TORONTO—Ontario’s financial watchdog warns the province’s net debt will grow by another $50 billion to $350 billion in the next four years, and predicts a return to deficit budgets even if the books are balanced next year.
The Financial Accountability Office said July 19 that the net debt will keep growing largely because of the Liberal government’s $160-billion, 12-year plan to invest in infrastructure and public transit projects.
The FAO said the debt will also grow because it predicts a return to annual budget deficits in 2018-19, even though the Liberals promise to eliminate a $5.7-billion shortfall next year.
This year’s provincial budget forecast Ontario’s net debt would hit $326.8 billion in 2018-19, which was as far out as its projections went, so the FAO’s prediction of a $350 billion debt by 2020-21 is not a big stretch.
The Opposition said the FAO’s report is proof that “the Liberals’ mismanagement and reckless spending” is causing Ontario’s debt to spiral out of control.
“This morning, the Financial Accountability Officer confirmed … that Ontario will continue to be the largest sub-national borrower in the world,” said Progressive Conservative finance critic Vic Fedeli.
“He also confirmed what we’ve been saying for months, that the government is using one-time money from asset sales, contingency funds and tax increases to artificially balance the budget in an election year.”
The New Democrats said the reason Ontario’s net debt is increasing is because Premier Kathleen Wynne’s choices are more about politics than about what’s best for Ontarians.
“The FAO reported that Kathleen Wynne’s decision to sell Hydro One doesn’t pay for infrastructure, but will actually increase the debt,” said NDP finance critic Catherine Fife.
“Instead of asking profitable businesses to pay their fair share, the Liberals have cut Ontario’s corporate tax rate so it’s lower than Alabama’s.”
The FAO report said Ontario’s net debt “increased significantly” during the 2008-09 recession, and grew by $139 billion between then and 2015-16.
Finance Minister Charles Sousa said the Liberals made a deliberate decision during the recession to stimulate economic growth, which he insists meant the downturn was not as deep or as long as it might otherwise have been. The government is making capital investments to promote long-term growth, he added.
“We know that investing in infrastructure spurs economic growth and increases GDP, which is why we’ve decided to make a historic $160-billion investment in roads, bridges, schools and hospitals across Ontario,” Sousa said in a statement.
“Through prudent debt management, we have consistently kept interest on debt costs below budget projections.”
Interest on Ontario’s debt is expected to be $11.75 billion this year and $12.45 billion in 2017-18, both lower than forecast in the 2015 budget.
On Monday, Ontario announced first quarter results showing 0.8 per cent growth, or three per cent on an annualized basis, the strongest among all G7 countries. Wynne said the growth will allow the government to balance the budget next year.
“Ontario remains firmly committed to eliminating the deficit by 2017-18, and will do so in a way that is fair, equitable and protects the valuable programs and services that Ontarians rely on,” Sousa said Tuesday.