Foreword
Ontario is feeling the effects of the global economic crisis. The impact on economic growth, jobs and investments is directly affecting Ontario people, families, communities and businesses.
Job losses have hurt Ontario families. Communities have lost mills and factories. Government revenues are in decline.
The challenge is significant, but it’s one the people of Ontario will meet and overcome.
This Budget lays out the McGuinty government’s strategy to help families being hurt by the global recession today. But it does more than that. This Budget takes action to make Ontario more competitive. A strong, competitive economy helps families and businesses take advantage of the next generation of growth, and maintains and enhances the province’s cherished public services.
Five Years of Progress
This Budget builds on the progress the people of Ontario have made over the last five years.
Five years ago, the McGuinty government was elected on its commitment to improve the public services Ontarians need to reach their full potential — public education, universal health care, modern infrastructure, support for vulnerable citizens and a greener Ontario.
Five years ago, Ontario’s infrastructure, including schools and hospitals, was crumbling. Primary school classes were too large. More doctors and nurses were needed. Wait times for key medical procedures were too long. In addition, the government inherited a hidden $5.5 billion fiscal deficit.
Between 2003 and 2008, the province experienced strong revenue growth. This period of economic growth and prosperity allowed the government to make much-needed investments in key public services. The government managed its spending prudently, not allowing average expenditure growth to exceed revenue growth during this period. In fact, the government paid down debt, balanced three budgets in a row and maintained impressively low debt-to-GDP ratios.
Working together, Ontarians have made progress.
Today, there are more teachers in Ontario’s publicly funded schools and more students in colleges and universities.
More families have a family doctor and patients have shorter wait times for cancer surgery, CT scans and hip replacements.
The Ontario Child Benefit is providing children who grow up in low-income families with a better start in life.
Partnerships with cities and towns are building infrastructure, such as public transit, roads and bridges, across Ontario.
The government has invested in innovative companies and cut business taxes.
The government’s investments over the past five years have strengthened the key public services that matter most to Ontarians — and also strengthened the economy. Ontario’s well-educated workforce, universal health care system, modern infrastructure, support for the vulnerable, and lower business costs are enormous competitive advantages.
As early as 2006, the government had recognized that economic storm clouds were gathering. A slowing U.S. economy, rising oil prices and a higher-than-anticipated Canadian dollar began to affect growth — particularly in the manufacturing and resource sectors. The government was able to continue to support its priorities because of prudent fiscal management and its five-point economic plan to encourage growth and job creation through ongoing investments in skills and knowledge, infrastructure, innovation, key partnerships and lowering business costs.
However, the scope and scale of the global economic crisis that began in the fall of 2008 were both dramatic and unanticipated by all jurisdictions. This is hurting individuals, families and businesses. Governments —including Ontario’s — are facing extraordinary challenges. Revenues have significantly declined. Expenditure growth cannot continue at the same rate; spending must be smarter and better focused.
The McGuinty government is therefore determined to work with all its partners to preserve — and find new ways to deliver — the public services Ontarians want and deserve. The progress made over the past five years must be protected and enhanced.
Looking Ahead
The government will continue to build on the success of its five-point economic plan through investments in skills and knowledge, infrastructure, innovation, key partnerships and lowering business costs.
It will also do more, right now, for Ontario families and businesses affected by the global recession.
The government’s infrastructure investments will create more than 300,000 jobs over the next two years. Additional investments in skills training will do more for people who have lost their jobs.
But it is not enough to just create jobs in the short term or to help Ontario’s families and businesses simply get by.
The Province must also take action to build a stronger economy for tomorrow by accelerating its efforts to enhance Ontario’s long-term competitiveness.
To build Ontario’s economy for the future, the McGuinty government is proposing a comprehensive tax reform package.
To further boost Ontario’s competitiveness, this Budget also invests in initiatives to grow a greener economy, accelerate innovation and attract investment.
In the context of the current global economic crisis and industrial restructuring, these efforts to enhance Ontario’s competitiveness are more important than ever. Ontario can no longer rely solely on its traditional strengths and past competitive advantages. The world has changed. The new global economy will favour jurisdictions that are nimble, innovative and creative.
The government cannot control the external factors that are challenging families and businesses, but it can help mitigate their impact and position Ontario to take advantage of the next generation of growth. The government’s goal is to ensure that Ontarians have good, well-paying jobs that allow them to succeed and support their families — today and tomorrow.
Preserving and Creating Jobs Today
Infrastructure
Modern infrastructure creates jobs today and also builds jobs and opportunity for tomorrow. The government will invest $32.5 billion in infrastructure in the next two years, creating and sustaining an estimated 146,000 jobs in 2009–10 and 168,000 jobs in 2010–11 across Ontario.
Over the past two years, the Province has invested more than $18 billion in infrastructure, including a one-time $1.1 billion payment directly to municipalities through the Investing in Ontario Act. These investments supported more than 85,000 jobs in 2007–08 and are creating and sustaining more than 100,000 jobs in 2008–09.
Incentives to Enhance Skills Training and Create Jobs
The skills and knowledge of Ontarians are key to the success of the province’s economy. This Budget announces nearly $700 million over the next two years to expand skills training, including a proposed $50 million a year to enhance the Co-operative Education Tax Credit and to make Ontario’s Apprenticeship Training Tax Credit the most generous in Canada.
This Budget also increases funding for summer jobs by 57 per cent to nearly $90 million, helping more than 100,000 young people find summer employment during these difficult times.
Sector Support
The government is committed to partnering with key sectors to help them become more competitive, so they can continue to be major contributors to the Ontario economy. This Budget announces support for key Ontario sectors, including manufacturing, agriculture, forest products and mining, which will protect and create jobs.
Creating Jobs Tomorrow
A Comprehensive Tax Reform Package
The McGuinty government is proposing fundamental reform of the province’s tax system.
Starting in July 2010, subject to the approval of the legislature, Ontario would move to a single sales tax based on value-added taxation, which would boost investment and productivity.
To help Ontarians through the adjustment period, and to provide ongoing tax cuts, the McGuinty government would provide $10.6 billion in tax relief for people over three years. This includes a broad-based permanent income tax cut and payments totalling up to $1,000 for single parents and couples, and up to $300 for single people, which would be made between June 2010 and June 2011.
At the same time, the government is proposing $4.5 billion in business tax relief over three years, including a number of specific measures to help small businesses. These tax cuts would lead to job creation and economic growth.
The comprehensive tax reform package proposed in the Budget would, once fully implemented, cut Ontario’s marginal effective tax rate on new business investment in half, making Ontario one of the most competitive jurisdictions in the industrialized world for new investment. This would lead to more investment by business, creating jobs and leading to higher incomes for Ontarians.
This tax reform package is the single most significant action the government can take to strengthen the Ontario economy for the long term. Overall, taxes would be lower.
Growing the Green Economy
The government is committed to attracting new investment, creating new green-economy jobs and protecting the environment, including vigorously addressing climate change. In addition to the measures introduced as part of the proposed Green Energy and Green Economy Act, this Budget announces more than $300 million in new initiatives to support Ontario’s move towards a greener economy. These include a new Emerging Technologies Fund that will invest in clean technology, retrofits to public-sector buildings and a Green Jobs Skills Strategy.
Innovation
Capitalizing on Ontario ideas will be important to the province’s ability to emerge strongly from the global economic crisis. This Budget proposes additional tax relief and over $700 million to boost innovation, including $300 million in capital funds over six years for research infrastructure; $100 million over four years in additional operating funds for biomedical research; $50 million over four years to enhance the successful Innovation Demonstration Fund; and $10 million over three years to the Colleges Ontario Network for Industry Innovation to help small and medium-sized businesses with hands-on applied research, technology transfer and commercialization.
Ontario’s innovation success stories include the entertainment and creative sectors. To further support these sectors, this Budget proposes approximately $100 million annually to expand and enhance tax credits for film and television production, computer animation, book publishing and the creation of interactive digital media products.
Attracting Investment
Ontario’s ability to attract new investment is critical to job creation and economic prosperity. The Province will continue to expand Open For Business, its plan to make government faster and friendlier for families and businesses.
Investments in Children and Families
The government remains committed to improving the quality of life for all Ontarians, and this is more important than ever during difficult economic times. This Budget advances the government’s Poverty Reduction Strategy by proposing to speed up the phase-in of the Ontario Child Benefit (OCB). This would represent an additional investment of more than $400 million cumulatively from 2009–10 to 2011–12. Maximum annual OCB payments would increase from the current $600 to $1,100 per child beginning in July 2009, two years ahead of schedule. This enhancement would benefit current OCB recipients and provide payments to an additional 115,000 families with 240,000 children who were not eligible to receive the OCB in 2008.
A two per cent increase to benefits under Ontario Works and the Ontario Disability Support Program and to the comfort allowances for residents of long-term care homes is proposed for 2009–10. The government will also invest in social housing, including capital investments for housing for low‑income seniors and people with disabilities.
Competitive Government
During tough economic times, the government must redouble its efforts to manage spending, while protecting core public services. The government will therefore identify $1.0 billion in efficiencies in 2011–12. It would also mandate certain procurement activities such as collaborative purchasing for the broader public sector, which are expected to result in annual savings of $200 million within the first three years of operation. As well, this Budget proposes to freeze MPPs’ salaries at their current level for the 2009–10 fiscal year and reduce the size of the Ontario Public Service by five per cent over the next three years through attrition and other measures.
These initiatives build on Ontario’s progress to date, including achieving more than $800 million in savings over the past five years, improving service delivery and reducing procurement costs. The government is also on track to exceed its target of $108 million in savings for the last five months of fiscal 2008–09, which was set out in the 2008 Ontario Economic Outlook and Fiscal Review.
As well, the Province held spending growth in 2008–09 to 0.8 per cent over 2007–08, the lowest in eight years.
The government will continue to transform public services in order to protect them over the long term.
Responsible Fiscal Management
The government will continue its prudent approach to managing Ontario’s finances during the current global economic downturn.
To protect key public services and make the short- and long-term investments required, Ontario, like many governments across Canada and around the world, will experience a deficit. This is due to a significant deterioration in revenues and short-term measures to stimulate the economy, not to significant increases in core program spending.
The Budget forecasts a deficit of $3.9 billion for 2008–09. The deficit is expected to reach its peak of $14.1 billion in 2009–10. As a percentage of gross domestic product, Ontario’s deficit is proportionally below that of the United States, and is about the same as that now anticipated by the federal government. This Budget lays out a plan to balance by 2015–16.
Between 2008–09 and 2011–12, core program spending is projected to increase by 3.6 per cent, below the government’s forecast of 3.8 per cent in revenue growth over the same period. Holding spending below revenue growth is key to the government’s fiscal recovery plan. Going forward, the government will work with its partners to continue to keep growth in public sector expenditures at or below the rate of Ontario’s revenue growth.
Conclusion
This Budget builds on the major investments the McGuinty government has made since 2003 to support universal health care, public education, modern infrastructure, vulnerable citizens, a greener Ontario and lower business costs. These investments have protected and enhanced the programs and services Ontarians need to emerge from the current economic downturn, and they will continue to strengthen Ontario’s economy and competitive advantage.
Looking ahead, the McGuinty government is committed to leading Ontario to a new era of competitiveness, success and prosperity. It will not happen overnight — no single budget by any one government in any jurisdiction can accomplish that objective in the current global economic climate. And just as this Budget builds on the progress made over the past five years, future budgets will build on the actions taken today.
Through responsible management, a fair and balanced approach, bold tax reform and strategic investments, the government will help ensure that Ontario families and businesses get the help they need today and are poised to take advantage of the next generation of growth and jobs. A strong, competitive Ontario that thrives in the new economy will fund excellent public services and support a high quality of life for all Ontarians.
