Ford government's first fiscal update shows Ontario cut deficit to $14.5 billion

Queen's Park is seen here in this file photo.

Ontario's way out of a deep "fiscal hole" won't be easy, the Progressive Conservative government warned Thursday as it announced plans to eliminate three independent legislative watchdogs, end subsidies to political parties and halt the development of a French-language university, among other measures.

The cuts laid out in the government's Fall Economic Statement for 2018-2019 -- its first major fiscal update since taking power in June -- helped the Tories shave $500 million off the province's $15-billion deficit.

The government did not, however, have a timeline for when it would get back to balance, though it maintained its promise to do so.

"The fiscal hole is deep," said Finance Minister Vic Fedeli. "The road ahead is not an easy one and will require difficult decisions. Everyone across the province will be required to make sacrifices."

The Tories concluded earlier this year that they were left with a $15-billion deficit by the former Liberal government. The figure has been disputed by critics who say it includes spending promised by the Liberals but cancelled by the current regime.

Fedeli argued, however, that the figure had not been inflated.

"It's a real deficit," he said. "The challenge ahead of us is real."

The government said it had made progress on chipping away at the deficit by finding $3.2 billion in efficiencies in operations. But it also said it was taking in $2.7 billion less in revenue in the fiscal year -- including $1.5 billion attributed to the cancellation of cap and trade, and $308 million attributed to cancelling planned tax increases.

Among the belt-tightening measures it laid out, the government said it would be rolling the positions of three independent officers -- the environmental commissioner, the child and youth advocate and the French language services commissioner -- into the offices of the auditor general or the provincial ombudsman.

Fedeli could not say what will happen to those working in the eliminated offices, but Premier Doug Ford has consistently promised that no jobs would be lost as a result of his cost-cutting.

Ontario's Provincial Advocate for Children and Youth, Irwin Elman, said he was shocked to discover the government's plan to cut his office with no official notice. He called the plan "dangerous" and asked the province to reconsider.

Plans for a French-language university have also been cancelled, though the government could not immediately say how much money the move would save.

The government is also maintaining a public service hiring freeze and ending taxpayer subsidies provided to political parties in Ontario, a measure created by the Liberals after they cracked down on the rules around political fundraising.

The fiscal update carried welcome news for low-income earners, promising to eliminate provincial income tax for those earning less than $30,000 a year.

The government said the measure -- expected to cost $495 million a year in lost revenue -- offsets its decision to scrap a planned increase of the province's minimum wage that was set to take effect next year.

Critics, however, have said raising the minimum wage to $15 an hour as the Liberals had planned would give low-income workers more money than the income tax cut would save. An independent financial analysis came to a similar conclusion.

The government also said it will exempt new housing units from rent controls as a way to spur construction of new units. In 2017, the Liberals closed a loophole in rent controls that exempted any buildings constructed after 1991. Prior to that, landlords could raise rent by any amount on those units.

The fiscal update further pledged to expand hours of operation at Beer Store and LCBO outlets, allowing them to open seven days a week until 11 p.m.

NDP Leader Andrea Horwath said the Ford government was making life harder for many in the province, and criticized the rent control move in particular.

"Doug Ford and his government actually tell Ontarians that they have to quote 'tighten their belts,"' she said. "Ontarians already have their belts tightened. That is the message they have been sending us for a very long time."

Green party Leader Mike Schreiner said the fiscal update was more about consolidating power than saving money.

"Premier Ford's attack on the checks and balances that hold government accountable are outrageous," he said. "It is bad for people and democracy"

One observer said the fiscal plan suggests the government is putting off making some of the "hard choices" about where it can cut costs.

"We have a government that still hasn't really come out with its decision about how it's going to balance its desire to balance the budget GǪ with a desire to cut taxes and at the same time a desire to spend new money in a number of different areas," said Peter Graefe, a political science professor at McMaster University in Hamilton.

Consolidating several independent oversight offices could be "a lot of theatre" that won't save much, he said.

"It's supposed to signal that it's a government that wants to cut things, although it hasn't decided the really hard things yet," Graefe said. "Secondly, I think it's consistent with a view that there shouldn't be any kind of institutions between what the people voted for in terms of the government and that government's capacity to do things."

Here are some highlights from the 156-page document:

- Reduced deficit: The government says it has reduced the 2018-19 deficit by $500,000 to $14.5 billion. That was achieved through cutting $3.2 billion in expenses with measures such as a freeze on hiring and limits on discretionary spending in the public service. However, much of those savings were cancelled out by the loss of $2.7 billion in revenue, largely due to the dismantling of cap and trade and scrapping planned tax increases.

- Relief for low-income workers: Those earning $30,000 or less will no longer have to pay provincial income tax starting next year, and those earning between $30,000 and $38,000 will get a tax cut. The government says some 1.1 million Ontarians will get relief through this program. The fall economic statement says that translates to savings of about $850 a year for a person who makes about $30,000. But critics say it would help low-income workers more if the government reinstated a planned increase to the minimum wage that would see it rise to $15 an hour next year.

- Tax changes: The government is halting planned tax increases for various groups including small businesses. Those taxes would have poured some $308 million into the public purse, according to the document. The Progressive Conservatives are also reversing tax changes brought in by the Liberals in the last budget, which included the creation of two new tax brackets and an increase in tax rates for the province's highest earners.

- Consolidation of oversight: Three of the province's independent oversight offices -- the environmental commissioner, the child and youth advocate and the French language services commissioner -- are being consolidated into either the existing auditor general's or provincial ombudsman's offices. The government did not say how much that is expected to save nor what would happen to those currently in those offices, but Finance Minister Vic Fedeli repeated the government's promise that no jobs will be cut.

- French university: Plans for a standalone French-language university were scrapped, despite the government's assurances this summer that it was "fully committed" to the project. The finance minister did not say how much money the province expects to save as a result of that decision.

- Alcohol sales: Starting Dec. 2, the LCBO and Beer Store will be allowed to stay open until 11 p.m. seven days a week. The fiscal update also repeats the premier's plan to expand sales of beer and wine to corner and big box stores.