Moody's downgrades Ontario's rating; Doug Ford promises corporate tax cut

Former Toronto city councillor Doug Ford speaks after winning the leadership of the Ontario PC Party on Friday, March 10, 2018. Ford will represent the party in the provincial election on June 7.

TORONTO -- Ontario's Progressive Conservatives promised Wednesday to cut the provincial corporate income tax if they win the spring election, saying the move would stimulate job growth and boost the economy.

Newly minted Tory Leader Doug Ford said his party would cut the rate from the current 11.5 per cent to 10.5 per cent.

"We're going to create the environment to make sure this province is the most prosperous province anywhere in Canada," he said. "We'll make sure we have the most competitive region in North America to do business."

The pledge came shortly after Moody's downgraded its outlook on Ontario's finances to "negative" from "stable" following the release of the Liberal government's budget, which featured a $6.7-billion deficit in 2018-2019, followed by five consecutive multibillion-dollar deficits.

"While this budget may not be implemented post-election, in Moody's opinion it highlights growing spending pressure that will need to be addressed in the near future," the Moody's forecast said.

The agency also expressed concern about the cost of servicing the province's net debt, which is projected to be $325 billion this year -- or more than $22,500 per Ontarian -- and grow to $360.1 billion by 2020-2021. Interest on debt is the government's fourth-largest spending area at $12.5 billion this year, and is projected to grow to $13.8 billion by 2020-21, and $16.9 billion by 2025-26.

If the current trend continues, the agency said, Ontario's interest expenses could "consume" nine per cent of government revenues by 2020-2021.

"An increasing interest expense is expected to further challenge the budget planning of the province," the forecast said.

Premier Kathleen Wynne defended the government's pre-election budget, saying Moody's outlook change wasn't a credit downgrade, which would effect borrowing costs for the province.

Ontario is leading economic growth in Canada, she said, and unemployment is the lowest it's been in 20 years.

"Not everyone's feeling the benefit of that," Wynne said. "And so my responsibility is to look at that and say, 'OK what is it that people need at this moment?' And what we hear from people around the province is that investment in them is what's needed."

Moody's maintained Ontario's Aa2 issuer and Aa2 senior unsecured long-term debt ratings despite the change in outlook.

Ontario heads to the polls on June 7.