Ontario Budget Confirms Sale of Hydro One, Tightens Social Spending

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Ontario budget

Ontario Liberal budget confirms the sale of Hydro One and tightens health, education spending..

The behind-the-scenes influence of big business in politics was never so evident than it was in the tabling of the 2015 Ontario budget on Thursday.

Two glaring examples stand out in the budget: 1) the 60% sell-off of government-owned Hydro One; and 2) the unwillingness of the Wynne Liberal government to reverse the McGuinty Corporate Tax reductions that are costing the Ontario treasury $2.5 billion annually.

First, some numbers from the budget.

The Hydro One sale is expected to generate about $9 billion, $5 billion of which will be used to pay hydro debt, with the remaining $4 billion to be allocated to transit and other infrastructure projects.

In other words, the Hydro One sell-off  will allow for one-time only transit investments of $1 billion in each of the next 4 years – a fraction of the $130 billion over 10 years the province has pledged to transit and other infrastructure.

Contrast the relatively small sums to be gained by the Hydro One sell-off with the fact that if Dalton McGuinty hadn’t lowered the Corporate tax rate in 2010 from 14% to 11.5%, the tax would have yielded $2.5 billion more in revenue annually. And that annual revenue loss will only increase as the corporate tax base grows over time.

That’s $2.5 billion that could have been invested every year in transit and other infrastructure – in perpetuity!

And what are the projected annual revenue losses due to the 60% sell off of Hydro One? Well, in 2013-14, Hydro One profits contributed $800 million to the provincial coffers. So, if the government sells off 60% of Hydro One, a reasonable estimate would be an annual loss of at least $500 million in provincial revenues once the full 60% is sold off in a few years.

So between the McGuinty Corporate Tax breaks and the sell-off of Hydro One, the Ontario treasury is losing about $3 billion in annual revenues – an amount that will only grow as Ontario’s economic base expands in the future.

And $3 billion in lost revenue means an awful lot of belt-tightening for a government that intends to balance its books in 2018 and invest heavily in infrastructure.

Social Spending Restraint

What does the budget say about how this belt-tightening plays out on the front-lines?

First, there will be a 5.5 per cent spending reduction, amounting to a $2.8-billion cut over three years, to such important ministries as aboriginal affairs, environment and agriculture.

Overall, government spending growth will be held to 0.9 per cent – below inflation.

Health, education, social services and justice will experience minor spending increases that max out at 2.9 per cent. This at a time when seniors spend years on waiting lists to get into long-term care facilities and classrooms in many communities are bursting at the seams.

In addition to the $2.8 billion cut in “non-core” ministries, a program review by Treasury Board president Deb Matthews will identify an additional $1.5 billion to be cut over the next three fiscal years.

Will Ontario achieve its goal of a balanced budget by 2018 with all this belt-tightening?

According to the budget, yes. The 2015/16 deficit will drop $2.5 billion to $8.5 billion. In subsequent years, the shortfall will further shrink to $4.8 billion in 2016/17 and return to balance in 2018.

The problem with the budget 

There is nothing wrong with the Liberal government aiming to balance its budget at the height of the business cycle almost ten years after provincial revenue cratered in the midst of the global economic crisis.

And the government should be lauded for its transit and other infrastructure investments.

The problem is the way the government is going about balancing its budget – through mis-guided short-term thinking in the case of a Hydro One sell-off that will deprive the provincial treasury of $500 million annually and a capitulation to big business interests that want to keep the $2.5 billion Dalton McGuinty bestowed upon them when he bowed to their pressure to lower the Corporate Tax rate in 2010.

That extra $3 billion in annual revenue could have gone a long ways towards funding badly needed public services and infrastructure.

Let’s be clear, this budget should have reversed the McGuinty Corporate Tax cuts and should not have included the privatization of Hydro One.

Too bad the Wynne government didn’t have the stomach to stand-up to corporate lobbying and do the right thing in its 2015 budget.

5 thoughts on “Ontario Budget Confirms Sale of Hydro One, Tightens Social Spending

  1. Christine

    some cuts should be made to the members pensions and free benefits maybe if they showed the way people wouldn’t be so angry , too bad there aren’t more benefits for seniors they have paid in to everything and live sub standard – hope you are proud of yourselves. I would like to know what infrastructure will be built in Northern Ontario none should be spent in Toronto they haven’t paid the huge rate for Hydro one and had to deal with the idiots that run it. Get a life Wynne the only time you are in Northern Ontario is for a photo op. There better not be one dime spent activities in Toronto no problem with them having cultural events they are fine but not out of my pocket when we can barely afford to live now.

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  2. Joanne

    Selling Hydro One is an outright disgrace by the Ontario Liberal Party—we live in a democracy. A referendum to the public is the only way this will be a democratic provincial government. Also if Hydro One goes public–employees of it and OPG are going to be given shares and other energy affiliated companies are speaking for the shares so none will be left for the public to buy anyway—-how is this going public? Ms. Wynn is a loss not a win. And the public will have a loss unless she can GUARANTEE that rates will not go up in the next 15 years—-maybe a class action suit could go against her and her party under tort law.

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  3. Bobart

    Still no talk of depreciative tax returns caused by excessive taxation. The loss of jobs in Ontario is in proportion to the over tax burden. When businesses close due to too many taxes, the gov gets even less year over year so they raise more taxes, closing more businesses. This is what government does, period. It does not matter who applies the taxes, feds or provincial, it all has the same result.

    I avoid all “products and services” tainted by government. I won’t drive. I don’t own a house. Insurance scams are avoided at all costs. I refuse to vote for any of these disfunctional parties people keep applying against me. My business will soon likely close with the help of the government. They apply 70 000 in taxes and offer zero services. I truly mean zero. No garbage pickup, no snow removal, no repairs or maintenance to property, no regulations keeping infrastructure costs down, nope just rules to govern how they should go up year after year for no reason.

    When they only add burdens and no benefits, they are a leech, a parasite living off the host. The government has become the peoples blood sucker taking and taking until it runs dry and yet most detach so as not to kill the host… not the Canadian governments though, they aim for dead bankrupt and the perfect examples of what never to do.

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