2023 Ontario Budget

On March 23, 2023, the Government of Ontario released its Budget: Building a Strong Ontario. The following is a summary of highlights from the perspective of Ontario’s business community.

Workforce Development

Budget 2023 outlines measures the government is taking to expand training opportunities, particularly in the skilled trades and health care. New investments include $25 million over three years to attract more skilled workers through the Ontario Immigrant Nominee Program, and $5 million to launch a second round of the Ontario Micro‑credentials Challenge Fund.

OCC analysis: With an estimated 68 percent of sectors currently facing labour shortages, targeted strategies and training programs will be necessary to help employers fill demand. Investments in skilled trades and health care and the continuation of the Ontario Micro-credentials Challenge Fund will help alleviate some of these labour shortages that are undermining growth and investment in the business community and the stability of our health care system. We look forward to working with the government on continuing to address workforce challenges including by making regional immigration pilots permanent, relaxing requirements for labour market impact assessments for employers in smaller communities, and exploring options to incentivize greater participation in experiential learning programs from employers, especially small and diverse-led businesses and employers in remote regions.

Health Care

Budget 2023 commits to incremental health care investments of $15.3 billion over the next three years, with some new funding focused on addressing immediate health human resource shortages and growing the health workforce, including:

• In 2023-24, accelerating funding for home and community care to $569 million (including $300 million to support contract rate increases for the home and community care workforce), providing $200 million to extend the Enhanced Extern Program and Supervised Practice Experience Partnership Program, $22 million to hire hospital preceptors to mentor and train newly graduated nurses, $15 million to retain mid‐to‐late career nurses, and $4.3 million to help license internationally trained physicians.
• Over the next three years, providing over $100 million to expand training seats for medical students and residents, $80 million to expand post-secondary nursing education, $51 million for the Dedicated Offload Nurses Program, and $3.3 million to expand access to health-related dual credit opportunities for secondary students and hands-on health care opportunities for students in Grades 7 to 12.
• In Fall 2023, further expanding pharmacists’ ability to prescribe medication for additional common ailments.
• In 2024-25, investing over $174 million over two years to continue the Community Paramedicine for Long-Term Care Program.

Additional new health-related investments include $425 million over three years to support mental health and addictions services (including a five percent increase in base program funding for community-based mental health and addictions service providers) and $72 million in 2023-24 to make more surgeries available at community surgical and diagnostic centres.

OCC analysis: Safeguarding health system capacity and resilience is a top concern for Ontario businesses, as the pandemic exacerbated many system vulnerabilities, leading to staff burnout, backlogs, and unprecedented mental health and addictions challenges. The OCC welcomes new investments to address the health human resources crisis, including attracting and retaining doctors and nurses to fill current gaps, expanding home and community care capacity to decrease unnecessary reliance on hospitals and other costly institutional care settings, and ensuring allied health professionals can work to their full scope of practice to allow other health workers to prioritize direct patient care. Leveraging private and non-profit sector capabilities, while ensuring adequate safeguards and accountability, is an important step to continue to address the surgical backlog. In the midst of a mental health “echo pandemic” and opioid overdose crisis, additional investments in community mental health and addictions services are critical to support Ontario workers, businesses, and the economy. We look forward to next steps from the government around implementing Ontario’s life sciences strategy, supporting the aging population, advancing an integrated health data system, and ensuring equitable access to care across the province.

Small Businesses & Entrepreneurs

To support diverse and young entrepreneurs, Budget 2023 announces an additional $15 million over three years for the Racialized and Indigenous Supports for Entrepreneurs Grant Program, $3 million in the Black Youth Action Plan, and $2 million to Futurpreneur Canada. For small businesses, the budget outlines details around a previously announced expansion of the small business Corporate Income Tax.

OCC analysis: Entrepreneurship generates innovation, competition, and economic development. Tax measures will help small businesses scale, particularly as they grapple with inflation, rising interest rates, and the winding down of COVID-relief programs. We would encourage the government to explore additional policies to support small and diverse-led businesses, including digitization programs, loan guarantees, and modernization of public sector procurement.

Housing

Budget 2023 includes an additional $202 million each year over the next three years for the Homelessness Prevention Program and Indigenous Supportive Housing Program to support people experiencing or at risk of homelessness.

OCC analysis: Affordable, supportive housing with wraparound supports is critical to tackling Ontario’s intersecting housing affordability, homelessness, and mental health and addictions crises. With businesses increasingly facing challenges attracting and retaining workers due to limited affordable housing options, we encourage the government to continue exploring innovative solutions and partnerships with all levels of government, the private, and non-profit sectors to preserve and build affordable housing options along the continuum. To ensure sustainable growth, it will also be critical to optimize existing settlement areas and encourage densification and complete communities.

Cost of Living

Budget 2023 proposes changes to expand eligibility for the Guaranteed Annual Income System (GAINS) program, starting in July 2024, which would see approximately 100,000 additional seniors be eligible for the program (adjusting the benefit annually to inflation). The provincial government is also extending the current gas tax and fuel tax rate cuts for an additional year, keeping the rates at nine cents per litre until December 31, 2023.

OCC analysis: With inflation and interest rates remaining high, affordability continues to be a challenge for Ontarians, as well as businesses looking to attract and retain workers. Expanded eligibility for the GAINS program and extending the gas and fuel rate cuts will provide some targeted relief for some Ontarians but 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. We also look forward to working with the government on the design of an effective and efficient portable benefits program that can help position Ontario for greater competitiveness and productivity.

Manufacturing

To support the growth of local manufacturing, the Ontario government has announced a new provision in Budget 2023 that would allow Canadian-controlled companies to claim a 10 percent refundable corporate income tax credit of up to $2 million annually for investing in buildings, machinery, and equipment. Additionally, the provincial government is collaborating with municipalities and utilities to create ready-use industrial lands that can support large manufacturing investments and potential mega-sites.

OCC analysis: Domestic manufacturing creates jobs, strengthens economic growth and productivity, and improves the resilience of our supply chains. The OCC welcomes these new measures and applauds the government for taking steps to foster an environment that boosts Ontario’s competitiveness and attracts investments and manufacturing projects. In addition to continuing to incentivize investments in manufacturing, the OCC would encourage the government to further invest in trade-enabling infrastructure and greater capacity across all modes and channels of distribution to safeguard the movement of goods both nationally and internationally.

Transportation and Infrastructure

Budget 2023 outlines an additional $5 million investment in annual funding for Winter Roads Program enhancements to improve the safety, reliability, and environmental impact of the winter roads network. It also signals the government’s plan to explore a new Urban Mobility Vehicle pilot program that would allow these vehicles and other micromobility options to operate on roads in the province, with local communities being able to opt-in by passing municipal bylaws. Ontario is also developing its first Marine Transportation Strategy to support greater integration of the movement of people and goods. Budget 2023 further highlights the government’s plan to leverage new technology, such as digital twins that would improve infrastructure planning and enable data-driven decision-making. To mitigate schedule delays for projects and accelerate construction, the government is undertaking several initiatives to improve procurement and delivery practices.

OCC analysis: The OCC is pleased to see additional investments toward northern roadway infrastructure, which is essential for connecting remote communities and delivering goods and services. The development of a provincial marine strategy is also an important first step in delivering trade-enhancing infrastructure. We would encourage the government to also ensure adequate funding towards building greater capacity throughout the province’s multi-modal transportation system, including last-mile connections. Streamlining processes and leveraging technology are necessary for modernizing infrastructure project planning and development. The OCC welcomes new government initiatives to accelerate construction and improve overall decision-making. To support this work, we encourage continued improvements in transit affordability and connectivity, and the resilience of our infrastructure. This includes improving regional fare integration, electrification, and investments towards the maintenance, repair, and resilience of municipal infrastructure assets.

Conservation

Budget 2023 commits to protecting southern Ontario’s green spaces by exploring the creation of a new provincial protected area in the Township of Uxbridge.

OCC analysis: Protecting Ontario’s green spaces is vital for environmental preservation and conservation. The OCC supports exploring the creation of a new provincial protected area in the Township of Uxbridge. We also encourage the provincial government to revisit current plans to develop other conservation lands and continue to look for new ways to better utilize urban areas for sustainable land development, while minimizing disruption to environmentally sensitive assets and agricultural land.

Fiscal Outlook

Budget 2023 reveals a record spending plan of $204.7 billion, with a large focus on health care and workforce development. In light of ongoing economic challenges and fears of a looming recession, the budget highlights investments that help boost Ontario’s economic productivity, resilience, and competitiveness against a backdrop of fiscal prudence.

Positively, the provincial government is now expecting to see a balanced budget as early as 2024-25 – much earlier than the 2027-28 projection reported in last year’s budget. The expected budget deficit for this fiscal year stands at $2.2 billion, an improvement of $10.7 billion relative to projections from Ontario’s most recent Fall Economic Statement. A small surplus of $200 million is expected in 2024-25 followed by a surplus of $4.4 billion the year afterwards.

This year’s budget also outlines improvements in the province’s debt burdens. The expected net debt-to-GDP ratio for Ontario in 2022-23 has decreased from 41.4 percent (as projected in the 2022 Budget) to 37.8 percent. This measure is used to indicate the government’s debt burden in relation to its capacity to repay the debt. The net debt-to-GDP ratio is forecasted to remain at 37.8 percent into 2023-24, before decreasing slightly in 2024-25 (37.7 percent), and again in 2025-26 (36.9 percent).

Much of these improvements are owed to higher nominal GDP growth due to inflation and lower-than-previously-projected deficits. Overall, Ontario’s economy continues to show signs of resilience despite ongoing labour shortages, high inflation, and geopolitical instability. The province saw strong employment gains (+4.6 percent growth) last year, with inflation cooling down to 5.2 percent year-over-year as of February – though increases in grocery and energy prices continue to persist.

As important as fiscal prudence and contingency planning are during times of economic uncertainty and higher interest rates, it will be important to provide ongoing relief to Ontarians burdened by significantly higher costs of living and businesses facing labour shortages and higher input costs. Equally important to this is ensuring that investments are being made in supply-side policies that promote greater productivity, market capacity, and social and economic returns.

What’s Missing

Budget 2023 did not include new announcements around employee ownership trusts, digital health innovation, or specific measures to support Ontario’s cannabis sector.

Budget 2023 was also light on measures to support businesses and communities with climate resilience and the energy transition, including a climate adaptation and mitigation strategy, clarity around the use of revenues from Ontario’s Emissions Performance Standard program, and sustained funding to support municipalities with climate emergency preparedness.

The government is terminating the temporary government-paid sick leave program it introduced during the pandemic, which allowed workers to stay home when sick and helped businesses keep their doors open. While this was introduced as a temporary COVID-relief measure, the OCC is disappointed to see the program wound down without undertaking a consultation process to evaluate successful aspects of the program and consider an amended version targeted towards smaller employers that cannot afford to offer employer-paid sick leave.

This budget also did not provide additional clarity around potential compensation for municipalities for development charge revenue losses resulting from policies intended to incentivize new housing developments. This clarity will be important to ensure municipalities can plan ahead and continue to invest in critical infrastructure and service delivery to support population growth.

Notwithstanding new funding for the Racialized and Indigenous Supports for Entrepreneurs Grant Program, Budget 2023 was light on opportunities to advance economic reconciliation, including supporting Indigenous procurement, employment, and economic development. Ensuring equitable economic opportunities for Indigenous Peoples is critical to bolster Ontario’s labour market and overall economic growth.

For more details, refer to the Ontario Chamber of Commerce’s 2023 provincial budget submission.