Rapid Policy Update
2021 Provincial BudgetMarch 25, 2021
On March 24, 2021, the Government of Ontario released its 2021 Budget, Ontario’s Action Plan: Protecting People’s Health and Our Economy. Budget 2021 contains measures to protect against the immediate impacts of the pandemic on the hardest hit sectors and communities while laying the groundwork for an inclusive economic recovery, bringing Ontario’s COVID-19 action plan to $51 billion in total support over four years. The following is a summary of highlights from the perspective of Ontario’s business community.
The Province is investing in new programs to support Ontario’s tourism industry: The Tourism and Hospitality Small Business Support Grant ($100 million) will provide one-time payments between $10,000 and $20,000 for small tourism businesses that have experienced a minimum decline in revenue of 20 percent. Examples include hotels, travel agencies, amusement and water parks, and camps. Additionally, the Tourism Recovery Program ($100 million) will help historically successful tourism operators, anchor businesses, and attractions that have helped to drive employment and visitation in their regions by assisting with costs related to restructuring, safe reopening, recalibrated marketing activities, and partnership development.
OCC analysis: Tourism is vital to regional economies across Ontario. Businesses and workers in the sector were among those most impacted by the pandemic. This new funding – combined with the tourism tax credit announced in the 2020 Budget – will support organizations that have not been eligible for other supports and help facilitate the industry’s revival post-pandemic.
Budget 2021 builds on many of the programs announced in 2020. The Province is doubling its investment in the Ontario Small Business Support Grant, for a total investment of $3.4 billion to support approximately 120,000 small businesses. Eligible businesses will receive an automatic top-up for this second round. Additionally, Ontario is investing another $10 million towards its Digital Main Street program.
OCC analysis: Small businesses are facing unprecedented cash flow challenges, forcing many to close and others to restructure. The OCC is pleased to see an expansion of successful grant programs. These measures will help thousands of small employers confront the health crisis and keep their workers employed. Using an automatic top-up will provide immediate relief and minimize the administrative burden on both businesses and government.
HEALTH CARE AND MENTAL HEALTH
Budget 2021 commits an additional $1.8 billion to the hospital sector in 2021-2022, as well as an additional $175 million in 2021-2022 to support mental health and addiction services.
OCC analysis: The OCC welcomes these significant investments to support Ontarians and patients. As discussed in the OCC’s report, Realizing the Full Potential of Virtual Care, the pandemic coupled with the public health measures that were put in place to prevent the spread of the virus (e.g., physical distancing), significantly impacted mental health, prompting advocates to warn of a potential “echo pandemic” of mental health problems in the future. This summer, the OCC will release a Mental Wellness in the Workplace Toolkit, which will include recent data and resources Ontario businesses and employers can use to support mental wellness in their workplaces.
BEVERAGE ALCOHOL INDUSTRY
In Budget 2021, the province will extend funding to 2022-2023 for several critical programs, specifically the VQA Wine Support Program (an additional $7.5 million) and the Small Cidery and Small Distillery Support Program (for a total of $2.6 million).
OCC analysis: Ontario’s beverage alcohol industry has been acutely impacted by COVID-19. Specifically, many local wineries and cideries across the province depend on local, international, and agri-food tourism. These local producers help support regional economies, adjacent sectors, and local jobs. While these supports are much welcome, the OCC encourages the Province to consider other recommendations outlined in our report, Refreshing the Sale of Beverage Alcohol in Ontario.
Budget 2021 commits $10 million in 2021-2022 for a one-year expansion to the Enhanced Agri-Food Workplace Protection Program, which aims to help farm businesses implement occupational health and safety measures to prevent and control the spread of COVID-19.
OCC analysis: The OCC welcomes the expansion of this program to help farm businesses with increased costs associated with the introduction of critical safety measures during the pandemic. On April 12, the OCC will be releasing a policy brief entitled Growing a More Resilient Food Supply Chain in Ontario. The brief examines the impact COVID-19 has had on Ontario’s food supply chain, specifically farmers and local producers, and steps the province can take to ensure the agri-food sector is better positioned to handle future disruptions.
The Minister of Finance and the Associate Minister of Children and Women’s Issues will establish a task force on inclusive economic growth to inform recovery efforts. To support parents, the government is proposing a 20 percent top-up of the CARE tax credit for 2021, which would increase the average amount from $1,250 to $1,500 per family, at a cost of approximately $75 million. Ontario is also providing a third round of payments through the Ontario COVID‐19 Child Benefit, doubling payments to $400 per child for this round and $500 for each child with special needs. Finally, the Budget invests an additional $2.1 million over three years to assist survivors of domestic violence and other heinous crimes like human trafficking.
OCC analysis: The OCC appreciates these new measures, as women have been disproportionately impacted by the pandemic. Investing in child care, advancing inclusive economic growth, and fighting gender-based violence are important steps to women’s economic empowerment. Budget 2021 delivers many of the measures we called for in our recent report, The She-Covery Project: Confronting the Gendered Economic Impacts of COVID-19 in Ontario.
Ontario is investing an additional $2.8 billion to expand broadband access, bringing the Province’s total investment to nearly $4 billion over six years beginning in 2019–20. An additional $61 million is being allocated to the Regional Opportunities Tax Credit and another $50 million to the Northern Ontario Heritage Fund Corporation. Further, the government is further extending the pause on property tax reassessments for municipalities.
OCC analysis: The OCC is encouraged by the new measures to support local communities in Budget 2021, particularly as the pandemic has widened regional disparities. The need for reliable broadband access has only become more essential to the well-being and competitiveness of communities. Additional resources towards the Regional Opportunities Tax Credit and Northern Ontario Heritage Fund Corporation will enable rural and northern communities to invest in projects that create local jobs and economic growth. Pausing the property tax reassessment gives municipalities and businesses more capacity and time to adjust to the economic uncertainty and challenges caused by the pandemic.
Budget 2021 proposes a new temporary Ontario Jobs Training Tax Credit which would provide support for 50 percent of eligible expenses (up to $2,000) in 2021 for a total projected cost of $260 million over two years. Similar to the Canada Training Credit, eligible expenses include fees for occupational skills courses, trade or professional exams, and postsecondary education courses.
OCC analysis: Amidst rapidly shifting labour market conditions, the OCC has underscored the importance of demand-driven skills programs that help Ontarians get the skills and training they need. Reskilling will be essential to the rapid re-employment of workers that have been displaced throughout the COVID-19 crisis. The government’s proposed tax credit is estimated to help approximately 230,000 Ontarians adapt to a quickly changing labour market.
Budget 2021 contains several other measures to help lay the foundation for a strong economic recovery. The Province is supporting the Invest Ontario Fund ($400 million over four years) to encourage business spending in the key sectors of advanced manufacturing, technology, and life sciences. Ontario is also investing $56.4 million over the next four years to create the Ontario Vehicle Innovation Network (OVIN). OVIN will build on successful elements of the Autonomous Vehicle Innovation Network (AVIN) to accelerate the development of next-generation electric, connected, and autonomous vehicle and mobility technologies. Finally, the government is expanding the Ontario Together Fund with an additional $50 million in 2021-22 to help manufacturers retool their operations to produce personal protective equipment and develop technology‐driven solutions and services for business to reopen safely.
OCC analysis: Programs that build on Ontario’s competitive advantages in high-growth sectors will help position our economy for long-term growth and job creation. In addition to the OVIN initiative, the OCC encourages the Province to consider the recommendations outlined in our report, Moving Forward Towards a Strategic Approach for Ontario’s Transportation Needs, to ensure Ontario maintains its leadership in AV technology.
Given the provincial government’s continued spending on healthcare and grants as a means for surviving the pandemic, Budget 2021 includes a number of time-limited COVID-19 spending amounting to more than $100 billion in new debt and deficits. Overall, the province is projecting to see a slight decline in the deficit from $38.5 billion in 2020-21 to $33.1 billion in 2021-22. This includes a decline in overall spending by around $4 billion relative to last year. Although the deficit is expected to gradually decline in the medium to long term, a surplus is not anticipated until at least 2029-30 under a medium-growth scenario and a return to the pre-pandemic deficit of around $10 billion is not expected until 2027-28.
OCC analysis: Given the record level deficit, it is important for the province to have a debt management plan in place and a path to fiscal balance. The continued challenges of COVID-19 have necessitated significant government spending in order to support businesses and individuals across sectors and regions. While support for those in hardest-hit sectors should remain a priority, policies to improve the cost-efficiency of Ontario’s public sector should be explored. The OCC encourages the government to adopt value-based procurement reforms and alternative service delivery, digitize government, reduce administrative burdens, pursue lost revenue from untaxed economic activity, and adopt a formal policy on asset recycling. These measures will improve value for public spending, encourage innovation, and support small businesses.
As outlined above, the 2021 Ontario Budget includes a number of major commitments and funding for the hardest-hit sectors and communities, as well as much needed aid for women who have been deeply impacted by the pandemic. However, given the government has recognized modernization of government services and regulatory innovation as priorities, there are certain measures well within the government’s purview that could help further improve the economic backdrop at little to no cost. These include:
- Being bold on interprovincial trade. Ontario should act swiftly to eliminate major interprovincial barriers to trade and labour mobility. The Government of Ontario should also continue supporting the work of the Regulatory Reconciliation and Cooperation Table established under the Canadian Free Trade Agreement.
- Using regulatory modernization to support economic recovery. Temporary regulatory improvements introduced during the pandemic should be made permanent to support economic growth. For example, legal cannabis retailers have been temporarily allowed to engage in e-commerce and offer delivery and curbside pickup options while under lockdown. The Government of Ontario should support the growth of this emerging sector by making online delivery and curbside pick-up options permanent for privately-owned legal cannabis retailers.