Ontario on a slow road to recovery, Duncan says

Ontario Finance Minister Dwight Duncan speaks during a press conference at Queen's Park in Toronto, Monday, Aug. 31, 2009.

TORONTO - Ontario residents could be facing service cuts as the province braces for a "long, slow grind" to economic recovery that includes a high deficit that will take years to overcome, Finance Minister Dwight Duncan said Tuesday.

Duncan, delivering a speech to Toronto's business community, said Ontario was hit earlier and harder than other provinces by a global economic downturn that has brought its economy down to the size it was in 2005.

"We are not out of the woods yet and before we see a full return to strong growth, there is much hard work to be done," Duncan said.

"We could very well be in for a long, slow grind before we achieve true economic recovery."

The government will undertake a review of service delivery to make sure every dollar is spent effectively, Duncan said, but declined to specify what cuts such a review may yield.

"What we need to do is make sure that we have a laser-like focus on our priorities," he told reporters after his speech, adding that while the government will strive to protect important services, trimming less critical areas "is one aspect of it."

"There's a range of these things that it's incumbent upon us to look at," he said.

Duncan wouldn't say whether the current deadline of 2015 to get out of deficit still stands, or by how much this year's projected $18.5-billion deficit will grow.

"It will take time -- there are no silver bullets. Governments won't be back into balance for several years," he said.

Duncan did say the deficit -- to be revealed in his economic update Thursday -- will be consistent with the size of Ontario's economy relative to the Canadian economy.

Robert Kavcic, an economist with the Bank of Montreal, said the province will stay out of a structural deficit if it returns to balance within six years as expected, but notes restraining spending growth will be the government's biggest challenge.

"If they can actually stick to that commitment of reining in spending, then it's not a structural deficit," Kavcic said.

"But if they can't stick to that commitment, then the deficit's probably going to last."

NDP Leader Andrea Horwath said she expected cuts in services, adding the government should come clean about its intentions before the March budget.

"They've already cut Children's Aid Societies, they're already cutting some of the most important programs to get people back to work, so already we're seeing what that looks like, and already it's not looking very positive," said Horwath.

Premier Dalton McGuinty and Duncan have both been warning about difficult choices ahead, and McGuinty warned the province's hospitals last week that while he'll try to help them out of their current shortfalls, they shouldn't expect as much funding as in the past.

He had a similar message for the Children's Aid Society a day later, when the agency warned it was facing a $67-million shortfall and called on the government for help.

That same day, it was revealed that the province was suspending the Ontario Self-Employment Benefit program, which provides financial assistance to laid-off workers looking to start their own business.

McGuinty said earlier Tuesday that his government has worked hard to stimulate the economy, create jobs and protect services, but it must also take steps to ensure the deficit is eliminated over a reasonable period of time.

"It means that we're going to be prudent, we're going to be responsible, and it's all with a view to protecting public services and assuring ourselves of future prosperity," he said.

Yet Progressive Conservative critic Norm Miller said the government should have reviewed its costs earlier, and done more to restrain spending, especially given recent revelations about the billions of dollars given to consultants at agencies like eHealth.

Documents obtained by the NDP under freedom of information laws and released Tuesday show the Liberal government spent more than $389 million on consulting services in 2007-08, and that doesn't include arm's-length agencies, boards and commissions.

"The problem is the government didn't show any restraint in the years leading up to the economic slowdown," Miller said.