Entries in provincial (3)

Wednesday
Apr292015

A tale of two budgets: federal and provincial

In a tale of two budgets, the federal and provincial budgets were delivered last week. The federal budget is a pre-election document with something for everyone.  The provincial budget is one of a majority government with an eye to transportation infrastructure and getting the province fiscally on solid ground. 

Provincially  

Ontario Chamber of Commerce (OCC) policy analysts were in the budget lockup at Queen’s Park last Thursday and came away with the following analysis:

Provincial deficit has risen

Budget 2015 makes the right commitments but is vague on details when it comes to how the government will meet its deficit reduction targets (eliminating the deficit by 2017-2018).  Total provincial debt is projected to grow to $284 billion this year – equivalent to $20,772 of debt for every Ontarian.  The OCC applauds the government for making difficult decisions in terms of wage restraint measures and holding average annual growth in program spending to 1.5 percent.  This should be a top priority area for the government as eliminating the deficit is the most important step government can take to improve Ontario’s competitiveness and create jobs in the province.

Government is plowing ahead with the Ontario Retirement Pension Plan (ORPP)  

The OCC remains concerned about the impact that the ORPP could have on the economy.  Budget 2015 provides little in the way of clarity for employers on the details of the ORPP.  We continue to call on government to develop a comprehensive understanding of the impact of the ORPP and to re-examine the narrow exemption rules it has in place.  These narrow parameters ignore the contributions that many employers are already making to their employees’ retirement through defined-contribution plans.

Employers will continue to be shocked by rising electricity rates

Budget 2015 does little to address business’ concerns over rising electricity rates.  According, to the OCC’s most recent survey, rising electricity prices are the number one factor hurting business competitiveness.  While the Industrial Conservation Initiative (ICI) and the extension of the Northern Industrial Electricity Rate (NIER) program are encouraging, we remain very concerned about out-of-control electricity rates.  

Government is making important investments in transportation infrastructure

The OCC welcomes increased spending in areas of strategic, economic importance, including transportation infrastructure.  Budget 2015 increases dedicated transportation infrastructure funds by $2.6 billion to $31.5 billion available over 10 years.  These funds will be used for transit, transportation, and other priority infrastructure projects across Ontario. The Province should continue to make use of its world-leading Alternative Financing and Procurement (AFP) expertise in order to ensure it is getting the best bang for its infrastructure buck.

Government is aggressively pursuing an asset recycling strategy

The OCC supports the government’s goal to maximize the value of its assets. Budget 2015 increases the asset optimization target to $5.7 billion, up from a $2.6 billion target in 2014.  As it undertakes its asset review, government must ensure that its actions do not hurt domestic industry and, as it relates to the sale of electricity infrastructure, do not put the rate payer at risk. 

Innovation initiative:  The government is investing $20 million to establish a Health Technology Innovation Fund and appoint a Chief Innovation Strategist.

Cuts to the Apprenticeship Training Tax Credit: Funding is being returned to pre-recession levels, resulting in $30 million in cost savings. 

Youth Employment: Ontario Youth Jobs Strategy is being renewed to the tune of $250 million in the next two years. 

Full Provincial Budget 

Federally

“Oil prices have recovered slightly, to around $56, and we expect them to be back in the $65 range by year-end.  The government also enjoyed a $3.4 billion windfall from the sale of GM shares,” says Hendrik Brakel, Senior Director, Economic, Tax and Finance Policy, Canadian Chamber of Commerce.  “As a result, there is room for some helpful measures to support Canadian business, a few things that will make life easier for business.”

Taxes

Small Business Tax Rate will be reduced from 11 percent to 9 percent by 2019 (0.5 percent reduction each year starting January 1, 2016), resulting in $2.7 billion in tax savings through 2020.  

The federal government also committed to extending the accelerated capital cost allowance to 2025.  

On payroll taxes, the Canadian Chamber was pleased by the government reconfirming the EI premium rate freeze.  

Trade and International Affairs 

There was a significant increase in funding for agriculture exports, including $18 million to promote
competiveness and trade opportunities and $12 million to market Canadian food.  

Technology and Innovation

The federal government promised $1.3 billion over six years starting in 2017-18 to the Canada Foundation for Innovation for advanced research infrastructure at universities and research hospitals. 

As well as, $1 billion over five years for technical demonstrations in the aerospace industry plus $30 million over four years for Canada’s satellite communications sector.  

People and Skills

The investment of $65 million will allow business and industry trade associations to work with post-secondary institutions to better determine the needs of the market.

The Canadian Chamber has been advocating for improved labour market information, so it was pleased to see $4 million over two years to launch a new one-stop national labour market information portal.  We welcome this as a first step toward more investments in actual surveys.  

Missing from the federal budget were discussions around climate change.

Full Federal Budget

The business community is fighting for a business climate that functions at the utmost efficiency and look to the government at all levels to set the framework so that goal can be realized.   The economic health of our country and our province are key to moving us forward.  However, both budgets reflect a common tension that governments must balance through the best of times and the worst of times. 

Comment through the "Peterborough Chamber" group of LinkedIn.

Tuesday
Nov182014

OCC Rapid Policy Update: Our take on the Government's 2014 Fall Economic Statement

 

On Monday, November 17, 2014, the Government of Ontario released its 2014 Ontario Economic Outlook and Fiscal Review, which provides an update on the government’s finances and progress on key commitments since the release of the 2014 Budget. In October, the province’s unemployment rate declined to 6.5 percent, its lowest rate since 2008. The province has also seen real gains in GDP, exports, and household consumption since the beginning of the year.

The government remains committed to eliminating its budget deficit by 2017-18. It continues to project a deficit of $12.5 billion for the 2014-15 fiscal year, with significant reductions in the deficit thereafter.

The government plans to meet this target despite a substantial decline in revenue. Projected revenue for 2014-15 is $509 million less than previously forecasted in the 2014 Budget. With projected government expenses declining by $208 million since the 2014 Budget, the government is using $300 million from its reserve fund to make up the difference. 

 

Path to a Balanced Budget

In the Fiscal Review, the government highlighted the four key components of its plan to reach a balanced budget by 2017-18. These are:

1. Reviewing and transforming programs

The government's annual program review savings targets remain at $250 million for 2014-15 and $500 million for 2015-16 and 2016-17.

OCC Position: The government expressed willingness to pursue “other tools” to meet its goal of balancing its books by 2017-18. We feel that a more robust program review and more ambitious targets are required prior to any revenue increases.

2. Managing compensation costs

Government has negotiated zero or minimal salary increases in recent agreements with public sector unions.

OCC Position: We support government's efforts to hold the line on public sector salaries. 

3. Ensuring everyone pays their fair share of taxes

According to government figures, the province generated over $380 million in additional revenue in 2013-14 by enhancing the integrity of the tax system. The government is taking action to tackle the underground economy. This includes: 

  • Pilot programs to strengthen compliance in high-risk sectors
  • Working with the federal government to identify new measures to curtail corporate tax avoidance
  • Stepping up efforts to curb contraband tobacco by establishing oversight of raw leaf tobacco, effective Jan. 1, 2015

OCC Position: We support a crackdown on the underground economy and on tax evaders.

4. Unlocking the value of provincial assets

The Premier’s Advisory Council on Government Assets will present its final recommendations in advance of the 2015 Budget. The Council is investigating how to generate the most value out of the LCBO, Hydro One, and OPG.

OCC Position: We support government's efforts to deliver more value from provincially owned assets, but these efforts should be expanded to more government assets in a regularized (not one-off) process. 

 

The Federal Funding Gap

In his address to Provincial Parliament, the Minister of Finance called on the federal government to reform the federal transfer system to treat Ontario fairly. The gap between what Ontarians pay in federal taxes and what they receive in federal funding and transfers is $11 billion, or $850 per Ontarian. He stressed that more of the money that comes to the federal government from Ontarians should be reinvested back into Ontario.

Specifically, the Minister called on the federal government to match the province’s $1 billion commitment to Ring of Fire investment, and increase federal investment in public transit.

OCC Position: We strongly encourage the federal government to reform fiscal transfers and programs that shortchange Ontario, such as Employment Insurance.

We also encourage the federal government to match the provincial investment in the Ring of Fire and to invest more in productivity enhancing infrastructure, such as transit.

 

 

Monday
Nov032014

Peterborough Chamber Sounding Alarm on Ontario’s Debt and Deficit 

 

Ontarians should be very concerned about the province’s fiscal situation, according to a new report from the Ontario Chamber of Commerce and the Greater Peterborough Chamber of Commerce.

The report, How Bad Is It? What Do We Do About It?, provides a straightforward account of Ontario’s current fiscal situation. It finds that while Ontario's fiscal situation is better than that of many other countries facing fiscal problems, the province is likely to reach a state of crisis unless it cuts spending and changes the ways it does business.   

The report finds that Ontario’s history of spending is unsustainable. In only seven of the past 25 years has the government balanced its books or achieved a surplus. As a result, the province has been digging itself deeper and deeper into the red. By 2016-17, interest payments to service the provincial debt are projected to consume ten cents of every dollar the government spends. 

According to the authors, a tipping point may be closer than Ontarians think. With a slower growth future projected for the province, combined with the growing demands of a rapidly aging population, the need to deal with the fiscal situation now becomes all the more urgent.  

A sustained state of poor fiscal health can hurt business confidence and makes the province a less attractive place to invest. According to a recent Ontario Chamber of Commerce survey, 93 percent of businesses in the province believe that eliminating the deficit should be a top priority for government. 

The authors also recognize the need for a solid partnership with the federal government that delivers on the need for more principled federal transfers. 

And as the authors conclude, the
approaches mentioned above “offer
opportunity to reduce government spending and to reshape government programs and services to increase the public’s return on investment.”   They can also “set the province on a path toward fiscal sustainability.”

What makes this report worth buying into is the idea that not any one
approach is the ultimate solution, but that there has to be a knowingness and willingness to use an approach that improves the business climate and improves the government’s ability to focus on key priorities.  

Read the Full Report

Comment through the "Peterborough Chamber" group of LinkedIn.