July 1, 2010 was a big day for me – Dwight Duncan Minister of Finance Ontario


Canadian MoneyTHUNDER BAY – Leader’s Ledger – July 1, 2010 was a big day for me. Most of you probably think I’m saying that because that’s the day the HST and the tax cuts of our Tax Plan for Jobs and Growth took effect.

However, it is also the day I began my journey to a slimmer, healthier lifestyle. I serve as proof that belt tightening doesn’t have to be all about cutting back.

I did cut out the late-night pizza … And I rarely eat dessert. However, I added more fruit … More vegetables … And exercise.

I focused on the things that contribute to a better future and eliminated the things that don’t.

Since then, I have shed 54 pounds and four suit sizes. Despite this progress, I have more to do… I have to lose another thirty pounds to get to the upper end of the “normal” weight range for my height.

That’s my goal … My personal challenge.

I’ve achieved these results through hard work, determination and smart choices.

That applies to fitness … And to finance, too.

A balanced approach – no gimmicks, no short cuts, no fad diet. Smart choices and hard work.

That’s why, as Ontario confronts the challenges brought about by the current economic environment, we have to work together and apply that same kind of determination to the choices we make.

Over the last generation — and then some — the fundamentals that have shaped our economy since Confederation have changed … Dramatically.

Protected domestic markets have been replaced by open markets and global competition.

Ontario families and communities that have relied on manufacturing and forestry can no longer count on guaranteed growth in those sectors to create jobs.

Economies that are driven by abundant natural resources are taking on roles of greater importance both around the world and here in Canada.

When you look at the entire global economy right now, what you see is uncertainty.

Christine Lagarde, Managing Director of the International Monetary Fund said recently, that:

“The global economy has entered a dangerous new phase.

There is a path to sustained recovery, but it is narrowing.

To navigate it, we need strong political will around the world – leadership over brinksmanship, cooperation over competition, and action over reaction.”

She’s right.

Strong steady leadership is required to balance eliminating the deficit with supporting jobs and growth and providing the best public services.

Within the global context, regional economies have their own, distinct stories to tell.

In many European countries, interest rates remain at unsustainable levels, putting new pressures and stress on both governments and people.

In the United States, political gridlock led to a credit downgrade because political parties could not reach an agreement to move forward on deficit and debt challenges.

Here at home in Ontario, we are still closely linked to the U.S. which continues to recover slowly from the recession.

The Canadian and American dollars at par puts additional stress on our ability to export to that important market.

Despite these challenges, Ontario is on a path of renewed growth and will continue to create jobs.

Ontario GDP grew in the third quarter of 2011 at 2.7 per cent on an annualized basis.

After creating more than 121,000 new jobs in 2011, Ontario employment remained steady in January of this year.

Ontarians have made tremendous progress over the last eight years.

We have modernized the tax system by introducing the HST and bringing in sweeping tax cuts for both people and business.

The Tax Plan for Jobs and Growth has also positioned Ontario for growth.

Our province, our home, is recognized as a good place to invest.

It is the second most attractive place for foreign investment in North America and Forbes magazine, among others, credits much of the work we’ve done for this fact.

To build on this growth, Ontario must confront another challenge.

The 2009 Budget took the bold step of transforming Ontario’s tax system into one of the most competitive in the world.

Ontarians recognized the need for this change and re-elected Ontario Liberals because of this leadership.

In fact, we are the only government in Canada — and from quite a few other countries — to be re-elected after introducing a value added tax.

We have turned around health care and education and are now getting world-leading results in both.

Now, we must transform the way public services are delivered and eliminate the deficit.

Before the global recession hit, Ontario had balanced three budgets in a row.

Then, just as the recession took a bite out of household budgets across Ontario, it took its toll on the provincial budget, too.

The McGuinty government, like many others, invested heavily in stimulus — building roads, bridges and other important infrastructure.

These investments served both a short-term goal and a long-term interest.

First, they reduced the impact of the recession on our families by protecting and creating jobs.

Second, the infrastructure we have been building will continue to make Ontario’s economy more competitive.

All this extra help for families combined with weaker revenues created a deficit which is now projected to be $16 billion.

Today’s fiscal challenge is ours to face yet it is not entirely new.

Governments of all political stripes over the last generation have accumulated debt.

In fact, four governments of three parties since 1990 have done so.

In the 21 years, a generation, since then, net borrowing has decreased only once — and that was just because of the accounting.

Governments have taken this path because they could rely on economic growth to keep the debt-to-GDP ratio sustainable.

Ontario is a low-tax province.

This is a trend that has been developing for many years

In fact, tax revenues are 13.6 per cent of GDP, almost 15 per cent lower today than they were in 1994.

Still, we’ve been hitting our expense targets.

Over many years, Ontario has built expertise at delivering supportive public services with low administrative costs.

Ontario spends the least per capita among Canada’s 10 provinces.

Last year we reported spending growth had been cut to about 4 per cent.

So far this year, we are tracking to keeping growth in spending to about 2.5 per cent.

The challenges are, in this environment, to eliminate the deficit and deliver the quality services families need.

We will meet these challenges …

That’s what strong leadership means.

We will build on the tax reform, infrastructure investments and other actions Ontarians have already taken, to increase the prospects for economic growth in Ontario.

All of us have a role to play …

Politicians of all stripes …

Doctors, nurses, teachers and every person in Ontario who delivers — or receives — a public service of any kind here in the Province …

All of us, together, must turn our attention to the way government delivers services to Ontario families.

When one half of all government spending is invested in the wages and salaries of workers…

It is not possible to reduce spending without addressing salary, benefits and pension expenditures.

As Premier McGuinty said last week, we cannot guarantee there will be no interruption in public services.

We can guarantee our government will be firm and fair so we can eliminate the deficit …

Something that is in everyone’s interest.

In the 2011 Budget, we outlined the need to keep the rate of spending growth at 1.4 per cent annually for the next six years.

We also committed to reforming public service delivery to help us meet our targets …

And we appointed the Commission on Broader Public Sector Reform, chaired by Don Drummond.

We know Mr. Drummond’s preliminary advice is that spending growth may need to be reigned in even more and held at 1 per cent, as a result of deteriorating revenue projections since the time of the Budget.

When this information became public, a lot of people did some back-of-of-the-envelope math …

Math that led to questions …

Questions about spending growth in key priority areas like education and health care …

And questions about cuts that may come to other ministries.

As finance minister, there are questions I asked.

What will happen if we DON’T restrain growth in spending to those levels?

Will Ontario be able to deliver world-class public services to the people who rely on them?

Will Ontario be able to meet the targets outlined in the balanced budget plan?

So, here’s the answer:

Last week you heard that the Conference Board of Canada estimates that in 2017-18, Ontario’s deficit could still be $16 billion.

Drummond looks at the pressures on Ontario’s economy and analyzes the status quo.

If the trends continue …

If the delivery of public services is not transformed …

Drummond projects that in 2017-18, the deficit will be closer to $30 billion.

And we’ve done some of the math.

If the NDP had been elected and implemented their platform, the deficit would have been — at best — $31 billion.

I say “at best” because no one knows how they costed promises such as their tuition freeze, new tax expenditures and so on.

Based on Drummond’s analysis, if the Hudak PCs had been elected, and implemented their platform, the deficit would be $36 billion.

These different numbers show us two things:

One, that economic forecasts and analysis are not absolutely definitive since they rarely come to a consensus.

Two, despite the differences presented by various projections, it is clear that this serious challenge requires a serious plan.

As Peter Drucker said, “Plans are only good intentions unless they immediately degenerate into hard work.”

It’s time to build on the work we started two years ago …

And we’re eager to move forward, because working hard and solving problems is the Ontario Liberal way …
Our plan is fair.
Our plan is reasonable.
Our plan ensures everyone plays a role.
We will continue to review all of our assets to ensure they are delivering the greatest value to taxpayers …

We will build on reforms to the way government operates to ensure Ontario families receive the best public services possible …

And we will continue to slow down government spending.

The McGuinty government will hit its targets on the way to eliminating the deficit by 2017-18.

Here are three examples.

First: The current headquarters of the LCBO was built in 1954.

The LCBO has grown since then …

And to accommodate staff, it rents additional office space elsewhere.

The property includes the head office, a warehouse and a retail store — all sitting on some of the most valuable real estate in the country.

We can make better use of the property to maximize the value of this taxpayer asset.

We have directed the LCBO to sell its headquarters property.

A flagship retail store will remain in the vicinity, while head office and the warehouse could be moved.

A new development project and new businesses on the site will create jobs.

A new modern facility will help the LCBO realize operational savings and as a result of this modernization, we expect to generate well over $200 million.

Second: We’ve improved the performance of Service Ontario.

Ontarians have taken advantage of the introduction of money-back guarantees for birth and marriage certificates, with a success rate of 99.8 per cent last year.

Customer satisfaction has increased from 75 per cent in 2008 to 93 per cent in 2011.

Two-thirds of Service Ontario is already privatized.
When an Ontarian goes to a Service Ontario office, it costs five times as much as a transaction performed on-line.
Obviously, greater efficiencies can be gained by driving customers to a lower-cost, on-line channel.

However, building that capacity requires a significant capital investment.

In the current fiscal environment, this kind of investment is not a priority …

So we will use private sector capital to keep taxpayer dollars devoted to public services that are of the highest priority, like schools and health care.

The government will continue to set standards for customer service …

Yet we are convinced that a stronger public-private partnership in Service Ontario is the right way to go …

And help us stay on track in reducing the deficit.

Third: Since 1998, Ontario taxpayers have been subsidizing horse racing in Ontario to the tune of $345 million a year through the OLG’s Slots at Racetracks Program.

To put that annual subsidy in perspective, it’s more support than we provide for water protection or road safety to protect our families.

It’s also more than 10 times the amount B.C., Alberta and Manitoba — combined — provide to horseracing.

That kind of money would pay for over 9 million hours of home care …

Or insulin pumps and supplies for five years for almost 17,000 people.

We are reviewing every program, every asset and every function of government.

We are considering if government should be in a specific line of business or service delivery.

If not, then we will get out of that business.

If we should be there, we will transform operations to ensure Ontario families are receiving the best possible service.

And, if an asset is not delivering the highest value to taxpayers, we will take action to ensure that it does so.

We are lowering the rate of spending growth – and we will continue to meet our targets on the way to eliminating the deficit.

Later this week, we look forward to receiving Drummond’s report.

It will help us inform the 2012 Budget as we move forward.

We also look forward to hearing ideas about solutions and seeking the input of Ontarians – that includes the Opposition.

Given the analysis, given the fiscal situation facing today’s generation and tomorrow’s, continued demands for short-term tax giveaways that undermine our long-term economic growth are not only unreasonable – they are irresponsible.

Now, all this is not to say cuts aren’t needed and won’t happen.

They are and they will.

The more we are able to transform the way we deliver public services, the less we will have to cut.

And that means we will be better able to protect schools and health care.

The public ultimately wants responsible spending but they also believe that government has a positive role to play in their lives.

Striking this balance in today’s economic uncertainty means that low-priority programs will be eliminated or scaled back.

Government needs to remove itself from lines of business that are not central to the expectations of Ontarians.

Our job is to ensure they are done the Liberal way …

With deliberation, compassion and a steady hand.

When I meet with investors from all over the world, they ask how, despite current global economic uncertainty, Ontario has managed to fare as well as it has.

I answer that Ontarians have built a strong, caring, progressive society and share a common ideal that every child from every home will have every opportunity to become the best they can be.

Ontarians have placed their confidence in our government to keep a steady hand on the tiller and steer us towards a stronger economy.

And that is exactly what we are doing and will continue to do.

We will eliminate the deficit.

We will keep strengthening our economic fundamentals.

We have put the right plan in place for the times …

A plan to strengthen Ontario’s economy for future growth and prosperity.

Now, each of us has to do our part in moving that plan forward …

Whether it’s businesses who need to continue making the necessary investments to increase productivity …

Or those of us in the public sector who need to strive constantly, to ensure we are delivering the best value and the best public services to Ontarians.

You know, I started tightening my own belt for health reasons.

I’ve been blessed with good health in so many ways – my heart is strong …

I don’t have diabetes.

Over the last year and a half I’ve enjoyed other benefits.

I have more energy.

I tire less easily.

My staff will tell you I’m often in a better mood.

My journey over these last eighteen months — and counting — has obviously been a means to a few different ends.

Similarly for Ontario, eliminating the deficit isn’t just about the numbers.

It’s about building the rock-solid foundation families need to support their jobs, their schools, their health care, their future.

It’s about acting responsibly.

It’s about building a bright future for our children and grandchildren.

Thank you.

Dwight Duncan
Minister of Finance

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