Notes for Remarks by The Honourable Greg Sorbara Minister of Finance to the Standing Committee on Finance and Economic Affairs

January 26, 2004

Notes for Remarks by
The Honourable Greg Sorbara
Minister of Finance
to the Standing Committee on Finance and Economic Affairs

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Thank you Mr. Chair.

Good morning committee members and invitees.

I'm delighted to be with you this morning as you begin what I consider to be extremely important pre-budget consultations. Yours is a vital part of a much bigger consultation that will be taking place over the next few weeks.

I am quite certain that the work you do will make the work that I do much easier, and I want to thank you for that in advance.

The 2004 Budget will be critical to this province's future. It is not only the first budget of a new government, but the first budget of a new kind of government.and it is going to signal a new era of transparency, accountability and, above all, absolute commitment to the public services Ontarians need and want most.

What I hope to do for you this morning is to set the stage for the discussions you are going to have as you consult with Ontarians across the province. I am going to talk about the priorities of this government.I'm going to report to you on the situation as it now stands.and I'm going to tell you about the steps we have taken, and plan to take, as we proceed towards the 2004 Budget and then beyond.

And let's be clear.what's "beyond" the budget is just as important as what is in it. Too often governments focus on just one year, treating budgets as things to be "got through" or "survived", instead of things on which to build.

We're not going to do that. This budget is the cornerstone of a new long-term approach to government, one that is going to benefit Ontarians long after all of us here in this room have left the picture.

So to begin.what are the priorities we have as a government?

Well, quite simply, they are the priorities of the people who elected us.

Last fall, Ontarians chose change. They asked for-in fact they demanded-a different approach, because they could see that the old one wasn't working.

They weren't getting the services they needed.

We have to change that.

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Ontarians want excellence in their public schools. The number of kids failing to meet provincial standards in reading, writing and math greatly concerns parents, and it should be of concern to us all.

Our future depends on those kids doing well.

Ontarians want the kind of health care that was once a source of pride in this province. Doctor shortages, nurse shortages, waiting times for cancer treatment.these things are not a source of pride; they are a source of grave concern, and we have to address them.

Ontarians want clean communities.and that means doing something about the smog that is killing 2,000 people in this province every year.

Ontarians want something done about gridlock.. That means improving and expanding public transit.

Ontarians want us to achieve our economic potential, not through competitive tax rates alone, but also by building the most highly skilled workforce in North America.that's how we will compete for the highest wages and the best jobs.

Ontarians want all those things, and they demand one other:

They want us to live within our means.

The people of this province understand that a deficit isn't simply some abstract economic bogeyman.

If you have more money going out than coming in, your debt rises. Your interest payments increase. And all of a sudden, you have less money to pay for the services that you were trying to protect in the first place.

Ontarians know we can only live well by living within our means, and they have told us to make that happen.

And we will.

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Now before I move to where we're going, let me tell you a little about where we are.and I must say where we are is quite a bit better than where we were four months ago.

Ontario has emerged from an economic downturn into a period of solid economic growth.

Today we are releasing the Ontario Economic Accounts for the third quarter, that is, July to September of 2003.

As everyone in this room knows, Ontario faced an extraordinary series of problems that started last spring with the SARS outbreak, continued with border problems relating to the war in Iraq and the impact of mad-cow disease, and climaxed with the blackout in August.

These were the main factors behind the downturn in the July-to-September quarter. Ontario's real GDP fell by 0.6 per cent. We expect that the year as a whole could fall below the current consensus estimate of 1.6 per cent.

As you will appreciate, the economic weakness of that quarter, as well as the quarter previous, contributed to the enormous fiscal challenge that we are addressing.which is the deficit of $5.6 billion we inherited from the previous government.

The good news, though, is that the new information about the third quarter has not worsened our current deficit projection for 2003-04.

And the reason for that, as I said, is that the economy is bouncing back. We emerged strongly from the third quarter, and the most recent data suggest that economic growth resumed in the fourth quarter of 2003. In part, the upturn reflects the fact that we have moved past the severe problems earlier in the year.

The evidence shows the economy has started to grow and will continue to grow. Ontario added 35,000 net new jobs in December and the unemployment rate fell to a nine-month low of 6.7 per cent. The housing market also remained very healthy through the final months of 2003.

Resales were at a record level and new housing starts at a 14-year high. However, our currency has risen sharply against the U.S. dollar. This unprecedented increase creates a tough challenge for Ontario businesses that compete in open world markets.

It was probably a major factor behind a decline in Ontario's real international exports of 1.1 per cent in October and 1.9 per cent in November.

There are positive aspects to the dollar's rise. It will help to keep interest rates low; it reduces the price of imported capital goods that will help businesses to become more productive; and for consumers, it makes imported goods more affordable.

I am confident that Ontario business will meet the challenge of the rising dollar. So are most economists-although there have been some recent lower forecasts, economists still expect growth to strengthen in 2004 and 2005. Staff will present more information on the economic situation and outlook later this morning.

But what I want to make clear here today is that while the economy looks to be getting stronger, our fiscal situation is not.

We cannot grow our way out of this deficit. We can't even come close.

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The deficit is a result of eight years of chronic mismatch between revenues and expenditures. It is structural in nature. Spending has grown very rapidly over the past several years, and tax revenues have stalled.

We've moved to restore our revenue base with Bill 2, but that won't bring us back into balance either.

To the members of this Committee I say: we're not going to get rid of this thing by closing our eyes and wishing really, really hard.

We're going to get rid of it by taking decisive, dramatic action.keeping in mind always the priorities we share with the people of Ontario.

There won't be any slash and burn "quick fixes". We have seen too much of this approach, and the results speak for themselves.

Ontarians are left with weakened public services and an unacceptable deficit.

With the greatest of respect to the previous administration, slash and burn "quick fixes" represent a failure of fiscal management, and a failure of the imagination.

What this government is going to do instead is to improve services and create real, positive change in Ontario. That is no more nor less than what we were elected to do.

So we know where we are, and we know where we want to be. There remains only the question of how we get there.

The fiscal situation may require us to alter our timetable for improvement, but it has not altered by one iota our commitment to making that improvement.

And in fact, we've already begun.

Bill 2 cancelled the tax cuts that were damaging our public services. That's going to save us three billion dollars as of the next fiscal year.

We also moved to ensure that the organizations we fund are as vigilant as we are going to be in pursuit of better and more affordable services.

Our amendments to the Audit Act would give the Province's Auditor-who would be renamed the Auditor-General-the right to carry out value-for-money audits on all organizations that receive significant provincial government funding.

These include our hospitals, school boards, long-term care facilities, colleges and universities.not to mention Hydro One and Ontario Power Generation.

We have also enlisted the help of our dedicated public service. We have asked government employees-the front line workers in many of the areas we plan to improve-for their ideas.

So far, we have received more than 2,000 suggestions for ways in which we could do better with the money we have.

Because that, of course, is the name of the game.

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It isn't how much you spend, or how much you don't spend. It's whether you are getting the right results for what you spend.

The way to protect and improve our public services in a sustainable manner is to take a long, hard look at the results we are getting for the money we are spending.

.and then to weigh those results against the priorities we have established.

And that's what we're doing now.

We are undertaking a complete re-assessment of how we do things, as well as what things we do.

This is going to mean a significant redesigning of government.

We're going to examine government programs against the priorities that we ran on, and that Ontarians voted for. That includes the array of programs that are provided through the tax system.

We're going to focus on what Ontarians have told us they want most from government, and build our budget strategy around that.

It may result in our doing some things differently.

It may result in our deciding to stop doing some things altogether-things we no longer need and can no longer afford-in order that we can continue to do those things that are of the greatest importance to our citizens.

Surely that is a better kind of choice than simple across-the-board cuts with an eye only on the bottom line.

And it isn't a choice we're going to make alone.

In the coming weeks, we are going to consult with the people of this province like no government has ever done before.

We're going to give them the straight goods, and we're going to ask for the same thing in return.

The bottom line, on which we all agree, is the need to balance the books. In our recent Fall Statement we included medium-term projections and described the changes in spending that would be needed to reach a balanced budget by any of the next three years. As I stated then, these do not represent options so much as the starting point for our consultations.

In that context, we are asking Ontarians from every walk of life-not just business people or interest groups-to talk to us.not only about what they want to see in the budget, but also about what they want to see after the budget.

We're going to ask them to examine their balance the things they need against the things they have simply always taken for granted.

I can't tell you the discussions will be painless. They won't be.

I can't tell you the decisions we weigh will be easy. They won't be.

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But I can tell you the process will have integrity. It will be honest. It will be entirely focused on the change that people want and need, and at the end of the day it will go a very long way towards bringing about that change.

This isn't about asking Ontarians to do our work for us. It's about asking them to help us work better for them.

As I said at the outset, our government's first budget will be a critical event in this province.

It will be a departure from doing things the old way, and a celebration of the fact that we don't need to do things the old way.

It will be born in consultation and cooperation, and it will be informed, always, by the priorities we share with the people we are honoured to serve.

The work of this committee is an integral part of the efforts required to reach out to Ontarians and to understanding their priorities and their aspirations for the future. It complements well my own pre-budget consultations, which I will soon commence, and the other consultations being undertaken by the government.

I want to thank you for this chance to outline my thoughts. I hope it will be of some help to you as you carry on with this extremely important job.

The Premier has made it very clear that our priority has to be protecting and improving the public services Ontarians need and deserve. And he has given me the job of finding the resources to make that happen.

So if I might, I'd like to ask you please.always keep in mind why we're here.

It isn't just to crunch numbers, although that's a big part of the job.

It isn't just to worry about the bottom line, although that's a big part of the job.

We're here to improve the quality of our schools and our make our communities clean and safe.and to have the best workforce and the best economy on the continent. And we want the people to tell us how we will know, four, five or six years from now, whether we've been successful.

Doing those things while getting our fiscal house in order isn't just a big part of the is the job.

You all have a unique perspective on the hopes and expectations of the people of Ontario, and your contributions to this process will be invaluable.

I look forward to your report, and to working with you as we move towards, and beyond, the 2004 Budget.

Thank you Mr. Chair.

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