reduction Strategy, to provide children and their families with the support they need and bring about opportunities for success in life. The Strategy set out a goal of reducing the number of children living in poverty by 25 per cent over five years. This would lift about 90,000 children out of poverty. This year, the government passed the Poverty Reduction Act, 2009, which will help ensure future governments keep poverty reduction as a priority.
Through a variety of programs designed to reduce poverty, the government is already making a real difference in the lives of people living in poverty. These efforts will lessen the suffering of families hurt by the global economic recession.
Supporting Incomes
In July 2009, the Ontario Child Benefit (OCB) was phased in two years ahead of schedule to reach a maximum of $1,100 annually per child, as announced in the 2009 Budget. This measure provides a significant increase in the cash benefits that low- and moderate-income families receive and supports families adversely affected by the current economic downturn. The OCB acceleration will provide over $400 million more in children's benefits between 2009–10 and 2011-12. Over one million children benefit annually from the OCB.
| 2008–09 | 2009–10 | 2010–11 | 2011–12 | |
|---|---|---|---|---|
| Previously Scheduled OCB Levels | 600 | 805 | 900 | 1,100 |
| Accelerated OCB Levels | 600 | 1,100 | 1,100 | 1,100 |
| Increase due to OCB Acceleration | – | 295 | 200 | – |
- 1 The OCB benefit year is from July 1 to June 30.
- Source: Ontario Ministry of Finance.
On November 30 and December 1, 2009, adult basic needs allowances and maximum shelter allowances for recipients of the Ontario Disability Support Program and Ontario Works, respectively, will increase by two per cent. Other social assistance benefits, including Temporary Care Assistance and Assistance for Children with Severe Disabilities, will increase by the same amount. The Ministry of Health and Long-Term Care comfort allowance will also increase by two per cent.
After the rate increase and OCB acceleration, a single parent on Ontario Works with two children aged five and seven will have an annualized income of $22,730 — $1,110 higher than in 2008. This is an increase of $5,670, or 33 per cent, from the family's 2003 annualized income of $17,060 (see Chart 3).
The McGuinty government increased social assistance rates by three per cent in the 2004 Budget and by two per cent in each of the 2006, 2007 and 2008 Budgets. With the 2009 rate increase, social assistance benefits, with compounding, will be 11.5 per cent higher than when the government took office.
With the proposed personal income tax cuts in the 2009 Budget, approximately 90,000 lower-income taxpayers would no longer pay Ontario personal income tax.
Providing Shelter
The 2009 Budget announced that, together with the federal government, the Province would invest $1.2 billion over two years in housing initiatives that support the government's Poverty Reduction Strategy. These investments include more than $700 million to repair social housing units through the Social Housing Renovation and Retrofit Program. In addition, more than $360 million will be provided to create affordable housing units for low-income seniors and persons with disabilities, and $175 million directed to create new homes for low-income families, senior citizens, persons living with mental illness and victims of domestic violence.
The 2009 Budget also provided more than $5 million annually to stabilize funding for Rent Banks. Since 2004, the government has provided nearly $24 million to municipalities for rent banks and has assisted over 15,500 low-income households.
Support for Seniors
As announced in the 2008 Budget, the Ontario Senior Homeowners' Property Tax Grant is providing grants of up to $250 to help low- to middle-income senior homeowners pay their 2009 property taxes. Starting in 2010, the maximum grant amount will double to $500. Over the next five years, the grant will provide about $1 billion in property tax relief to over 600,000 seniors.
Since 2003, the government has made several improvements to the Ontario Property and Sales Tax Credits to ensure they better reflect circumstances facing low-income seniors. The 2009 Budget proposed to further increase the threshold at which senior couples' benefits begin to be reduced, to ensure that senior couples receiving the guaranteed minimum level of income from governments receive the full benefit from these credits. Starting in 2010, the Ontario Property and Sales Tax Credits would be replaced with separate and enhanced tax credits.
The 2009 Budget announced the government's intention to provide retirees with greater access to locked-in funds by increasing from 25 per cent to 50 per cent, unlocking of new Life Income Funds (LIFs), effective January 1, 2010. In addition, seniors who purchased a new LIF after January 1, 2008, will have an opportunity to unlock an additional 25 per cent of amounts previously transferred into their existing fund. Remaining old LIFs and Locked-in Retirement Income Funds (LRIFs) will be harmonized with the updated new LIF rules. The Pension Benefits Act (PBA) regulation has now been amended to implement these changes.
Green Economy
The Ontario government is also addressing important environmental issues such as climate change while encouraging the creation of green jobs. The Green Energy and Green Economy Act, combined with more than $300 million in new initiatives announced in the 2009 Budget, are helping Ontario make progress on climate change. These measures establish the foundation for a green economy to position Ontario as a world leader of green energy.
The Green Energy and Green Economy Act is helping to ensure Ontario's green economic future by attracting new investment in the renewable energy sector.
Since the Green Energy and Green Economy Act was passed this spring, Ontario has asked Hydro One to immediately proceed with planning and implementing major transmission projects across Ontario. About $2.3 billion will be spent by Hydro One on transmission and distribution projects over the next three years.
The launch of the Feed-in Tariff program on October 1, 2009 will attract further investments in renewable energy projects across Ontario.
Ontario has also demonstrated significant progress on Canada's largest climate change initiative as Ontario Power Generation prepares to close four coal-fuelled power units. This will help move the province to electricity generated from greener sources, which will increase investment and opportunities in Ontario's green economy.
The Province has continued to build on this foundation with the introduction of legislation that, if passed, would give the government authority to set up a greenhouse-gas emission trading system in Ontario. The proposed act would enable Ontario to link to other North American and international cap-and-trade systems. Linked systems provide maximum trading opportunities and reduce costs for companies participating in a cap-and-trade system.
Supporting the Knowledge-Based Economy
Ontario has the third-largest entertainment and creative sector in North America, after California and New York, and is a solid international competitor in the rapidly growing interactive digital media sector.
The government's ongoing support is helping to strengthen the competitiveness of Ontario's entertainment and creative industries, an important component of the new knowledge-based economy.
Interactive Digital Media Sector
The Ontario Interactive Digital Media Tax Credit is a refundable tax credit available to qualifying corporations for expenditures related to the creation, marketing and distribution of eligible interactive digital media products.
The 2009 Budget proposed to significantly enhance the tax credit rates and extend the tax credit to more digital media game developers.
To strengthen Ontario's competitiveness for investment in this sector, the government is proposing to streamline support for large, specialized game developers. (See Chapter V: Creating a More Competitive and Modern Tax System.)
Enhancing the Ontario Production Services Tax Credit
The Ontario Production Services Tax Credit (OPSTC) is a 25 per cent refundable tax credit for qualifying labour expenditures available to corporations for qualifying foreign film and television production services and non-certified domestic film and television productions in Ontario.
"It [expanding the OPSTC] will ensure Ontario continues to attract productions that generate billions of dollars in economic activity, protecting our infrastructure and creating jobs throughout the industry."
Brian Topp, Co–Chair, FilmOntario, June 29, 2009
As announced on June 29, 2009, effective for qualifying expenditures incurred after June 30, 2009, the OPSTC would be expanded to additional production expenditures incurred in Ontario, including eligible service contracts as well as the purchase or rental of qualifying tangible properties, such as equipment and studio rentals.
Tax Cuts and the Harmonized Sales Tax Will Lead to Economic Growth
"An immediate priority for Ontario is to move toward harmonizing our provincial sales tax with the federal GST, converting it to a value added tax. Research by us and others shows that this is the most effective tax change to stimulate investment and job creation."
Roger Martin, Dean of the Rotman School of Management, University of Toronto, and Chair, Task Force on Competitiveness, Productivity and Economic Progress, Sixth Annual Report, November 2007
Sales tax harmonization is the single-most important thing Ontario can do to increase long-term economic growth. The proposed move to a value-added sales tax, together with other tax changes would increase Ontario's competitiveness dramatically by cutting the marginal effective tax rate (METR)1 on new business investment in half. A lower METR is important for attracting new investment. Ontario's METR is currently well above the average for the industrialized countries that are members of the Organisation for Economic Co–operation and Development (OECD). The measures proposed in the 2009 Budget would bring Ontario's METR below that average in 2010, as seen in Chart 4.
Studies show that the proposed comprehensive tax package would provide Ontario's economy with the boost in competitiveness required to meet the growing challenges of an integrated global economy. The recent and proposed tax cuts complement the government's investments in infrastructure, research, training and education, and help ensure continued growth in Ontarians' standard of living.
Making Progress by Working with the Federal Government
Ontarians expect governments at all levels to work together. That is why Ontario, along with the federal government, is providing significant and timely stimulus to the economy through investments in infrastructure and financial support for Ontario's auto sector.
The Ontario and federal governments are also working together to promote long-term economic development and growth. Supported by federal funding, Ontario has made significant investments in the skills of Ontarians.
In addition, the proposed sales tax harmonization is only possible through working in partnership with the federal government. This measure, along with the comprehensive tax package proposed in the 2009 Budget, would make Ontario one of the most attractive jurisdictions in the industrialized world for new investments.
Ontario values this partnership with the federal government and appreciates the significant investments that have been made. While much has been accomplished, the federal government needs to do more to support Ontarians in addressing current challenges.
The federal government announced changes to Employment Insurance (EI) that will better support laid-off workers in Ontario. However, eligibility rules for EI income support continue to be particularly unfavourable to most of Ontario's workforce. The Province believes that laid-off workers should be treated equitably regardless of where they live.
The federal government can also do more to ensure long-term support for Ontario's most vulnerable citizens by reconsidering its decision to terminate the Early Learning and Child Care agreement and by increasing support for low-income individuals and families through further enhancements to the Working Income Tax Benefit and the National Child Benefit Supplement.
Further, investing in people through expanded training and postsecondary education opportunities requires deeper investment by the federal government.
Finally, the Ontario government considers a healthy pension and retirement income system to be an integral part of Canada's income security system and believes that the security of retirement income will become a defining public issue in the years to come. Given the importance of pensions to Ontarians, the Ontario government is calling on the federal government to host a National Summit on pensions and retirement income as endorsed by the Council of the Federation in August.
- 1 The METR is a comprehensive measure of the tax that applies to an incremental dollar of income from new capital investment. It reflects the combined effect of federal and provincial corporate income taxes, rules related to depreciation, investment tax credits, capital and sales taxes.