2018 Fall Economic Statement

On November 15, the Government of Ontario released its 2018 Fall Economic Statement entitled “2018 Ontario Economic Outlook and Fiscal Review”, which provides an update on the government’s finances and announces commitments for the upcoming 2019 Budget.

The government is projecting steady, moderate growth in Ontario’s economy, with real GDP forecasted to rise by 2 percent in 2018. The Fall Economic Statement forecasts a deficit of $14.5 billion in 2018-19, down by $0.5 billion from the previous year. Growth is expected to be more modest over the next four years due to limited economic capacity, higher interest rates, and slowing US growth.  

FISCAL RESPONSIBILITY, GOVERNMENT TRANSPARENCY AND ACCOUNTABILITY

The government announced plans to:

• Set an appropriate target and timeline to reduce Ontario’s net debt-to-GDP ratio.
• Undertake a review of the Fiscal Transparency and Accountability Act, 2004 to ensure greater transparency from government about the long-term policy consequences of its decisions.
• Commit to a multi-year framework for ongoing review of programs and services to ensure that they remain relevant, effective, and efficient.
• A new approach to managing compensation within the public sector, beginning with a requirement that provincial agencies obtain approval of their bargaining mandates and ratification of collective agreements.

OCC Response:
In our blueprint letters to the Premier and the Minister of Finance, the OCC urged the Ontario government to restore fiscal balance and demonstrate accountability to taxpayers. The government’s announcement signals a clear intention to adhere to these principles. We also encourage the government to pursue value-based procurement reform and alternative service delivery opportunities as means to enhance efficiencies in public spending, encourage innovation, and support small businesses.

REGULATORY REFORM

The government announced plans to:

• Reduce red tape for business by 25 percent by 2022.
• Work with other provinces and territories to remove barriers to interprovincial trade.

OCC response:
The OCC led the charge in identifying how overregulation is harming the economy, and are pleased to see the government take serious and tangible action on regulatory reform. Additionally, in our blueprint letter to the Minister of Economic Development, Job Creation and Trade we indicated that Ontario should demonstrate leadership on implementing the Canadian Free Trade Agreement and reducing red tape barriers between provinces and territories.

TAX REFORM

The government announced plans to:

• Reverse the previous government’s planned changes to the small business deduction, which parallelled the federal government’s proposal to reduce or eliminate the deduction for some businesses.
• Increase the amount of payroll that is exempt from the Employer Health Tax, from $450,000 to $490,000 in 2019.
• Push the federal government to allow accelerated depreciation, and introduce it in Ontario once they have done so.

OCC response:
In response to unprecedented tax reforms in the US, the OCC asked for similar relief in both our 2018 Pre-Budget Submission and our blueprint letter to the Minister of Finance. Specific asks included not paralleling the federal small business tax changes, increasing the Employer Health Tax exemption, and introducing accelerated depreciation. We hope that the Government of Ontario would consider implementing accelerated depreciation or similar investment incentives in future, regardless of federal action.

ENERGY AND ELECTRICITY

The government has announced plans to:

• Launch a public review of current electricity pricing for industrial users.
• Support the continued operation of the Pickering Nuclear Generating Station until 2024.
• Relinquish the right to veto any project that would transport oil from Western Canada to Ontario or the East Coast.

OCC response:
In our blueprint letter to the Minister of Energy, Northern Development and Mines, we asked that the government undertake a review of electricity prices for all consumers, with a focus on illuminating the drivers within the Global Adjustment. We also voiced support for the continued operation of Pickering Station, as well as a similar project planned by Bruce Power. Finally, the OCC stood with the Canadian Chamber of Commerce in calling for federal leadership on approving and building new pipelines.

TRANSPORTATION AND INFRASTRUCTURE

The government has announced plans to:

• Release a broadband and cellular strategy in early 2019, outlining plans to expand broadband, digital services, and cellular access in both unserved and underserved areas.
• Continue expansion projects along Highway 11/17 and increase the capacity from two lanes to four lanes.
• Review transportation needs in the North, including passenger rail and bus services.

OCC response:
The OCC has called for a provincial broadband strategy and investments in a series of letters and reports since 2016. We have also identified Ontario’s overall “infrastructure gap”, which requires serious and sustained investment from government to overcome. In our upcoming report, Moving Forward: A Strategic Approach to Ontario’s Transportation Needs, we call for a comprehensive review of Northern Ontario’s transportation needs, including road and rail passenger services.

SUPPORT FOR KEY ONTARIO SECTORS

The government announced plans to:

• Launch an agricultural advisory group made up of leaders from the agri-food and agriculture sectors, to provide expert perspective on policies.
• Immediately start work on developing the Ring of Fire, and establish a mining working group to improve regulatory processes and attract investment.
• Undertake a review of the Far North Act, 2010 to ensure land use planning aligns with local, First Nations’ and Provincial priorities.

OCC response:
The OCC released a report, Fertile Ground: Growing the Competitiveness of the Agri-Food Sector, which contains recommendations that would be valuable to the proposed advisory group. We have also been a long-standing supporter of the Ring of Fire and efforts to increase mining investment in Ontario. In our blueprint letter to the Minister of Energy, Northern Development and Mines and Indigenous Affairs, we recommended a review of the Far North Act to improve alignment of and respect for stakeholder priorities.

OTHER ISSUES

The government has announced plans to:

• Launch a Housing Supply Action Plan in spring 2019 to address barriers that limit housing supply.
• Launch a public awareness campaign about illegal tobacco. Undertake a review of tobacco tax regulation and enforcement to reduce the size of the illegal tobacco market.  
• Expand the sale of beer and wine into private stores, based on a comprehensive review of the beverage alcohol sector.
• Review auto insurance regulation in order to modernize the sector.

OCC response:
In our blueprint letter to the Minister of Municipal Affairs and Housing, we explicitly call for a housing strategy that addresses barriers to increasing supply. In our letter to the Attorney General, we identify illegal tobacco as both a public safety issue and a source of lost revenue for the Province, and suggest approaches for tackling this challenge. We also outlined our support for cannabis sales in private retail outlets; our position on alcohol sales is founded on the same principle. Across a number of our blueprint letters, we ask that government work with sectors such as auto insurance to modernize the regulation to which they are subject.

PAY TRANSPARENCY

The government announced plans to:

• Delay the implementation of the Pay Transparency Act, 2018 to allow for consultation. The Act was to take effect on January 1, 2019.

OCC Response:

In our blueprint letter to the Minister of Labour, we urged the Ontario government to avoid inflicting administratively burdensome and costly pay equity reporting requirements on to employers. The government’s announcement signals it recognizes the business community’s concerns. We encourage the provincial government to review and modernize the Pay Equity Act, 1987, ensure the Pay Equity Office has the resources it needs to make employers aware of the current legislation, and consult with the business community to help close the gender wage gap.

Read the OCC’s Statement.

Read the full 2018 Fall Economic Statement.