2011 Ontario Budget: Chapter II: Ontario's Economic Outlook and Fiscal Plan
Section F: Ontario Needs a Strong Federal Partner


The coordinated response of the federal and Ontario governments to the recent recession helped achieve renewed economic growth and job creation. Both levels of government delivered investments in infrastructure, provided financial support to the auto industry and worked together on sales tax harmonization. These measures, combined with the federal government’s enhanced short-term support for skills training, will continue to help the province turn the corner and position Ontario and Canada for sustained economic growth.

More remains to be done — and the Province is concerned about the trend of waning federal interest in programs and the unfair treatment of Ontarians compared to people in other provinces. Although many families are still feeling the effects of the recession, the federal government is reducing its support for skills training and immigrant settlement. While Ontario is addressing emerging economic and demographic challenges, the federal government remains vague on its long-term commitment to Ontario’s health, education and social programs.

The Province needs a strong partner to meet the needs of Ontarians and to help them prepare for the future. Ontario calls on the federal government to provide adequate long-term support to help build a stronger Ontario — in a stronger Canada.

To Meet the Needs of Ontario’s Workforce

Employment Insurance

The federal Employment Insurance (EI) program is still failing to meet the needs of Ontario’s unemployed workers and the modern labour market.

Despite some improvements in 2008 and 2009, Ontarians still have trouble accessing EI regular benefits. In 2010, only 34 per cent of Ontario’s unemployed received EI regular benefits compared to an average of 54 per cent in the other provinces.

Chart 21: Bar Graph: Ontario's Low EI Coverage Rate Persists in 2010

Ontarians also continued their long-standing overcontribution to the EI program in 2010 by paying an estimated 40 per cent of premiums but receiving only 31 per cent of total regular benefits.

These persistent discrepancies show that the EI program has reached a permanent state of imbalance that has negative implications for unemployed workers and Ontario’s economy. The EI program should be responsive to current labour-market conditions, facilitate productivity in all regions of the country and ensure fairness for Ontario workers.

Labour-Market Training

As the province emerges from the global recession, the Open Ontario plan will help Ontarians increase productivity and promote economic growth. While the Province is investing in the tools Ontarians need to prosper in the new economy, it is also important that the federal government continue to maintain its enhanced support for Ontario’s skills training programs. These enhancements have helped Ontario make investments in Second Career and other critical programs. If the federal government fails to maintain its support of skills training, tens of thousands of Ontarians would lose the opportunity to develop essential labour-market skills required to succeed in a growing, knowledge-based economy.

Table 22. Examples of the Impact of Expiry of
Enhanced Federal Funding for Skills Training1
Programs Clients Served
Summer Jobs Service An estimated 29,000 fewer students per year would receive help to find a summer job.
Literacy and Basic Skills An estimated 13,000 fewer learners per year would be able to access Literacy and Basic Skills programming.
1  Selected programs presented for illustration purposes only.

In addition, Ontario remains concerned about its overall share of EI training funds, which support numerous training programs delivered by the Province. In 2010, Ontarians accounted for 42 per cent of Canada’s unemployed but received only 31 per cent of the EI funding allocation for training. This would be further reduced if the federal government continues with current plans to reduce funding. Ontario also calls on the federal government to review the principles for allocating EI training funds and provide Ontario with greater flexibility in designing EI training programs so the Province can better respond to the specific needs of Ontarians.

Immigration Settlement

Helping new Canadians contribute to Ontario’s success is an important part of the Open Ontario plan to strengthen the economy. However, the federal government failed to fully meet its commitment under the Canada–Ontario Immigration Agreement (COIA) by underspending over $200 million allocated to Ontario settlement agencies. This funding would have benefited 60,000 newcomers to Ontario, with services ranging from settlement to workplace-focused language and communications training to bridging and technical upgrading programs. These services would have accelerated the integration of newcomers into the workforce. In addition, the federal government recently announced that Ontario agencies serving newcomers can expect cuts to their funding, beginning with $44 million in 2011–12. This lack of commitment from the federal government seriously limits the ability of newcomers to fully participate in the labour market and contribute to Ontario’s growth.

Ontario is committed to supporting the success of its immigrants. The federal government must fulfill its obligations under COIA and flow the full funding it committed under that agreement to immigrant service agencies immediately. Moreover, to improve outcomes for immigrants who choose Ontario as their home, the federal government must also negotiate a new agreement with the Province — one that would give Ontario greater policy control and full funding support for immigrant settlement and training. Similar to the agreements with Manitoba, British Columbia and Quebec, a new devolved agreement is necessary in order for Ontario to provide more coherent training programs that would meet the needs of Ontario’s workforce.

To Lay the Groundwork for Future Prosperity

Equally crucial to the success of Ontarians are long-term federal commitments to infrastructure, innovation and financial regulation. Ontario has benefited from the federal Building Canada Plan and infrastructure stimulus through various joint projects that have improved Ontario’s universities, roads and economy.

Windsor is Canada’s premier trade gateway. Each year more than 12 million cars, trucks and buses, and nearly $120 billion worth of goods, flow between Canada and the United States through the Windsor–Detroit corridor alone. With support from the federal government, the Windsor–Detroit crossing will be upgraded to ease traffic congestion across the border and improve trade flows. Ontario welcomes the federal government’s commitment to fund 50 per cent of eligible capital costs of the Windsor–Essex Parkway leading to the new bridge.

The Province is committed to promoting productivity and encouraging economic growth in Ontario. The federal government is currently undertaking a review of its research and development (R&D) supports, while also developing a national Digital Economy Strategy. Ontario is Canada’s largest performer of R&D and is home to significant digital economy clusters in Toronto, Ottawa and Waterloo. Any federal actions must protect Ontarians’ interests in these two areas and be based on principles of fairness, transparency and excellence. See Chapter III: Tax and Pension Systems for Ontario’s Future for further discussion of the federal R&D review.

Ontario is committed to maintaining and promoting the strength, vibrancy and integrity of Canada’s capital markets, which are mostly based in Toronto. The Province and federal government have worked together to promote Canada’s reputation for strong financial institutions and Toronto’s status as a premier financial services centre through the creation of the Global Risk Institute in Financial Services.

Ontario believes that a strong Canadian regulator would further improve the efficiency of Canada’s capital markets and facilitate better enforcement and investor protection. The new regulator should be centred in Toronto, Canada’s financial capital, to meet the needs of Canadian capital markets. Ontario will continue to actively work with the federal government to create a Canadian securities regulator.

“A Canadian securities regulator would provide better protection for investors, more efficient regulation and lower costs for firms… The establishment of a Canadian securities regulator administering a single federal Securities Act for the whole country will reinforce financial stability, strengthen enforcement and help protect investors through increased accountability.”

Federal Finance Minister Jim Flaherty, September 16, 2010.

To Help Families and Support Communities

The Province is working with the federal government on a new affordable housing initiative that would extend federal and provincial funding. This program would help build and renovate affordable housing, improve housing affordability, and foster safe, independent living for low-income families. However, Ontario continues to maintain that the federal government should be a long-term partner in funding affordable housing. Going forward, a long-term, fair-share commitment from the federal government would help ensure that Ontario families have access to housing.

While Ontario supports the federal government’s efforts to improve the safety of communities, federal anti-crime initiatives come with a cost. The Province expects the federal government to recognize any fiscal pressures created by its recent crime bills and to provide support to provinces to address these pressures.

Provincial governments are working together to manage the cost of health care services, including work on pan-Canadian procurement of drugs and medical equipment and sharing clinical best practices. However, the future of universal health care also depends on the federal government providing adequate financial support to provinces and territories. Ontario welcomes the federal government’s commitment to continue transfers that support hospitals and schools as it moves to balance its budget. To continue to deliver quality services on which Ontarians rely, provinces need a strong and sustained federal commitment beyond the expiry of current agreements in 2013–14 and a renewal of the federal government’s commitment to the reduction in health care wait times.

Federal Contribution to Health Care in Ontario

Universal health care in Canada was founded in the late 1960s on the understanding that the costs would be shared 50–50 between the provinces and federal government.

In 1977, the federal government gave the provinces more policy flexibility by splitting its support for health care into half cash and half transfer of tax room.

Beginning in the 1980s, however, the federal government gradually reduced its health and social transfers, leading to drastic cuts in the 1990s.

With the 2004 Health Accord, the federal government agreed to increase its investment in health care and ensure a more consistent level of support through a six per cent escalator for 10 years. By 2013–14, the last year of the Accord, federal support for health care in Ontario is expected to stand at roughly 24 per cent.

Moving to the next generation of funding arrangements, Ontario expects the federal government to maintain a strong and sustained commitment to health care.

Ontario encourages the federal government to work with provinces and territories in renewing all fiscal arrangements, including the Canada Social Transfer. In particular, Ontario looks to the federal government to partner with the Province in its plan to raise Ontario’s postsecondary attainment rate while increasing the quality of postsecondary education.

To Improve Government Efficiency

To manage taxpayers’ dollars responsibly, governments must ensure that services are not duplicated across levels of government. Ontario and the federal government have acted to streamline services and realign responsibilities where it makes sense. Over the last decade, various labour-market agreements have devolved the responsibility for the design and administration of certain federal training programs. For businesses, the Corporate Tax Administration Redesign initiative implemented a single federal–provincial corporate tax return and the Harmonized Sales Tax will reduce compliance costs from the move to a single administration. Ontario also supports the creation of a Canadian securities regulator, which would strengthen financial regulation.

Governments must continue to ensure that services are delivered efficiently and effectively by the level of government best positioned to provide them; sometimes it will be the federal government and sometimes it will be the Province. Governments can better serve people by working together to take advantage of opportunities to realign.

Immigration Settlement and Labour-Market Training

The devolution of immigrant settlement and integration services to Ontario with federal funding would realize this opportunity to realign. Situating training, immigrant settlement and integration programs under one level of government would allow the Province to strengthen its one-stop shop of integrated services. The federal government could further improve service delivery for Ontarians by devolving the remaining federal labour-market training programs with adequate and predictable funds, which would allow clients to access the full range of training services available in one location.

Correctional Services

International experience suggests that rehabilitation services provided in prisons are effective at keeping communities safe and controlling correctional expenses. The delivery of these rehabilitation services could be more effective and efficient if mainly delivered by one level of government. Ontario calls on the federal government to assume responsibility for inmates serving sentences of over six months to ensure that inmates receive the effective rehabilitation services they need.

“Clearly assigning responsibility for corrections services based on a distinction that makes sense will minimize duplication, improving the sector’s efficiency.”

James Pearce, Joshua Hjartarson and Matthew Mendelsohn, “Saving Dollars and Making Sense: An Agenda for a More Efficient, Effective and Accountable Federation,” Mowat Centre for Policy Innovation, October 2010.