Canadian Manufacturing

Ontario government gives no specifics on how it will pay for $1B hydro bill tax cut

Criticized for trying to bribe Ontarians with their own money, Liberals would not say how they will cover cost and keep promise to balance budget



PHOTO: David Kennedy

The Liberal government pledged to forego the provincial portion of HST on hydro bill in its speech to the throne earlier this week. PHOTO: David Kennedy

TORONTO—The Ontario government’s throne speech came with billions of dollars in new promises, but the opposition parties are questioning how the Liberals plan to pay for them.

Lower electricity bills and more child-care spaces are on the way, the government announced in its speech outlining priorities for the new session. Removing the eight-per-cent provincial portion of the harmonized sales tax from hydro bills is expected to cost taxpayers about $1 billion a year.

Creating an additional 100,000 licensed child-care spaces for children aged four and under will cost $600 million to $750 million in operating costs and $1 billion to $3 billion in capital funds over five years.

But the Liberals were vague Sept. 13 when asked where that money would come from, while insisting that they will still eliminate the deficit next year.

“The economic growth that has happened, we’ve had six-per-cent growth over the last two years, we’re projecting 2.5 to three-per-cent growth over the next couple of years, so we actually have been able to see those results because of the investments that we’ve made…so we’re in a position to take further steps on both of these fronts,” Premier Kathleen Wynne said.

The Liberal government has promised it would balance the books by 2017-18, so the next budget should see a return to the black.

Finance Minister Charles Sousa suggested there had been room in the budget.

“In the last budget I provided for larger levels of reserves and contingencies to accommodate the ability to start giving back as the economy improved,” he said. “We had to assess the economic rebound and as it’s proceeding and as we are coming to balance we’re able now to provide some more accommodations.”

When asked if the new money would come from a $1-billion reserve fund from the last budget or about $1.2 billion in contingency funds, a spokeswoman for Sousa said the upcoming fall economic statement and the 2017 budget would contain details on how the latest commitments fit in the government’s fiscal plan.

“In the first quarter of this year Ontario posted higher real GDP growth than Canada, the U.S. and all G7 countries,” Kelsey Ingram said in an email. “Our economy is growing which is allowing us to make important investments in energy relief and childcare.

Ivey School of Business economist Mike Moffatt said it’s possible the government will use some of a reserve fund, but likely they’ve saved money from making pessimistic interest rate projections.

“(In their budgets) they make assumptions that interest rates are going to rise and are going to rise fairly rapidly,” he said. “If anything interest rates have gone down since budget 2016. That saves the government quite a bit of money.”

The child-care funding could be backloaded and not really affect the next budget, Moffatt said, but they will have to find that billion dollars for the hydro pledge.

“I think the balanced budget is one of those hell-or-high-water-type promises for them, so I think they’ve done the calculations internally and realized they do have a bit of a cushion to use and they’ve chosen to use it this way,” he said.

Progressive Conservative Leader Patrick Brown said the promises didn’t add up.

“The government’s spending promises—it seems the more desperate they get, the lower they get in public opinion, the more promises they make that aren’t funded,” he said.

NDP Leader Andrea Horwath suggested the budget will only be balanced by counting revenues from the partial sale of Hydro One.

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