April 11 marks the Doug Ford government’s first budget.
Looming over this process is not only a large structural deficit, but also a massive public debt of more than one-third of a trillion dollars – that is 346 with nine zeros behind it.
Ontario is the most indebted sub-national government on the planet.
Interest payments on Ontario’s debt are the fourth largest item in the budget – after health care, education, and social services. Every dollar spent on interest, never mind the debt itself, means one less dollar going to our hospitals, schools, and vital infrastructure.
Interest rates began to rise in 2017/18 and there is an increasing risk that the government will have considerably less flexibility to provide these key public services.
The Bank of Canada raised its key lending rate five times between April 1, 2017 and Oct. 24, 2018. When the province refinances debt at a higher interest rate than that paid on maturing debt, then the average interest expense will rise. This means more money will go toward interest expense, therefore increasing the annual deficit and ultimately, the debt.
In 2018, both the Moody’s and Fitch credit-rating agencies revised their rating outlook for Ontario’s debt from stable to negative, reflecting their assessment of increased credit risk. While Ontario’s credit rating remained unchanged, the four main agencies cited several concerns regarding Ontario’s credit outlook, including the province’s high and rising debt burden, the projection of ongoing deficits, and the risk of a future economic downturn.
Ontario’s deficit and debt represent lost opportunities for Ontario, a fiscal albatross around the neck of future generations, and a sad situation that leaves us extremely vulnerable to an economic downturn.
We are working to restore accountability, sustainability and trust in Ontario’s finances. Through the report of the Independent Financial Commission of Inquiry, we learned the previous government left Ontario a massive $15-billion deficit. The report uncovered how the previous government continually and systematically abused our collective trust, wasted precious resources, and recklessly spent the province to the brink of a fiscal cliff. The mess our government inherited cannot be overstated. All of us are now seeing the results of 15 years of fiscal mismanagement. The approach of the previous government was unsustainable, irresponsible, and frankly, put the future of our children at risk.
If we fail to act now, if we don’t get our spending under control, we won’t be able to protect the public services we all rely on each day. To that end, we must make decisions that may be unpopular.
The people of Ontario expect our government to protect what matters the most. We expect government to protect and continue to strengthen public health care. We expect government to protect those social services that support the most vulnerable in our society.
Budget 2019 will be thoughtful, measured, and a forward-looking plan with four specific objectives:
- Restoring fiscal balance in a responsible and sustainable manner;
- Protecting what matters the most – health care, education, and other critical public services;
- Making Ontario open for business and open for jobs; and
- Always putting people first.
On April 11, our government will present a plan to balance Ontario’s budget in a reasonable and responsible manner, while reducing the burden of debt.
Toby Barrett is MPP for Haldimand-Norfolk