Finance Minister Charles Sousa has prescribed a remedy for the Liberal government’s political ailments – an election-ready balanced budget with free pharmacare for everyone 24 and under.
Sousa on Thursday tabled the first Ontario budget without a deficit since 2008 thanks to a growing economy that has led to a massive jump in tax revenue.
It’s a record $141.1 billion spending plan that increases funding for health care by $7 billion over the next three years, including a signature $465 million children and youth pharmacare program that will pay for 4,400 different medications as of January 2018.
The Liberal plan comes just five days after NDP Leader Andrea Horwath promised a $475-million a year universal pharmacare plan to cover 125 commonly prescribed drugs if she wins the June 7, 2018 election and replaces Premier Kathleen Wynne.
“Four years ago, our government promised to balance the budget and today… I am proud to announce that we did it,” said Sousa, promising to keep things in the black again in 2018-19 and the year after that if the Liberals are re-elected.
The last time there was no shortfall in the provincial treasury was 2008 – just before the global financial crisis that led to the biggest recession since the Great Depression almost 90 years ago.
But the cost of running deficits for nearly a decade has been an Ontario debt that has ballooned from $169.6 billion in 2008 to a projected $311.9 billion this year, making the province the world’s largest sub-national borrower.
“The road to balance has not been easy. We had critical choices to make,” said Sousa.
“We could do what some suggested: cut expenses, cut vital programs and services that people depended on to eliminate the deficit or take a more principled and thoughtful approach to make strategic investments and stimulate economic growth,” he said.
With the shortfall eliminated and a hotly contested election 13 months away, Sousa has loosened the purse strings and acknowledged that many Ontarians are feeling the pinch.
“We recognize that families are struggling with the increased cost of living so we’re doing more to help with everyday costs,” he said.
As first announced last month, residential electricity rates will be cut by an average 17 per cent starting in June – atop the 8 per cent reduction in the harmonized sales tax that kicked in on Jan. 1.
Overall, hydro relief measures will cost the treasury $1.4 billion in 2017-18.
The new spending is fuelled by tax revenue that has outpaced last year’s forecast by more than $3.4 billion, including $1.3 billion in additional corporate taxes, $717 million in extra personal income taxes, $714 million more in sales taxes and a windfall of $637 million in increased land transfer taxes due to skyrocketing house prices.
To slow southern Ontario’s rapidly rising real estate market, there’s the recently announced 15 per cent “non-resident speculation tax” on foreign buyers. It is expected to be revenue neutral because it should be offset by lower land transfer tax proceeds.
“It’s not fair for some speculators with deep pockets to drive up the cost of a family home at the expense of working families trying to save enough to realize their own dreams of a place to raise their kids and call their own,” he said.
That levy on offshore speculators is the only tax increase in the budget aside from a $2-a-carton hike on tobacco effective as of midnight Thursday. (There is no mention in the budget about anticipated revenues from legalized recreational marijuana, which Ottawa will allow as of July 1, 2018, because the province has not yet determined where and how it will be sold or taxed.)
Municipalities, however, will be empowered to impose lodging taxes – on hotels and Airbnb rentals – if they choose.
Sousa boasted that the province is outpacing most of the developed world with gross domestic product growth of 2.7 per cent last year.
“That’s almost twice the rate of growth of all of Canada – it’s better than Germany’s 1.9 per cent; it’s better than the United States at 1.6 per cent; it’s better than all G7 countries,” said the treasurer.
But Progressive Conservative Leader Patrick Brown, who enjoys a double-digit lead over Wynne in public-opinion polls, insisted the budget was not balanced, claiming there is a $5 billion operational deficit due to one-time infusions of cash such as government land sales and the majority sell-off the Hydro One transmission utility.
“It’s a scam. The numbers do not add up. The Liberals have no plan to get debt under control,” said Brown, who declined to say what services he would cut if elected next year though he stressed his opposition to municipal hotel taxes.
The NDP’s Horwath, whose pharmacare proposal would not take effect until 2020, said “this budget doesn’t even come close to undoing the damage Kathleen Wynne and her Liberals have done over the last 14 years.”
“Ontarians are desperate for change,” she said, blasting Wynne for falling short on universal pharmacare.
“We didn’t get the pharmacare plan that the people of this province deserve.”