: 2013 Ontario Economic Outlook and Fiscal Review

Foreword

The Ontario government is introducing a new three-part plan to grow the economy and create jobs. This plan invests in people, builds modern infrastructure and supports a dynamic and innovative business climate.

We do so at a time when the world’s recovery from the global recession remains uncertain, causing many families to feel unsure about the security of their job and their financial future. We must work to expand opportunities for Ontario families and in order to do so must make new choices and take new decisions.

Premier Kathleen Wynne and our team have created a new plan to spur growth, create jobs and strengthen services that help families.

That plan involves three core priorities:

  • Investing in our people;
  • Building modern infrastructure; and
  • Supporting a dynamic and innovative business climate.

The government’s plan is focused and strategic.

By investing in our people, we will prepare them for the economy of today and tomorrow. By building more modern infrastructure, we will create jobs immediately and increase our competitiveness for the long term. And by fostering a dynamic business climate, we will help small and medium-sized businesses grow and attract larger companies to invest and create good Ontario jobs.

And with growth, we will have the revenue to balance our budget.

With hard work and discipline, Ontario families are helping our province emerge from the global recession. But there continue to be uncertainties for people and businesses. We now face decisions about the way forward that will test our priorities and our values.

There are those who believe we must cut deeply even at the risk of stalling growth and harming vital public services in order to eliminate the deficit even sooner than planned. Others would increase taxes recklessly, hurting job-creating businesses and Ontario families. Neither approach is sensible. Both approaches would hurt businesses and jeopardize public services on which Ontario families rely.

Our plan calls for a fair and responsible approach.

That will mean new strategic investments to spur growth, create jobs, strengthen services and help families. We remain on track to balance the budget by 2017–18.

However, should global economic conditions falter, causing revenue growth to fall further, our priority is clear — this government will continue to protect investments in jobs, growth and our families ahead of short-term targets.

Stronger growth and new jobs are the surest, fairest path to higher revenues and balanced budget.

Indeed, our three-part plan will be critical to fostering the jobs and growth necessary to both support Ontario’s families and generate the revenues necessary to eliminate the deficit.

Managing Responsibly

Continuing global economic uncertainty is slowing Ontario’s economic growth and reducing revenues. These external forces have led to lower revenues since the 2010 Budget, totalling $5 billion less than projected.

Your government, however, has taken firm, effective measures to reduce spending growth, which has allowed us to overachieve on deficit-reduction targets four years in a row — something no other government in Canada has accomplished.

Your government will continue to make strategic investments to grow the economy, which will eliminate the deficit and protect important public services on which Ontarians rely.

This approach is balanced, fiscally responsible and fair to Ontario families.

Growing the Economy and Reforming Public Services

As a matter of fairness and fiscal discipline, Ontario’s government has undertaken important reforms to control spending while maintaining and improving the quality of public services. Ontario has the lowest per-capita program spending in Canada. For two years running, growth in program expenditures overall has been held to less than one per cent. And last year, total government spending fell for the first time in more than a decade.

From this disciplined position, we must approach additional reforms to public services with careful attention to how Ontario families might be impacted. We will hold our spending firm. Vital public services are simply too important to the well-being of Ontario families. Cutting funding to health care and education — as some have done in the past and would suggest that we do again — would put our province’s schools, hospitals and jobs at risk.

Instead, we will maintain a rigorous approach to control program spending to reduce Ontario’s net debt-to-GDP ratio to the pre-recession level of 27 per cent.

In order to do so, we are currently moving forward with 60 per cent of the recommendations of the Commission on the Reform of Ontario’s Public Services, including increasing the use of nurse practitioners, offering online driver’s licence renewals and providing increased access to mental health consultations for youth through videoconferencing. Our next step will be to analyze all remaining recommendations, except those already ruled out because they do not align with the priorities of Ontario families.

Investing in People

The Ontario government’s plan will make new investments in our people its foremost priority. In challenging economic times such as these, the role of government is to provide families with the opportunity to realize their full potential and to ensure their access to vital public services. A healthy, well-educated population leads to a stronger economy.

Investing in people begins with education and health care. We will continue to invest in early learning to give our kids the best start in life. Our schools must be safe and well equipped. Our hospitals and home care must be effective and responsive to the needs of patients, especially our seniors and most vulnerable.

Your government continues to improve care in our province’s hospitals. More than 100 hospital projects have been built or are under construction across Ontario in communities such as Thunder Bay, London and Cornwall. To ease the critical transition from hospital to home, we are also investing substantially in home and community care services, particularly for our seniors.

The government is also helping seniors stay active, healthy and connected to the community. We are creating Ontario’s first-ever grants program dedicated solely to helping seniors participate in additional community activities and continue learning in areas like technology and financial literacy.

Canada Pension Plan

A fundamental priority for your government is retirement income security — especially for the middle class. Long-term savings and investment play a critical role. So too, governments must ensure a reliable and responsible retirement income system — one that evolves and responds to the practical realities of our times.

The Canada Pension Plan (CPP) is the foundation of the nation’s retirement income system. It is a program that has served generations of Ontarians well. The CPP has brought provincial and federal governments together in the common cause of supporting our seniors for nearly half a century. To enhance it for Ontarians, particularly for the middle class, we must make improvements now.

However, the federal government is resisting calls for improvement from provinces, from Premier Kathleen Wynne and from independent experts.

Your government is leading the way to secure a new agreement among provinces, territories and the federal government to enhance the CPP — to strengthen the benefits it provides. If an agreement cannot be reached, we will move forward with a “made in Ontario” solution.

Your government’s efforts to ensure retirement income do not conclude with CPP reform. We also recognize that ensuring a strong and stable retirement income system requires a comprehensive, long-term strategy and a range of tools. We will continue to work with Ontarians to provide more retirement savings options such as pooled registered pension plans. We will also work to assist those with workplace-based pension plans to ensure that these plans are sustainable and reliable over the longer term. For those who are accumulating retirement savings on their own, we will be vigilant in our effort to help reduce the costs associated with investing and consider options such as enhancing the oversight of financial advisers.

Helping Our Youth

To remain strong at home and competitive in the global economy, we must continue to support the efforts of our youth to gain the education they require, the skills they seek and the opportunities they deserve. This will help all Ontario families both in the near term and for the long run. Your government is taking specific actions to help youth.

Together, we are helping Ontario families cover the costs of postsecondary education. Many families work hard to send their kids to college or university. Our 30% Off Ontario Tuition grant helps families with those costs, and helps young people get the education they need to secure a brighter future. This grant helps more than 200,000 students every year pay for their education.

And, as part of our government’s plan to help create jobs and grow our economy, in the 2013 Budget, we announced a Youth Jobs Strategy to help young people find their way into the workforce. Over the next two years, 30,000 young people will gain the benefit of on-the-job workplace experience, introducing them to employers and offering them a head start on their future careers.

Fair Society

Ontario’s economy is strengthened when everyone has the opportunity to achieve their full potential. Strategic investments in education, health and income support help reduce reliance on social services, build the workforce and strengthen Ontario’s economy. While the minimum wage was frozen for a nine-year period before 2003, our government has increased it by 50 per cent to $10.25 per hour. We are currently awaiting recommendations on the appropriate timing and scale of future minimum-wage increases. We are also helping people get back into the workforce by removing barriers faced by social assistance recipients.

Our government recently increased access to French-language postsecondary education and services to help Ontarians prepare for future jobs.

And in order to reduce costs for consumers, we will consider changes to the Drive Clean program to ensure that it remains cost neutral over its lifetime.

Investing in Modern Infrastructure

The second part of our plan is to build more modern infrastructure, helping to drive economic growth and prosperity. Such an approach attracts private-sector investment and spurs the creation of good Ontario jobs.

By investing in our roads, bridges, highways and transit systems, we help to make our province safer, more competitive and more productive. Just as important, we boost the quality of life that families enjoy when they are able to spend less time trapped in traffic.

We need to invest the money necessary to put people to work and modernize our transit systems, roads, bridges, schools, hospitals and other important infrastructure projects.

To focus this effort, your government plans to create a special fund dedicated to the support of our province’s most pressing and important infrastructure projects. The Trillium Trust would receive revenue gains from asset sales, such as the sale of our interest in GM shares, and put that money to work by creating jobs and building an even stronger Ontario.

Building transit is an economic priority — we know that congestion costs our economy $6 billion annually. This merits specific attention and is already a cornerstone of your government’s approach to creating jobs and spurring economic growth. However, new innovative approaches are required to meet new challenges.

In addition to the work Metrolinx has done devising new revenue tools, Ontario would be the first province in Canada to develop and sell “Green Bonds.” The proceeds from these financial instruments would finance environmentally friendly infrastructure projects across our province — in communities of all sorts and sizes — while offering Ontarians an innovative way to contribute to the province’s future and earn a return on their money. The new bonds would capitalize on the Province’s ability to raise funds at competitive interest rates and serve as a tool to address critical infrastructure needs, create jobs and strengthen the economy.

Your government is also investing more than $35 billion over the next three years in capital projects that increase Ontario’s competitiveness and productivity. These investments will help create and support more than 100,000 jobs on average per year and make Ontario’s economy stronger for years to come.

Communities across the province will benefit from the building and improvement of roads, bridges and transit systems as well as schools and hospitals. These will be modern facilities equipped and constructed to respond to tomorrow’s demands, including the effects of climate change and extreme weather.

All regions will benefit from this enhanced focus on modernizing our infrastructure. A special fund was launched to continue to meet the unique needs of small, rural and northern municipalities. The government is looking at details of what a permanent fund would look like.

Your government will also work to ensure that these infrastructure projects are completed on time and on budget, with efficiency and focus. Already, Infrastructure Ontario, through its alternative financing and procurement (AFP) model, has helped reduce costs and risks to Ontario in many major projects. New projects set to be developed through AFP include the Eglinton Crosstown, Burlington’s Joseph Brant Hospital, Cambridge Memorial Hospital and University of Ottawa Heart Institute.

This model has been a success. Now we will build on its strengths and enhance it with provisions to increase the number of Ontario-based companies that participate in the construction of AFP projects.

Over the last eight years, Ontario companies have developed world-class expertise in the AFP model. As more countries see the value of this approach, Infrastructure Ontario will work with Ontario’s international trade offices around the world to export the expertise of our construction companies, engineers, financial services industry and architects.

Dynamic and Innovative Business Climate

Our plan’s third priority is to foster a dynamic and innovative business climate. Despite the uncertainties in the global economy, the fundamentals of Ontario’s economy are strong and our industries are well positioned to take advantage of new opportunities as they arise.

In order to attract more investment, your government has created a stable and competitive business climate for jobs and growth by encouraging investment with favourable tax policies such as eliminating the Capital Tax and lowering Corporate Income Tax rates. This attracts prosperity, spending and hiring. Your government also recently introduced legislation to cut the Employer Health Tax for 60,000 small businesses. With this change, almost 90 per cent of Ontario businesses would not pay this tax. This would help small businesses compete and grow across our province. That is why we urge all parties in the legislature to pass this Bill as soon as possible.

Jobs of Tomorrow

There is a heated competition among jurisdictions to attract the jobs and industries of tomorrow. Ontario is committed to succeed in this effort on behalf of the countless families who will rely on these good, well-paying jobs in the future.

As the government works to develop important sector strategies for Ontario industries, it will take targeted measures to encourage new investments from global information and communications technologies (ICT) companies.

Aerospace is another example of a sector that is increasing its presence in Ontario, creating good, well-paying jobs. To further accelerate this success, your government will work with partners to offer enhanced training for this sector. For example, Centennial College will partner with Bombardier, Canada’s leading aerospace manufacturer, on a new facility at Downsview Park.

In addition, Niagara College will expand its existing advanced manufacturing program to serve more businesses.

These initiatives will help create the next generation of manufacturing in the province.

Two months ago, Ontario opened its first law school and school of architecture in more than 40 years — both in northern Ontario. To continue helping young people find their future careers, Lakehead University in Thunder Bay opened its law school and Laurentian University in Sudbury opened its school of architecture.

Ontario also has an innovative agri-food industry that supports more than 740,000 jobs across the province. We have recently proposed a Local Food Act that, if passed, would celebrate and support the good things grown, harvested and made in Ontario.

To encourage entrepreneurial activity, we are also reinvesting in Communitech, an innovation hub that anchors the Waterloo Region’s vibrant technology cluster. Through targeted mentorship and access to seed investment, Communitech will help to grow Ontario technology companies into global players.

More Competitive Businesses

Your government wants to help businesses become even more competitive by encouraging them to invest in new machinery and equipment. Recent research shows that many companies are not taking advantage of potential opportunities to innovate, improve productivity and expand.

We will consider measures, including some taken in other places in the world to promote capital investment — including changes to research and development (R&D) tax credits to reward incremental R&D spending and a new “pay or play” incentive where a special corporate tax could be earned back through investments in new equipment, R&D or training.

Your government will also partner with industry to measure and report investments in innovation, training and technology, and showcase top performers against international benchmarks.

Your government will take targeted measures to encourage new investments from global companies with strength in IT, manufacturing and R&D. And we will continue to capitalize on our emerging growth opportunities at home and around the globe.

Our government is also helping communities through its economic development funds:

For example:

  • In North Bay, the Northern Ontario Heritage Fund invested in Cementation, creating 10 jobs;
  • In Kingston, the Eastern Ontario Development Fund invested in MetalCraft Marine, creating nearly 40 jobs; and
  • In Woodstock, the Southwestern Ontario Development Fund invested in North American Stamping Group, creating almost 50 jobs and protecting 210.

The Need for a Committed Federal Partner

Building a prosperous and fair society requires collaboration among all orders of government. The results of successful partnerships are making a positive difference to Ontarians.

Unfortunately, in an effort to balance the federal budget, the federal government has been making a series of changes to programs and funding that negatively affect Ontario and other provinces.

These decisions often involve cutbacks in financial support and offload many responsibilities onto provinces and territories without proper consultation or compensation, including in such areas as public transit, skills training for workers, and support for our mining sector in the north and the Ring of Fire.

The federal government is announcing new immigration allocations to provinces through the Provincial Nominee Program. An increase would be a positive step forward. Our allocation has been too low and we have not had the same flexibility in the program as other provinces to meet changing labour market needs.

We need a committed federal partner to work with us to enhance the quality of life for all Ontario individuals and the competitiveness of Ontario’s businesses.

Conclusion

This province and its people are stronger when we work together as One Ontario — spurring economic growth, creating new jobs, strengthening public services and helping our families.

Your government has a fair and responsible approach to pursue precisely this path. By investing in our people, building new and more modern infrastructure, and fostering a dynamic business climate, we can achieve even greater prosperity in Ontario.

We remain on track to balance the budget by 2017–18, but we will make growing the economy and protecting vital public services our top priority.

We cannot cut our way to prosperity. Nor can we tax our way to growth.

As Ontarians, we will not create false divisions between employers and employees; rural and urban; north and south.

We will work together as One.

Your government knows that we must invest strategically in our people, in our infrastructure, and support a dynamic and innovative business climate, particularly in an uncertain global economy, to promote growth that helps support Ontario families and helps to balance our province’s budget.

That is our plan for jobs and growth.

We are taking positive, practical steps to grow the economy and create jobs, to grow a stronger Ontario, One Ontario.

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The Honourable Charles Sousa
Minister of Finance