Rapid Policy Update
2022 Provincial BudgetMay 2, 2022
On April 28, the Government of Ontario released its 2022 Budget: Ontario’s Plan to Build. Developing on previous commitments, Budget 2022 proposes a series of new measures to support workforce development, transportation infrastructure, health care capacity, and other priority areas. The following is a summary of highlights from the perspective of Ontario’s business community.
Budget 2022 proposes an additional $114 million for the Skilled Trades Strategy over three years, an additional $16 million for the Skills Development Fund to expand brick-and-mortar training facilities, $5 million in new funding for Better Jobs Ontario (formerly the Second Career program), and an additional $268.5 million over three years to strengthen training programs at Employment Ontario. Further, the government commits to developing a long‐term Ontario Workers’ Plan to address labour shortages and train workers for the future, leveraging new initiatives such as real‐time labour market data and partnerships with local organizations to develop better programs that match workers with jobs.
OCC analysis: With an estimated 62 percent of sectors currently facing labour shortages, targeted strategies and training programs will be necessary to help employers fill demand. We look forward to working with our members to inform the Ontario Workers’ Plan to proactively address future workforce needs. Immigration will be equally important as Ontario’s population ages and the labour market continues to tighten; we encourage the Province to help attract more immigrants outside the Greater Toronto Area by making regional immigration pilots permanent and relaxing requirements for labour market impact assessments for employers in smaller communities.
Cost of Living
Budget 2022 proposes new funding to make life more affordable for Ontarians. On top of its previous commitment to cutting the gas tax for six months, it proposes an expansion of the Low-Income Workers Tax Credit for Ontarians earning up to $50,000 per year. This new funding will deliver an average $300 tax break to an estimated 700,000 people. It also commits an additional $395 million towards child care in addition to the $13.2 billion in federal investments, to cover the costs of inflation.
OCC analysis: With inflation at a record high, affordability has become a challenge for Ontarians, as well as businesses looking to attract and retain workers. Child care investments will support higher workforce participation rates among parents, particularly women. Expanding the Low-Income Workers Tax Credit will provide some financial relief to Ontarians; however, as a long-term approach, we encourage the government to reinstate the Basic Income pilot program to obtain data to assess the impact such a program could have in Ontario.
Infrastructure and Supply Chains
Budget 2022 highlights $159 billion as part of Ontario’s Capital Plan towards key infrastructure projects over the next decade, with $20 billion earmarked for this fiscal year alone. This includes an additional $4 billion towards the planning and construction of highway projects across Ontario, such as the QEW Garden City Skyway rehabilitation project; completion of Highway 7 between Guelph and Kitchener; widening of Highway 401 between Pickering and Oshawa and Highway 17 from Arnprior to Renfrew; bridge replacements; and reconstruction of Highway 101 through Timmins to support commuters as well as the forestry and mining industries.
The budget also highlights investments in public transit, with $62 billion over the next decade to improve GO Transit access and to help reduce commute times across the Greater Golden Horseshoe and Southwestern Ontario. Targeted projects include expanding GO Transit rail services from Oshawa to Bowmanville, working with rail partners to increase service between the Niagara Region and Union Station, and making progress on new subway transit plans for the GTA.
In terms of housing, the government reiterates previous commitments in its More Homes for Everyone plan to build 1.5 million new homes over the next 10 years. Lastly, Budget 2022 also commits to moving forward with Phase 3 of the Natural Gas Expansion Program, with consultations launching in Fall 2022.
OCC analysis: As part of Ontario’s economic recovery, investing in new and improved transportation networks will play a crucial role in enabling the efficient movement of goods and people, especially given employers’ ongoing challenges with supply chains and access to talent. We welcome continued action to address infrastructure backlogs across the province, and urge policymakers to ensure those projects are transparent, fiscally sound with a clear return on investment, and carried out in a way that minimizes environmental impacts.
Housing affordability is also a pressing issue for Ontarians and employers. While setting targets for new builds is encouraging, it is equally important to ensure the province has an adequate supply of skilled trades workers to build those homes, maintains transparency throughout the process to protect the public’s trust, and explores the additional recommendations laid out in the recently published Housing Affordability Task Force report. Meanwhile, continued expansion of the natural gas program will also continue to improve affordability for Ontarians and businesses in rural, northern, and Indigenous communities. In addition, expanding natural gas can help reduce GHG emissions as it emits less than some alternative sources.
The budget includes an additional $10 billion over the next 10 years in hospital infrastructure, building on the $30 billion introduced in the 2021 budget. Additionally, to address health human resource shortages, the government is proposing to allocate funding previously committed in its 2021 Ontario Economic Outlook and Fiscal Review into a series of new programs. This includes $764 million over two years to provide Ontario’s nurses with a retention incentive of up to $5,000 per person, $42.5 million over two years to expand undergraduate and postsecondary medical training programs, and $61 million for a new Learn and Stay Grant to encourage workers to remain in underserved communities.
Budget 2022 proposes an additional $204 million for mental health and addiction services. The government is also increasing funding for Ontario’s dementia strategy by $5 million per year for three years to support an additional 6,500 individuals each year.
OCC analysis: Recognizing capacity gaps and backlogs within Ontario’s health care system, it is critical for the government to invest in health care infrastructure and health human resources. We are encouraged to see commitments around mental health and Ontario’s dementia strategy, as the pandemic and aging population continue to increase demand for these services. It will also be important to prioritize routine immunizations to avoid the spread of vaccine-preventable diseases.
Further, while funding for health care innovation was previously committed to the Life Sciences Innovation Program and we look forward to informing the government’s life sciences strategy, the pandemic has also demonstrated the value of virtual care. We would also like to see a commitment to provide the necessary resources to expand virtual care across the province.
Small Businesses & Entrepreneurs
Budget 2022 commits to creating an Entrepreneurship Council to support the development of a new Entrepreneurship Strategy aimed at positioning Ontario as the fastest and easiest jurisdiction to start up and scale up a business. The government is looking to improve financing for small businesses and entrepreneurs by increasing Venture Ontario’s venture capital funding from $100 million to $300 million. Ontario will also consult with the angel investment community to explore opportunities across the province.
OCC analysis: Entrepreneurship and small business growth will help fuel Ontario’s economic recovery. Financing is a key challenge for small businesses and we support work being done to improve their access to venture capital, angel investments, and capital markets. We look forward to informing the government’s new Entrepreneurship Strategy, and we encourage an approach that supports diverse entrepreneurs, including Indigenous peoples, women, and persons with disabilities.
Additionally, as the population ages and more small business owners retire, it will be important for Ontario to support succession planning. To this end, we encourage the government to explore an employee ownership trust policy framework to complement the federal government’s approach. Ontario may also consider developing a pathway for international students who purchase shares or ownership of a small business in the province to apply for Permanent Residency, similar to programs that exist in Alberta and Nova Scotia.
Through Budget 2022, the government is committing an additional $3.5 million to improve emergency readiness. This funding will enhance the government’s coordinated approach to emergency management through additional capacity to plan, prepare, respond and recover from emergencies.
OCC analysis: The OCC has called on the Ontario government to evaluate the effectiveness of its pandemic response, including business support programs and public health restrictions. New funding allocated in this budget should help Ontario develop and implement a government-wide strategy for crisis management and pandemic preparedness based on lessons learned in Ontario and best practices from other jurisdictions.
Budget 2022 underscores the government’s efforts to invest in infrastructure, affordability, labour, and productivity as a means for economic growth through a $199-billion spending plan, with nearly $160 billion earmarked for infrastructure over the next 10 years.
Despite this sizable spending plan, Ontario’s deficit is expected to decline beginning next fiscal year with a balanced budget by 2027/28 – two years earlier than initially forecasted in last year’s budget, but longer than the forecast presented earlier in April by the Financial Accountability Office of Ontario. The uptick is thanks in part to an increase in revenue, which is expected to grow by four percent annually. Inflation and increased spending by households as restrictions were lifted (further supported by strong household savings throughout the pandemic), have contributed to the better-than-expected tax revenue projections.
The deficit is now projected to be $13.5 billion for fiscal year 2021/22 (compared to $33.1 billion projected in last year’s budget) and increase to $19.9 billion in fiscal year 2022/23 (compared to $27.7 billion projected in last year’s budget). The government’s current windfall fiscal position puts the expected net debt-to-GDP ratio at 41.4 percent in 2022/23, representing a less than one percent increase from last fiscal year, and is projected to remain below the net debt-to-GDP target of 42 percent over the next few years.
Following a real GDP growth of 4.3 percent in 2021, the economic indicator is forecasted to remain strong at 3.7 percent in 2022 and 3.1 percent in 2023 but will begin to slow down at 2.0 percent and 1.9 percent in 2024 and 2025, respectively.
However, in light of the ongoing war in Ukraine and supply chain challenges, inflation continues to be a significant risk factor. Last month, Canada saw annual inflation reach a record-high of 6.7 percent, up from the 5.7 percent reported in February. Price pressures are expanding and having a real effect on all segments of the economy, and while interest rate hikes are being used to manage and control price growth, higher interest rates also mean higher borrowing costs for governments. The coming years will therefore require a thoughtful and balanced approach to address affordability and investments in productivity as a means for securing short-, medium-, and long-term fiscal sustainability and economic growth.
As noted above, Budget 2022 did not include significant new announcements around immigration, employee ownership trusts, routine immunizations, or a commitment to continue freezing Ontario’s beer tax. Nor does it contain specific measures to support growing sectors, such as cannabis.
Beyond highlighting recent investments in electric vehicle supply chains and a new hydrogen strategy, Budget 2022 does not provide clarity on climate policies or take a comprehensive approach to tackling emissions. We urge the Ontario government to reduce uncertainty and help businesses unlock opportunities in the green economy. This includes providing clarity on how Ontario will spend revenues from the Emissions Performance Standard program.
Further, while we look forward to the previously announced $10-million investment to establish a Food Security and Supply Chain Fund, we hope to see more investments to address supply chain challenges faced by other industries such as health care and retail, and support small businesses that are still recovering from revenue losses due to COVID-19. The OCC continues to call on the government to strike a task force with private sector leaders to identify existing and potential bottlenecks, sensitivities, and risk factors within the province’s supply chain network and develop a strategy to support local manufacturing and sourcing of materials to reduce the cost of goods and services to Ontarians while also reducing dependence on foreign entities.
There is also a need to move more quickly on the rollout of broadband infrastructure. While investments towards broadband connectivity have been previously announced, greater collaboration between the public and private sectors will be critical for fast-tracking the government’s target of internet access in every community throughout Ontario by 2025.
Finally, we would like to see bolder action on interprovincial trade and labour mobility to unlock internal markets for local businesses. While the government says it will continue participating in the Regulatory Reconciliation and Cooperation Table, more can be done; we encourage Ontario to sign mutual recognition agreements with other provinces and territories and consider unilaterally recognizing adequacy of standards used elsewhere in Canada.