2010 Ontario Economic Outlook and Fiscal Review

Chapter 1: Open Ontario

Section A: Helping Ontario Families

Highlights

Helping Electricity Consumers

• The proposed new Ontario Clean Energy Benefit would reduce the electricity bills of eligible residential, farm and small business consumers by 10 per cent a month for the next five years, effective January 1, 2011.
• The Northern Ontario Energy Credit is providing up to $200 per family and up to $130 for single people to help with home energy costs. It will be available to more than half of all northerners.

Tax Relief for People and Businesses

• The Tax Plan for Jobs and Growth will help create nearly 600,000 net new jobs within 10 years.
• Personal Income Tax cuts for 93 per cent of income tax payers, effective January 1, 2010.
• Up to $50 per child per year (up to $100 per child with a disability) proposed to help parents with the cost of enrolling their children in activities that encourage them to be healthy and active.
• Up to $1,040 in annual tax relief for a qualifying family of four through the Ontario Sales Tax Credit.
• The proposed Ontario Energy and Property Tax Credit would provide up to $900 in annual tax relief for a non-senior family or single person and up to $1,025 for seniors, benefiting about 2.8 million low- to middle-income individuals and families.
• Up to $1,000 per family or $300 per single person through the Ontario Sales Tax Transition Benefit to help Ontarians adjust to the Harmonized Sales Tax. The second of up to three payments will be delivered in December 2010.

Infrastructure Investments

• Investments over 2009–10 and 2010–11 for roads, bridges, public transit and other infrastructure are creating and preserving jobs and increasing Ontario’s long-term competitiveness.

Investing in Knowledge and Skills

• 20,000 new student spaces in colleges and universities in 2010–11.
• 200,000 more postsecondary students and apprentices will be learning this year compared to 2002–03.
• More than one million Ontarians are receiving skills training and employment assistance annually. The government committed approximately $1.6 billion to jobs and skills training through Employment Ontario in each of 2009–10 and 2010–11, with a special focus on workers affected by the economic recession.
• Full-day kindergarten is available in nearly 600 schools for up to 35,000 students. In September 2011, full-day kindergarten will be available in 200 more schools, meaning up to 50,000 children will be benefiting from the program.
• In 2009–10, over 50,000 more students in Grades 3, 6 and 9 met or exceeded the provincial standard in reading, writing and mathematics when compared to 2002–03 results.
• High school graduation rates increased from 68 per cent in 2003–04 to 79 per cent in 2008–09. That means more than 52,500 additional students have graduated since 2003–04.

Securing Our Retirement Future

• Advocating for a stronger retirement income system for working Ontarians through a modest, fully funded and gradual enhancement to the Canada Pension Plan (CPP), and pension innovation to provide new, lower-cost savings options.
• Introduced the most significant reforms to Ontario’s pension laws in over two decades.
• Continuing to consult widely with Ontarians on how to make saving for retirement easier, more affordable and more secure.

Protecting Consumers through Strong Financial Regulation

• Proposed amendments to the Ontario Securities Act to promote fair and efficient capital markets, enhance investor protection and help Canada deliver on its international commitments.
• Working with federal, provincial and territorial governments to establish a Canadian Securities Regulator.

Supporting Ontario Prosperity and Jobs

• Ontario was the only sub-national jurisdiction in North America to invest in the long-term viability and competitiveness of the auto industry, while protecting workers and communities. For the first 10 months of 2010, total vehicle production in Ontario rose by 46 per cent compared to the same period last year and workers are being rehired.
• Supporting jobs and growth in the north through Ring of Fire investments and the Far North Act, 2010.
• Provided support to the Toronto Financial Services Alliance to help implement a government-industry plan to grow Ontario’s financial services sector.
• The Global Risk Institute (GRi), comprising industry leaders, regulators and members of the academic community, was announced in September 2010. This new institute will build on Toronto’s status as a premier financial services centre.

HELPING ELECTRICITY CONSUMERS

The Plan:

The McGuinty government is committed to building the electricity system the people of Ontario need and deserve to power their homes and businesses — a clean, modern and reliable system with stable prices.

For a decade, Ontario made little investment in new supply and transmission infrastructure. By 2003, Ontarians did not know if the lights would stay on. The province had just endured the largest blackout in North American history. The previous government’s reliance on five coal plants meant that about 25 per cent of Ontario’s electricity came from dirty coal. There was no plan for conservation, and no plan for supply to keep up with demand. Energy infrastructure was under stress and in decline. Instead of adding generation capacity, the electricity system lost a net 1,800 megawatts (MW) of power capacity — the equivalent of Niagara Falls running dry. Moreover, Ontario had to import U.S. coal-generated electricity just to keep the lights on. The government had even set up emergency generators for fear of brownouts. A brief deregulated market experiment in 2002 saw spot-market energy prices spike an average of about 30 per cent over seven months. That prompted the government of the day to freeze rates at an artificially low level.

The Results:

As a result of necessary investments in new sustainable generation made by this government, Ontarians can count on a reliable electricity system that ensures the lights stay on. Since 2003, more than 8,000 MW of new, clean power have come online, making up more than 20 per cent of current capacity. Ontario Power Generation completed the refurbishment of Pickering A Unit 1 and launched significant hydroelectric and other renewable and clean energy projects. The Niagara tunnel project, using the largest hard-rock tunnelling machine in the world at the time, will increase the output of power from Niagara Falls and produce enough extra annual energy to power as many as 160,000 homes. The Lower Mattagami hydroelectric project will increase Ontario’s supply of clean, renewable power by about 440 MW, powering over 300,000 homes. Furthermore, Bruce Power is currently working to return two units of Bruce A to operation, with a total of 1,500 MW of additional baseload capacity.

The Province’s transmission and distribution company, Hydro One, has also invested $7 billion in the improvement of some 5,000 kilometres of its transmission and distribution lines, along with other system improvements. Hydro One’s average annual investment has been double what it was from 1996 to 2003. Local distribution companies in the province have also invested in the modernization of Ontario’s distribution system, and are working to develop a smart grid to increase the reliability of electricity delivered to homes and businesses. By using communications technology, the smart grid will make more efficient use of existing infrastructure, improve conservation, and allow better integration of small renewable projects.

These investments have also allowed the Province to pursue the elimination of coal-generated electricity, replacing it with cleaner sources such as wind, solar and bio-energy. In 2005, the government permanently shut down the four-unit Lakeview coal plant in Mississauga. In October 2010, four more coal-fired generating units were permanently shut down. The Province is on track to phase out dirty coal-fired electricity generation in 2014, the largest initiative of its kind in North America in that timeframe. This will be equivalent to taking seven million cars off the road and will improve air quality while reducing health care costs.

LONG-TERM ENERGY PLAN

When this government took office in 2003, it inherited an electricity system that had no long-term plan. Through the Electricity Restructuring Act, 2004, the government created and mandated the Ontario Power Authority (OPA) to use a formal 20-year planning process to help forecast and meet the province’s electricity needs. Under this process, the long-term plan was designed to be updated every three years to incorporate developments in technology, in the supply of renewables, and changes to demand.

The OPA’s first long-term plan, known as the Integrated Power System Plan, was submitted in 2007. The Plan was based on a supply-mix directive that the OPA received from the government in 2006. It set the stage for moving Ontario forward to a more sustainable supply mix and reliable system.

Building on these efforts, the government passed the Green Energy and Green Economy Act, 2009 (GEA) as part of its plan for Ontario to become a leading economy in clean and sustainable technologies. The GEA will help boost investments in clean, renewable energy and conservation, securing long-term economic development and job creation in Ontario.

The GEA was a groundbreaking and significant accomplishment. It is:

• sparking growth in clean and renewable sources of energy such as wind, solar, hydro, biomass and biogas in Ontario;
• creating incentives to increase energy efficiency through a series of conservation measures;
• encouraging the development of a leading clean energy economy;
• setting the stage for smart grid implementation in Ontario; and
• creating 50,000 jobs for Ontarians in its first three years.

Since 2003, new renewable energy projects already in place or under construction represent a total investment of approximately $8.1 billion and have brought more than 1,500 MW of new renewable energy online. In 2003, Ontario had only 10 wind turbines; now there are more than 700.

With this foundation in place, it is time to review Ontario’s long-term energy plan. The Ministry of Energy will be releasing an updated Long-Term Energy Plan and a new directive to the OPA shortly.

The 2010 Long-Term Energy Plan will provide the roadmap for an updated supply mix, new investments in transmission and distribution, and stable and predictable industrial and consumer electricity pricing.

ENERGY PRICES

In order to have a clean, modern system that includes a significant proportion of renewables, ensures reliability and creates jobs, investments in Ontario’s electricity system will need to continue. While absolutely necessary, these investments are increasing electricity costs. Based on the Ministry of Energy projections from the forthcoming Long-Term Energy Plan, prices over the next 20 years are expected to increase by about 3.5 per cent per year.

Over the next five years, however, residential electricity prices are expected to rise by 46 per cent, which is an average annual rate of about 7.9 per cent. This increase will be due to two factors: upgrading and modernizing Ontario’s existing capacity in nuclear and natural gas generation, transmission and distribution (44 per cent); and the investment in new clean, renewable energy generation (56 per cent).

Continued investments in transmission, conservation and supply are needed for a system that provides more efficient and reliable electricity to consumers whenever they need it and does not pollute Ontario’s air or negatively affect the health of citizens and future generations.

After five years, Ontario will have largely completed the transition to a cleaner, more reliable system due to the replacement of coal-fired generation and new renewable generation under the GEA. The GEA investments will create more than 50,000 jobs. Once these investments have been made, the price increases are expected to moderate.

Ontario families and businesses are now paying the true cost of electricity. Rising electricity prices are having a significant impact on consumers who are asking for help with the cost of clean, modern energy.

Every little bit of assistance helps during lean times and there are several measures in place or proposed to help families cope with rising electricity costs.

ONTARIO CLEAN ENERGY BENEFIT

Through the 2010 Ontario Economic Outlook and Fiscal Review, the government is taking action today to help Ontarians who are feeling the pinch of rising costs and electricity prices. The Ontario government is proposing direct relief through a new Ontario Clean Energy Benefit (OCEB).

For eligible consumers, the proposed OCEB would provide a benefit equal to 10 per cent of the total cost of electricity on their bills including tax, effective January 1, 2011. Due to the length of time required to amend bills, these price adjustments would appear on electricity bills no later than May 2011, and would be retroactive to January 1, 2011.

Eligible consumers include residential, farm, small business and other small users. The proposed OCEB would help over four million residential consumers and over 400,000 small businesses, farms, and other consumers with the transition to a reliable and cleaner electricity system as more investment in transmission and supply capacity is brought online to support the province.

The following table provides examples of the impact the proposed OCEB would have on monthly electricity bills.

Table 1
Benefits for Eligible Customers

Customer (Monthly Consumption)	Current Estimated Monthly Bill	Estimated Bill after Ontario Clean Energy Benefit	Monthly Benefit1 (10%)	Yearly Benefit1 (10%)
Typical Residential 800 kWh	$128	$115.20	$12.80	$153.60
Small Business 10,000 kWh	$1,430	$1,287	$143	$1,716
Farm 12,000 kWh	$1,710	$1,539	$171	$2,052

• ¹ Typical 2011 monthly benefit for a consumer. Benefit amount will vary based on actual price, consumption and location.
• Source: Ontario Ministry of Energy.

In 2010–11, the estimated cost of the proposed OCEB is $300 million, with an estimated full-year cost of $1.1 billion next year. These costs are accommodated within the fiscal plan as a result of the government’s prudent approach to managing its finances.

The Province’s revenues from its ownership of Ontario Power Generation and Hydro One are projected to be approximately the same as the cost of the OCEB.

Providing the 10 per cent OCEB to Ontarians is a responsible way of helping Ontario families through the transition to a cleaner electricity system. The OCEB would help residential and small business consumers over the next five years as the grid is modernized and coal generation is eliminated. The government is introducing legislation to implement the proposed OCEB.

In addition to the OCEB, the government will also outline, through its Long-Term Energy Plan, a strategy that will carefully balance cleaner generation, job creation, reliability and cost.

Instead of a system that was polluting, unreliable and in decline with unstable pricing, Ontarians will have a
North American–leading clean energy system that keeps the lights on for generations to come, creates jobs for Ontario families and ensures the air they breathe is cleaner.

TAX RELIEF FOR PEOPLE AND BUSINESSES

SUPPORTS FOR LOW- TO MIDDLE-INCOME ONTARIANS

The Plan:

Ontario’s Tax Plan for Jobs and Growth and additional tax measures announced since the 2009 Budget would provide tax relief of $12 billion for people over three years.

The Results:

Permanent cuts to personal income taxes mean that, for 93 per cent of Ontario income tax payers, taxes will be reduced by $200, on average, for the 2010 tax year. In addition, Ontario offers several tax credits that put money back into the pockets of those who need it most. Tax relief provided through tax credits has been significantly enhanced to provide more relief to more people.

• The Ontario Sales Tax Credit provides up to $260 per person in annual tax relief or up to $1,040 for an eligible family of four.
• The proposed Ontario Energy and Property Tax Credit would provide up to $900 annually for non-seniors in relief for sales tax on energy and for property tax, or up to $1,025 for seniors.
• The new Northern Ontario Energy Credit provides up to $130 annually for a single person and up to $200 for families (including single parents).

Starting with these tax credits, the government is moving towards providing benefits on a more timely and regular basis. People used to receive the combined property and sales tax credits after filing a tax return; that is, once a year in a lump-sum payment. Ontarians began to receive quarterly instalments of the new Ontario Sales Tax Credit in August 2010. The Northern Ontario Energy Credit and proposed Ontario Energy and Property Tax Credit would also begin to be paid four times a year, starting in July 2011. The government will continue to work to better align the timing of Ontario’s tax credits and other benefits with the day-to-day expenses that people face.

These new tax credits would assist low- to middle-income people, and build upon this government’s other initiatives, including the Ontario Child Benefit, introduced in 2007, the Ontario Senior Homeowners’ Property Tax Grant, introduced in 2009, and the proposed Children’s Activity Tax Credit.

A new web portal will soon make it easier for people to find out what tax credits they can claim.

CHILDREN’S ACTIVITY TAX CREDIT

A new Children’s Activity Tax Credit has been proposed to help parents with the cost of enrolling their children in activities that encourage them to be healthy and active. This would be the only tax credit in Canada that provides for a broad range of children’s activities. Parents would be able to claim up to $500 of eligible expenses and receive up to $50 per child per year (up to $100 per child with a disability) towards the cost of these activities. Parents would be able to claim this credit in addition to the federal children’s fitness tax credit.

The federal children’s fitness tax credit is a non-refundable tax credit — it reduces the amount of income tax a person pays. People who do not earn enough to pay income tax do not benefit from non-refundable tax credits. Ontario’s proposed credit would be refundable so people would get the credit even if they pay no income tax. This would allow more lower-income families to benefit.

OPENING ONTARIO TO JOBS AND GROWTH

The Plan:

In addition to helping families through tax relief and the Ontario Clean Energy Benefit, the government is making Ontario a more attractive place for businesses to invest and create jobs. Over three years, the Ontario Tax Plan for Jobs and Growth is providing more than $4.8 billion in tax relief for businesses.

The Results:

The Tax Plan for Jobs and Growth announced in the 2009 Budget replaced the Retail Sales Tax (RST) with the Harmonized Sales Tax (HST) on July 1, 2010 and delivers both permanent and temporary tax relief to people and businesses. See Chapter 5: Tax and Pension Modernization for additional details on the tax relief measures for people and businesses.

The replacement of the RST with the HST has reduced operating costs for businesses in Ontario. The RST applied to many business purchases and, as a result, multiple layers of sales tax were built into the cost of these purchases. The HST removes the sales tax on business inputs, providing a cost saving to businesses. The HST also simplifies tax compliance for businesses by streamlining tax administration and eliminating over 5,000 pages of outdated rules, regulations and operating procedures. The move to a single tax administration with one set of forms, one payment and one point of contact for audits, appeals and taxpayer services will save businesses more than $500 million a year.

These cost savings allow businesses to lower their prices for Ontario consumers and to better compete for more sales abroad. These changes, combined with other tax relief for businesses, encourage new investment and create jobs.

In today’s global economy, many businesses can operate almost anywhere in the world. In order to compete with other jurisdictions for investment and jobs, Ontario must have a tax system that encourages businesses to locate here. The HST, together with other tax changes, will cut Ontario’s marginal effective tax rate on new business investment in half by 2018, making Ontario one of the most tax-competitive jurisdictions in the industrialized world for business investment, leading to more jobs.

A study that examined the experience in the Atlantic provinces that adopted the HST in 1997 found that investment in machinery and equipment was 12.1 per cent higher relative to other provinces.¹ In Ontario, the HST will also contribute to the strong growth in business investment in machinery and equipment expected between 2010 and 2013.

Other studies from around the world have confirmed that lower corporate tax rates result in higher investment, which in turn leads to a higher demand for workers and higher incomes for working people.²

The Tax Plan for Jobs and Growth will lead to similar benefits for Ontarians. It is estimated that by 2020, the reduction in the tax burden on new business investment due to the tax plan and other tax changes will increase investment in the province by $47 billion, leading to almost 600,000 net new jobs and higher annual incomes of up to 8.8 per cent.³

INFRASTRUCTURE INVESTMENTS

Investment in public infrastructure is a key component of the government’s Open Ontario plan and an essential building block of the economy. Infrastructure investments are improving Ontario’s schools, hospitals, roads and bridges. They enhance the quality of life for citizens, improve public services, reduce business costs and stimulate the economy by preserving and creating jobs.

The Plan:

The government is investing approximately $28 billion in 2009–10 and 2010–11 to stimulate economic growth. These investments include short-term stimulus projects as well as major new investments to enhance Ontario’s economic and community-based infrastructure.

Ontario’s communities are benefiting from infrastructure investments in clean water, health, education, transportation, culture, tourism, sports and recreation, and social and affordable housing.

The Results:

Significant progress was made over the summer construction season on the government’s stimulus investments. For example, the average percentage of project completion for the Infrastructure Stimulus Fund rose from 42 per cent in June 2010 to 66 per cent in October 2010. Over 3,300 short-term stimulus projects are now complete.

Infrastructure investments are making a difference in Ontario:

• Improving Community Infrastructure: In 2009–10, the provincial and federal governments jointly committed more than $110 million to 55 community centre and community service infrastructure projects through the Infrastructure Stimulus Fund. Projects include the rehabilitation of the Chaplin Family YMCA in Cambridge, which is improving the energy efficiency and longevity of a facility that serves the family recreation needs of this community.
• Improving Health Care: Construction is in progress or completed for more than 100 major hospital projects. For example, the new Sudbury Regional Hospital, one of 18 new hospitals built or underway since 2003, brings together all acute and rehabilitation services from three sites into one location.
• Improving Ontario’s Schools: Infrastructure investments are making schools better places to learn. Since 2003, 400 new schools have been built with 100 more in progress. In addition, more than 17,000 school renewal projects, including replacing roofs, windows and boilers, are completed or underway.
• Improving Postsecondary Facilities: In 2009–10, the federal and provincial governments committed approximately $1.5 billion in joint stimulus funding for 49 infrastructure projects at Ontario’s colleges and universities. These projects include a new library and academic facility at Centennial College’s Progress campus and a new instructional and laboratory project at the University of Toronto Mississauga. This and other stimulus investments are modernizing campuses and creating more than 36,000 spaces at postsecondary institutions across Ontario.
• Improving Ontario’s Highways: Ontario highway investments have created or rehabilitated more than 3,500 kilometres of new and existing roads since 2004. This is roughly the same distance as the drive from Ottawa to Calgary. Recently completed projects include four-laning of a nine-kilometre section of Highway 11 from Katrine to Burk’s Falls — a $126 million investment in a key gateway corridor to northern Ontario — and the opening of 16 kilometres of high-occupancy vehicle lanes on the Queen Elizabeth Way between Trafalgar Road in Oakville and Guelph Line in Burlington.

INVESTING IN KNOWLEDGE AND SKILLS

The Plan:

A well-educated workforce drives the province’s economic growth and competitiveness. That is why education, from early learning through elementary, secondary and postsecondary, is a top priority for the McGuinty government. Ontario’s colleges, universities and training institutions play a critical role in equipping people for the jobs that will ensure future prosperity. They also open the province to the world, attracting students from every corner of the globe, which has significant economic benefits in a knowledge-based economy.

SECURING OUR RETIREMENT FUTURE

The government is committed to strengthening the retirement income system and helping Ontarians secure a stable retirement. More Ontarians are concerned about their retirement savings because they saw how the global recession affected their investments. At the same time, fewer working Ontarians have a pension plan. Many Ontarians are not saving enough to maintain their standard of living in retirement and are feeling insecure and uncertain about their financial future.

The Plan:

Ontario has a comprehensive plan to improve retirement income security for Ontarians. The plan consists of three key elements:

• supporting a modest, fully funded and gradual increase to the Canada Pension Plan (CPP) to ensure that working Canadians have an improved pension. The Province is requesting feedback on possible approaches to a modest expansion of the CPP by November 29, 2010. This feedback will help inform Ontario’s position at the federal–provincial–territorial finance ministers’ meeting on December 20, 2010;
• working with other governments and pension partners to develop new and innovative ways to expand the range of institutions that can set up pension plans and the range of people who can access them, including the self-employed; and
• modernizing Ontario’s Pension Benefits Act to enhance reliability, security and affordability of employment-based defined benefit pension plans.

The Results:

The Securing Pension Benefits Now and for the Future Act, 2010 proposes changes that would strengthen pension funding rules, clarify pension surplus rules and ensure a more sustainable Ontario Pension Benefits Guarantee Fund. It builds on the first phase of reforms that were passed unanimously by the legislature in May 2010 (the Pension Benefits Amendment Act, 2010). These changes constituted the first major pension reforms in over 20 years.

PROTECTING CONSUMERS THROUGH STRONG FINANCIAL REGULATION

Ontario is moving ahead with plans to protect consumers and investors and to ensure strong and competitive financial markets. Canada’s financial system, largely based in Ontario, has emerged as a world leader, according to the latest reports by the International Monetary Fund and World Economic Forum. Effective federal and provincial regulation and prudent risk management contributed greatly to market safety and stability.

The Plan:

The government is modernizing Ontario’s financial regulation by protecting consumers and investors, strengthening regulatory requirements to bolster the soundness and stability of financial markets, and adopting flexible and effective global regulatory practices.

• The federal government and interested provinces and territories are working together to establish a Canadian Securities Regulator. To meet the needs of Canadian capital markets, the national regulator should be centred in Canada’s financial capital, Toronto.
• The government is proposing amendments to the Ontario Securities Act to allow the Ontario Securities Commission (OSC) to develop and implement a robust regulatory framework for over-the-counter (OTC) derivatives. These amendments would allow for new rules specifically designed for OTC derivatives and would also include derivatives within the scope of existing insider-trading offences.
• With the proposed amendments to the Act, Ontario is providing regulatory leadership, promoting fair and efficient capital markets, enhancing investor protection and bringing its legislation in line with Canada’s international commitments. The proposed framework is also consistent with the federal government’s draft Canadian Securities Act and would facilitate a seamless transition to the regulation of this vital market at the national level.
• This legislative initiative will help promote Ontario’s growing stature as a well-regulated, world-class financial market.
• Additional proposed amendments to the Ontario Securities Act would provide for regulatory oversight of credit rating agencies and strengthen the oversight of alternative trading systems (ATSs), which are securities marketplaces that perform some of the functions of an exchange.

• On September 1, 2010, the government introduced key reforms to Ontario’s auto insurance system. The main goals of the reforms are to promote greater price stability, ensure more premium dollars go towards treating injuries, and create a less complex auto insurance system. This fall, the government will be enhancing consumer protection by strengthening the Financial Services Commission of Ontario’s ability to ensure fairness in the rules that auto insurers use to choose whom they will insure.

The Results:

• The OSC Investor Advisory Panel is now up and running and it has begun commenting on OSC initiatives to help ensure that the work of the Commission is informed by the perspectives of a broad range of investors.

• The OSC and the Investor Education Fund have been actively supporting the Ministry of Education’s plans to introduce financial literacy in Ontario’s curriculum, commencing in September 2011. These new classroom learning opportunities will help Ontario’s youth develop critical money-management skills, ensuring a financially literate population and well-educated workforce.
• Ontario’s financial services sector remained resilient during the recession, increasing its employment by 3.3 per cent in 2009. In comparison, employment in the U.S. financial sector fell by over 4 per cent.
• The government has kept growth in auto insurance premiums low since 2003. Over the past seven years, average premium growth is below inflation over the same period. With the reforms that took effect this fall, Ontario drivers are now in a better position to customize their auto insurance coverage to suit their own circumstances. Ontario’s standard auto insurance medical and rehabilitation benefits remain the most generous in Canada when compared to other provinces with similar auto insurance marketplaces.
• While the government anticipates that rate stabilization will take some time, recent information indicates that this is taking place. Average auto insurance rate approvals have decreased for two consecutive quarters, decreasing by more than 1 per cent in the second quarter of 2010 and by almost 0.1 per cent in the third quarter of 2010.

SUPPORTING ONTARIO PROSPERITY AND JOBS

Through the Open Ontario plan, the government has supported key sectors in the economy to encourage jobs and growth. These supports have improved competitiveness and will help to ensure long-term prosperity.

PUBLIC TRANSIT

The Plan:

The Province is investing heavily in public transit. By the end of 2010–11, the Province will have provided $10.8 billion in support including $4.7 billion for GO Transit since 2003. The Province is committed to making further significant investments in the Metrolinx Regional Transportation Plan and other municipal transit priorities. These projects will ease traffic congestion, thereby improving the movement of people and goods on Ontario’s roads and highways.

The Results:

• GO Transit commuters are benefiting from expanded services. In 2007, rail service to Barrie resumed after being cancelled in 1993. In addition, GO Transit bus service to Peterborough, Niagara and Kitchener–Waterloo has been expanded.
• Buses began running in Brampton’s Queen Street corridor in September 2010, as part of the first phase of the Züm bus rapid transit service.
• Work has begun on a number of major Greater Toronto Area transit projects, including the Toronto–York Spadina Subway Extension, York vivaNext bus rapid transit and Mississauga bus rapid transit project. In addition, work is underway on projects in Toronto that support Metrolinx’s Regional Transportation Plan, including construction on the Sheppard Light Rail Transit line and acquisition of tunnel-boring machines for the Eglinton Crosstown Rapid Transit project.
• The PRESTO electronic fare card is rolling out, with more than 14,500 PRESTO cards being used in the Greater Toronto and Hamilton Area for over 900,000 trips as of October 2010.
• Toronto is one of the few remaining metropolitan cities without a rail link to its airport. Construction is underway on the GO Georgetown South Corridor to support the Air Rail Link that will connect Union Station to Toronto Pearson International Airport and will be in place for the 2015 Pan/Parapan American Games.
• Funding is committed for large rapid transit projects in Ottawa and the Kitchener–Waterloo region.

Jobs and Economic Growth in Northern Ontario

The Plan:

Ontario is committed to helping strengthen and increase prosperity in the North. The government is promoting economic growth with new investments to help all northern Ontarians participate in and benefit from emerging economic development opportunities.

The Results:

The government is taking action to help build opportunities in the Ring of Fire, an area of the Far North with potentially large deposits of minerals like chromite, copper, nickel and platinum. On September 30, 2010, a Ring of Fire Coordinator was appointed. The Coordinator will work with northerners, Aboriginal communities and the mining industry to help facilitate new mining development.

The Far North Act, 2010, when proclaimed, will support growth in the region through land use planning that enables both economic development and the protection of approximately 225,000 square kilometres of public lands. First Nations will work with Ontario to identify the areas to be protected and the law will require First Nations’ approval of community-based land use plans.

AUTO SECTOR

The auto industry is a key driver of Ontario’s economy. It includes major vehicle assemblers and more than 400 parts manufacturing plants, accounting for over 90 per cent of the total Canadian automotive industry. There are five automakers with 12 assembly plants and one heavy-truck manufacturer in the province. Ontario builds more vehicles than any other province or state in North America.

The auto industry was hit hard in the global recession. It is now on the path to profitability, as production volumes increase. For the first 10 months of 2010, total vehicle production in Ontario rose by 46 per cent, compared to the same period last year. Ontarians are expected to produce about 1.9 million vehicles in 2010.

The Plan:

Ontario is a leading player in the North American auto industry and is taking steps to remain a leader in the future. The Province invested $4.6 billion in General Motors and Chrysler to preserve at least 85,000 jobs and ensure the future global competitiveness of a sector that directly and indirectly supported about 400,000 Ontario jobs in 2008.

Ontario was the only sub-national jurisdiction in North America to make these investments. This action was necessary to save thousands of jobs and avoid significant permanent damage to Ontario’s economy and communities.

The Results:

• General Motors (GM) has a significant production footprint in Ontario and continues to invest in the province. On October 19, 2010, GM recalled about 600 workers and started a third shift at the Oshawa assembly plant. Vehicle production at the GM plants is up by more than 60 per cent as of October 2010 compared to the same period in 2009. Also, the company has recently added capacity at its plant in Ingersoll. General Motors’ vehicle production, capital expenditure, and research and development commitments to Canada remain, even if Ontario and Canada sell their shares.
• Chrysler vehicle production in Ontario is up by 76 per cent compared to the same period last year.
• On August 12, 2010, Chrysler announced a $27.2 million investment in its Etobicoke Casting Plant, which will retain 280 jobs.
• On April 20, 2010, GM repaid the outstanding loan portion of its support from the U.S., Canadian and Ontario governments.
• Toyota, Honda and Ford, which employ approximately 19,000 people in Ontario communities, have increased production from the previous year, which will keep more people working.

FINANCIAL SERVICES

The financial services sector is a critical engine and a key job creator in Ontario’s economy. Toronto is home to the head offices of globally successful banks, insurance companies, and investment and pension funds. It is the third-largest financial centre in North America based on employment. Since 2003, employment in the financial services sector grew to 365,000 jobs in 2009, an increase of 60,000 jobs. The sector supports an estimated 280,000 ancillary jobs, including high-paying business services jobs (such as software design).

The Plan:

The Ontario government is partnering with leaders in the financial services industry through the Financial Services Leadership Council to implement a plan to improve the sector’s competitiveness and create thousands of high-paying jobs. This is part of the Open Ontario plan, which includes helping Toronto become one of the top 10 financial centres in the world. Toronto currently ranks twelfth based on the Global Financial Centres Index.

The Results:

• In the 2010 Budget, the government provided support to the Toronto Financial Services Alliance to help implement a government-industry plan to grow Ontario’s financial sector and create jobs.
• Ontario is providing $10 million for the Global Risk Institute in Financial Services (GRi), which will be a non-profit entity comprising industry leaders, regulators and members of the academic community. Announced in September 2010, GRi will build on Toronto’s status as a premier financial services centre.
• Ontario has established the Centre of Excellence in Financial Services Education to build on the province’s strong knowledge and skills base. It is working to attract foreign students and develop the best financial services sector talent out of Ontario’s highly skilled and diverse workforce.

Section B: Managing Responsibly

HIGHLIGHTS

• 2010–11 deficit projection is $18.7 billion, down from the $19.7 billion forecast in the 2010 Ontario Budget. This represents an almost 25 per cent improvement from the $24.7 billion deficit forecast a year ago for 2009–10.
• The government has laid out a realistic, responsible plan to cut the deficit in half within five years of its highest point and to eliminate it in eight years.
• Proceeds from the government’s proposed agreement with Teranet would be used to reduce Ontario’s debt.
• The government has introduced a number of measures to improve accountability and transparency within the Ontario Public Service (OPS) and across the broader public sector.
• To achieve its fiscal targets while protecting public services, the government:
  • reduced consulting expenditures by 50 per cent since 2002–03;
  • is on track to reduce the size of the OPS by five per cent by March 31, 2012 through attrition and other measures;
  • reduced travel expenses by 26 per cent between 2008 and 2009;
  • has taken action to restrain compensation in the OPS and in the broader public sector that would help redirect approximately $2 billion towards sustaining public services over two years;
  • extended the pay freeze for Members of Provincial Parliament from one year to three years;
  • revised the scope and timing of some capital investments;
  • introduced additional accountability measures to ensure taxpayer dollars are used wisely; and
  • reduced the prices of most generic drugs listed under the Ontario Public Drug Program by 50 per cent, to 25 per cent of the cost of the comparable brand-name product.

A REALISTIC AND RESPONSIBLE PLAN

The government has a record of achieving fiscal results ahead of schedule. It eliminated the $5.5 billion deficit it inherited and posted three consecutive balanced budgets.

The current deficit projection for 2010–11 of $18.7 billion is down from the $19.7 billion forecast in the 2010 Budget. The current projection represents an almost 25 per cent improvement from the $24.7 billion deficit forecast a year ago for
2009–10.

The Province remains on track to meet its medium-term fiscal targets and achieve its plan to cut the deficit in half within five years of its highest point and eliminate it in eight years.

The improvement in the 2010–11 fiscal forecast is mainly due to an increase in revenue resulting from stronger economic growth and the government’s prudent fiscal and expenditure management. Over the past seven years, the government’s responsible approach has enabled Ontarians to benefit from ongoing investments in education, health care and infrastructure — even during the difficult 2008 global economic recession.

Since 2003, the government has continuously worked to modernize the delivery of public services, create administrative efficiencies, and improve accountability and transparency to achieve better value for money.

In 2007, the government announced that over four years it had identified savings of $806 million, by consolidating administration, streamlining processes, making better use of technology, and establishing ongoing cost-avoidance and cost-reduction initiatives. In 2008–09, Ontario’s spending per capita on general government services was $134 per person. This is the second lowest among the provinces and 28 per cent lower than the $186 average per person spent across all provincial governments.

Building on these results, as part of its 2010 ongoing comprehensive review, the government has identified an additional $260 million in efficiency savings.

The government remains committed to managing growth in spending. These actions allow the Province to support the Open Ontario plan investments in knowledge and skills, health care, the green economy and the Poverty Reduction Strategy.

MODERNIZING ONTARIO’S ELECTRONIC LAND REGISTRATION SYSTEM

The Province of Ontario is the first jurisdiction in the world to provide electronic registration of land-related documents. Electronic land registration enhances security, improves the accuracy and integrity of the database, and provides an electronic audit trail.

The government has negotiated the principal terms of a proposed agreement to renew its long-standing business partnership with Teranet Inc. by extending Teranet’s exclusive licences to provide electronic land registration and writs services in Ontario.

Teranet Inc., which is owned by Borealis Infrastructure, was formed to provide electronic land registration services for the Province in 1991. The Province has negotiated the principal terms of a proposed agreement with Borealis to continue this long-standing business partnership by renewing, for an additional 50 years, Teranet’s exclusive licences to provide electronic land registration and writs services in Ontario.

Under the proposed agreement, Borealis would provide the Province with an upfront payment of $1 billion, which would be used to reduce the Province’s debt. Reducing borrowing needs would lower interest costs, and lowering interest costs would create more fiscal room. Using the Borealis payment to reduce debt would also help protect the fiscal plan against any future rise in interest rates. Beginning in 2017, the Province would also receive annual royalty payments from Teranet, which are expected to be approximately $50 million in 2017–18 and to grow in future years.

The proposed agreement would also specifically provide for Provincial control over the fees charged by Teranet for statutory land registration and writs services. The proposed agreement does not provide for any fee increases for five years. In 2015, certain fees would be increased to equalize fees for searches done in land registration offices and those done remotely, and certain fees would be adjusted by 50 per cent of inflation based on the consumer price index. The first adjustment would be cumulative, based on 50 per cent of inflation over the previous five years, with future adjustments occurring annually. Because these adjustments would be based on only 50 per cent of the full rate of inflation, fees would not rise as quickly as inflation and thus decline in real terms over time.

The Province would also continue its oversight of the integrity of the Electronic Land Registration System data. In addition, the proposed agreement includes a performance framework and commitments by Teranet to ensure Ontario’s Electronic Land Registration System remains modern, user friendly, reliable and secure.

This proposed agreement would ensure that high-quality services continue to be delivered to the public and that the electronic service offerings continue to be enhanced and modernized.

The proposed transaction is subject to certain final closing conditions and is expected to close in late 2010.

STRENGTHENING ACCOUNTABILITY AND TRANSPARENCY

The Plan:

Since 2003, the government has introduced a number of measures to improve accountability and transparency within the OPS and across the broader public sector. More recently, Premier McGuinty committed to implementing additional accountability measures to ensure taxpayer dollars are used wisely.

The Results:

• Effective April 1, 2010, the revised Travel, Meal and Hospitality Expenses Directive provides stronger and easy-to-follow expense rules for staff at ministries and 22 of the largest government agencies. The directive raises the standard of oversight by requiring those government entities to adhere to consistent rules and provide online disclosure of expenses to the public.
  • The public now has access through the Ontario.ca website to a listing of all the travel expenses for the Premier, Cabinet Ministers, Parliamentary Assistants, political staff and senior management in the OPS and at the largest agencies.
• The government has introduced new legislation that would, if passed, bring in a higher standard of accountability for hospitals, Local Health Integration Networks (LHINs) and the broader public sector, around the use of external lobbyists, procurement and expenses. As a result:
  • rules would be put in place to ensure fair, open and transparent expense and procurement rules in broader public-sector organizations;
  • freedom-of-information legislation would be expanded to cover hospitals;
  • hospitals and LHINs would be required to post expenses of senior executives online and report annually on their use of consultants; and
  • executives at hospitals and LHINs could see reductions in pay, should they fail to comply with the requirements of the proposed act.

MANAGING HEALTH CARE COSTS WHILE PRESERVING FRONT-LINE SERVICES

Ontario Drug Strategy

The Plan:

Since 2006, the government has implemented reforms under the Ontario Drug Strategy to improve the value for money that Ontarians pay for prescription drugs.

The Results:

• As announced in June 2010, the prices of most generic drugs listed under the Ontario Public Drug Program have been reduced by 50 per cent, to 25 per cent of the cost of the comparable brand-name product.
• The elimination of so-called professional allowances and rebates paid by generic drug companies to pharmacies that drove up the price of prescription drugs.
• Expedited approval processes to add new generic drugs and more effective brand-name drugs to the list of products covered under the Ontario Public Drug Program.

Excellent Care for All Strategy

The Plan:

Under the Open Ontario plan, the government committed to improving quality and accountability in the health care system and to focusing on patient care by promoting effective health care services based on medical evidence.

The Results:

• Based on expert recommendations, the government is reducing Ontario Health Insurance Plan expenditures in areas where medical evidence has shown services to be clinically ineffective or inappropriate. For example, the government is proposing to curb unnecessary vitamin D testing for otherwise healthy people.
• In June 2010, the Excellent Care for All Act, 2010 received Royal Assent. As a result:
  • hospitals are now required to develop annual improvement plans. The compensation of health care executives will be tied to the achievement of performance improvement targets under these plans, making them more accountable for improving patient care; and
  • the mandate of the Ontario Health Quality Council has been expanded to further promote evidence-based care in the health care system. The council will develop clinical practice guidelines and provide recommendations on appropriate funding for health care services.

REDUCING THE SIZE OF THE ONTARIO PUBLIC SERVICE

The Plan:

The government is committed to making the OPS more efficient, while recognizing the importance of the services it delivers to the citizens of Ontario. In the 2009 Budget, the government announced it would reduce the size of the OPS by five per cent over three years through attrition and other measures.

The Results:

• The size of the OPS has been frozen at 68,645 full-time equivalent staff.
• The government is on track to reduce the size of the OPS by five per cent by March 31, 2012:
  • the federal government has agreed to make comparable job offers to all OPS employees affected by the move to the Harmonized Sales Tax (HST), reducing the number of positions by 1,253; and
  • federal administration of the HST will save the Province approximately $100 million annually in compensation and overhead by 2014–15.

COMPENSATION MEASURES

The Plan:

The 2010 Budget announced actions to manage compensation costs, the largest single expense for government. Currently, 55 per cent — or more than $50 billion — of all government program expense goes to compensation, either directly or through transfers.

As a result of the government’s approach, provincial public-sector settlement trends have fallen since the Budget to below the averages in the private sector as well as the municipal and federal public sectors.

Ontarians value and appreciate the contributions of those who deliver their public services. The compensation restraint measures that the government has taken ask employers and employee groups in the public sector to work together and do their part to sustain public services.

The Results:

• The freeze on salaries for Members of Provincial Parliament has been extended for a total of three years.
• The compensation structure of non-bargaining political and Legislative Assembly staff has been frozen for two years.
• For non-bargaining public-sector employees, legislation has been passed to freeze compensation for two years.
• The government’s actions to restrain compensation in the OPS and in the broader public sector would help redirect approximately $2 billion towards sustaining public services over two years.
• For bargaining parties, existing collective agreements have been, and will continue to be, respected. The government has brought unions and employers together to seek ways of achieving collective agreements with two years of net zero increases in compensation. As a result of these consultations, employers and unions have a much better understanding of the fiscal challenge faced by the Province and the government has a better understanding of employer and union positions.
• The fiscal plan provides no funding for incremental compensation increases for the first two years of any future collective agreements.

It is now up to bargaining agents and employers to ensure that the progress made together to restore services in hospitals, schools and other public services is maintained.

BALANCING INFRASTRUCTURE PRIORITIES

The Plan:

The government recognizes the importance of continuing to balance investments in infrastructure to help build a stronger economy with the need to be fiscally responsible. To ensure the right balance between infrastructure priorities and deficit reduction, the government has committed to undertaking a comprehensive review of capital spending.

The Results:

• The 2010 Budget initiated this process through revising the scope and timing of some capital investments by:
  • working with Metrolinx to phase construction of major transit projects in its Regional Transportation Plan over 10 years instead of eight in order to realize $4 billion in appropriation savings;
  • delaying some investments in government office space by five years, resulting in appropriation savings of over $1.4 billion;
  • eliminating the Ontario Bus Replacement Program and providing more flexibility in the criteria of the gas tax funding program to include replacement bus purchases; and
  • delaying the construction of the Toronto West Courthouse by one year, resulting in appropriation savings of $130 million over four years.
• The Ministry of Infrastructure has completed consultations with its government partners on the prioritization of investments and is currently evaluating potential options to delay, re-scope or cancel lower-priority initiatives. The comprehensive review will be completed before the end of 2010.

ONGOING COMPREHENSIVE REVIEW

As announced in the 2010 Budget, the government has continued a comprehensive review of all government programs and services. The review is working to ensure that the government’s resources are focused on delivering the programs and services that support:

• jobs and economic growth;
• access to high-quality health care and education; and
• clean and strong communities, including effective supports for the most vulnerable.

The goal of the review is to move resources from low-priority areas to high-priority ones and to move forward the Open Ontario plan.

To date, the review has identified over $260 million in potential savings through both programming and administrative expenditure reductions. Some recent examples of savings include:

• streamlining OntarioBuys investments to transformation projects that deliver supply chain efficiencies and focusing on policy, support and tools for hospitals, school boards and other public institutions to enhance accountability in procurement; and
• streamlining the Ethanol Growth Fund program, while ensuring the achievement of previously stated targets. The fund supports Ontario ethanol production for gasoline blending, for a more sustainable environment.

• ¹ Michael Smart, “Lessons in Harmony: What Experience in the Atlantic Provinces Shows about the Benefits of a Harmonized Sales Tax,” C.D. Howe Institute Commentary, C.D. Howe Institute, Issue 253, July 2007.
• ² For example, Wiji Arulampalam, Michael P. Devereux and Giorgia Maffini, 2009, “The Direct Incidence of Corporate Income Tax on Wages,” Working Paper 09/17, Oxford University Centre for Business Taxation; and Ruud A. de Mooij and Sjef Ederveen, “Taxation and Foreign Direct Investment: A Synthesis of Empirical Research,” International Tax and Public Finance 10, no. 6, 673–93, November 2003.
• ³ Jack Mintz, “Ontario’s Bold Move to Create Jobs and Growth,” School of Public Policy, University of Calgary, November 2009.