The National Post is Canada’s second largest national paper.
We couldn’t read the Premier’s lips because he was conspicuous by his absence. But Dalton McGuinty has been explicit in recent speeches — the $16-billion deficit that is on course to balloon to $30-billion within seven years, will not be balanced by raising taxes.
That means the Premier will have to implement all 320 recommendations made by economist Don Drummond and his Commission on the Reform of Ontario’s Public Services, released Wednesday. Except, the Ontario Liberals have already made clear they will ignore Mr. Drummond’s suggestion on Mr. McGuinty’s pet full-day kindergarten project — namely that it is a $1.5-billion luxury the province cannot afford.
The former TD Bank chief economist pulled no punches in his press conference: “This is pretty much unprecedented in post-war Canadian history. It is very daunting. Lots of governments have had it tough for two to three years. But then there was a reprieve. There is no reprieve here,” he said, pointing to low growth rates as far as the eye can see.
The report said the slow decline of Ontario’s manufacturing sector is partly to blame for the malaise that will see the deficit double and net debt rise to 50% of GDP by 2017/18. But it did not gloss over the culpability of a Liberal government that has failed to keep spending in line with revenue growth.
Mr. Drummond said the situation is fixable, but only if all the measures in his report are implemented. “Each rejected recommendation must be replaced, not by a vacuum, but by a better idea — one that delivers a similar fiscal benefit.”
Thus, if the Premier wants to keep two provincially-owned casinos in Niagara Falls and all three deaf schools in the province (Drummond recommends closing two), then he has to cut elsewhere. Finance Minister Dwight Duncan said all of Mr. Drummond’s recommendations are on the table, except full-day kindergarten. We will find out in next month’s budget how many other programs are deemed too crucial to cut.
Mr. Drummond said many of the suggestions in the report will not be popular. And it’s true, they are not going to go down well in a province that still patronizes the rest of the country by instinct — like little Englanders oblivious that the sun has sent on their empire. Voters can hardly be blamed for being insensible to the problems facing Ontario — all of their politicians during the recent election campaign told them to soak up the sun. “All the parties campaigned on unrealistic economic assumptions,” Mr. Drummond conceded.
Yet, the report is far from apocalyptic — we are a long way from being Greece, even if Moody’s Investor Services has downgraded the province’s outlook. True, unemployment in Ontario is now above the national rate and average personal incomes are lower, contrary to much of Canadian history.
But Ontario’s finances do not yet constitute a crisis “and a crisis can be averted with early action,” according to Mr. Drummond.
If the report is implemented in full, he said the province could limit program spending increases to 0.8% a year for the next seven years and bring the budget back into balance. Health-care spending, which has grown by 6.3% in each of the past five years, would have to be constrained to a 2.5% growth rate; education to 1%; post-secondary education to 1.5%; social programs to 0.5% and all other programs would need to be cut by 2.4%.
While unlikely to provoke Athens-style riots, if implemented, this amounts to a very large cut in the level of public services Ontarians have come to expect — a real per capita cut of 16.2% by 2017/18. By comparison, the Mike Harris government reduced spending by just 3.9% from its 1995/96 peak and spending was curtailed for just three years. “The government will have to cut program spending more deeply … and over a much longer period than the Harris government did,” Mr. Drummond said.
The Commission repeatedly pointed out that the problem goes well beyond a temporary freeze on spending — that the only way to sustain services in the long-term is to reinvent government.
On health care, Mr. Drummond and his colleagues heeded the caveat that delivery must be kept within the public payer model. Nevertheless, they advocated a greater role for the private sector in service delivery, pointing out that most family physicians are private sector operators paid by OHIP. Specifically, the report encourages many trends that are already gathering steam — regional management, an emphasis on home care and doctors working in primary care clinics.
For the rest of this column, please go to the National Post website: http://fullcomment.nationalpost.com/2012/02/15/drummond-report-will-test-mcguintys-pledge-not-to-raise-taxes/