The Top Line
Today, the Government of Ontario released its 2017 Fall Economic Statement (FES). Along with Budget 2018, the FES is one of the Liberal Government’s final major fiscal policy initiatives prior to Election 2018. The FES sets the stage for next year’s budget, which will in turn be a centerpiece of the Liberal Party’s re-election campaign.
Ontario is performing well on several economic growth indicators. While presenting the FES, Finance Minister Charles Sousa emphasized some of those numbers, and argued that they offer proof that the Government’s program of large-scale and wide-ranging investments in infrastructure, business incentives, and social services has created economic growth and increased economic equality in Ontario.
That narrative is in line with the Liberals’ overall one-two punch economic policy pitch to voters. The Government will claim that it has created the right conditions for strong economic growth in Ontario, which in turn allows for significant new and ongoing spending on public and social services. That dynamic has been at the core of the Government’s ‘activist centre’ philosophy since Election and Budget 2014.
With Election 2018 approaching, those policies are, at least in part, designed to capture the centre left vote and set up a two-way race between Premier Wynne and Opposition Leader Patrick Brown in the election.
Economic and Fiscal Outlook
The Government used FES 2017 as an opportunity to tout the economic growth that Ontario has experienced in recent years. Amongst other economic metrics, the FES reports that Ontario’s real GDP growth continues to exceed that of all G7 countries. Furthermore, the Provincial unemployment rate has been below the national average for 31 consecutive months. The FES forecasts real GDP growth of 2.8% in 2017, up from the projection of 2.3% in Budget 2017.
A critical element of the Government’s fiscal policy agenda is its promise to balance the budget this year and over the next two years, even while announcing several new spending initiatives. FES 2017 forecasts indicate that the Government will meet that target, with increasing revenues playing a role in the balancing act. Over the coming years, Provincial revenues will rise to $158.2 billion in 2019–20, up from $140.7 billion in 2016–17, with an average annual growth rate of 4%.
Support for Business
Another major element of the FES is a renewed focus by the Government on policies designed to support small business growth. Those measures, highlighted by a commitment to reduce the Corporate Income Tax for small businesses, come in the context of ongoing criticism from the business community about polices, including a minimum wage increase (to $14 per hour on January 1, 2018 and then to $15 per hour on January 1, 2019) and hydro price hikes, that have increased the cost of business. As of January 1, 2018, however, the Corporate Income Tax for small businesses will decrease to 3.5% from 4.5%.
The Government also used the FES to announce two new programs aimed at helping small businesses employ young adults. A Graduated Apprenticeship Grant for Employers will provide incentives to encourage apprentices to complete training and offer hiring and retention incentives of $1,000 to small businesses that employ apprentices. That proposed program is a revamped version of the existing Apprenticeship Training Tax Credit. Under the new program structure, employers would receive funding as apprentices complete levels of certification. Five additional trades will be covered by the new program criteria and targeted funding bonuses will aim to increase the number of apprentices from underrepresented groups, such as women, Indigenous peoples, Francophones, people with disabilities, newcomers, and visible minorities. Similarly, the Government is proposing to provide $124 million over three years to support companies with fewer than 100 employees who hire youth and young adults (age 15 to 29).
Vic Fedeli, the Progressive Conservative (PC) Party Finance Critic, said that FES 2017 demonstrates that the Government is out of touch and willing to say anything to stay in power. To support his statements, Mr. Fedeli pointed out that both the Auditor General and the Financial Accountability Officer have disagreed with the Government’s accounting methods and claims about balancing the budget. Mr. Fedeli argued that the Government has actually mismanaged Ontario’s finances and has instituted policies, including the minimum wage increase and hydro price hikes, that hurt businesses and stunt economic growth.
Very notably, the PC Party announced in response to FES 2017 that it would not roll back the $14 per hour minimum wage if it forms government in 2018, but that it would slow down the timeline of the increase to $15 per hour (currently scheduled for January 1, 2019).
Meanwhile, Ontario New Democratic Party Finance Critic John Vanthof criticized the Government for not doing well enough on the social spending. He cited the example of over 30,000 Ontarians who are waiting for long-term care as a case where the Government’s social spending has not been sufficient.
What this Means to You
FES 2017 had a twin focus on the economy and social programs. Stakeholders will recognize that has been the Government’s messaging since Premier Wynne came to power. Moving into 2018 and the next election, the Government will continue to look to link economic growth and major business expansions in Ontario to its fiscal policies.
In summary, the Liberal Government sees good fiscal management as a means to the end of making more investments in new social programs and infrastructure. The Liberals will argue that sets them apart from a Progressive Conservative Party that views economic growth and balanced budgets as end goals.