TORONTO – Ontario will bleed red ink for several years as it limps through a recession and fights to recover from a “significant” deficit in the upcoming budget, Premier Dalton McGuinty warned Monday.
Some predict Ontario’s deficit will reach at least $5 billion this year, taking into account a $500-million shortfall the government forecast in the autumn, as well as the billions of dollars that have since been promised for infrastructure and troubled automakers.
McGuinty wouldn’t confirm the $5-billion figure, but suggested it wasn’t too far off.
“Some of the numbers are already out there and people can make those calculations, I think, pretty accurately on their understanding of how things are unfolding,” he told The Canadian Press.
“I think that we’re going to run a significant deficit. I’m not going to put a number on it, but we’re going to do it for the right reasons.”
McGuinty has changed his usually cheery tone about Ontario’s economic situation in recent days, painting a far gloomier picture of what’s in store during a series of rare sit-down interviews with reporters.
The premier said he only wants to prepare Ontario residents for what’s ahead, but critics have already interpreted his rhetorical shift as laying the groundwork for cuts to services like health care and schools.
“I expect it means we’re going to see some of the same things that we’ve seen from the Harper government,” said NDP Leader Howard Hampton.
“Lots of corporate tax cuts and we’ll see some cuts to important social and health services.”
McGuinty wouldn’t say whether cuts are on their way, but predicted the province will pay a price for running “multi-year” deficits.
Spending will slow, and Ontarians will have to “temper” their demands on how much more can be invested in provincial programs, McGuinty said.
“Let’s not be carried away with deficit euphoria,” he said.
“We will not be able through our budget to do everything we would like to do.”
Doug Porter, a senior economist with the Bank of Montreal, said slowing spending may not be enough if the economy doesn’t start recovering quickly – and McGuinty’s talk about a multi-year deficit indicates the deficit will be relatively large.
“Based on what Ottawa foresees as the underlying deficit even before they took any measures … I don’t think it would be a great shock if Ontario’s (budget deficit) is around $5 billion or even possibly larger in the coming fiscal year,” Porter said.
“The Ontario economy is struggling even more than the broader Canadian economy, so it’s quite possible that the province’s revenues will take an even deeper hit than what Ottawa will see in the next year.”
McGuinty also acknowledged Monday that his five-point economic plan may not be enough to get Ontario back on track, and more “fundamental changes” will be required.
“We’re going to have to do more to enhance our competitiveness if we are going to achieve the rates of growth we need to support the quality of public services that we have come to expect, and to support the standard of living that we’d like to hand down to our kids,” McGuinty said.
“We’re going to have drill deeper here now, beyond the five-point plan, beyond the support for public services.”
With commitments to match federal dollars for infrastructure projects in the province and provide $1.3 billion to bail out troubled automakers, the Liberals must ensure every penny borrowed is well-spent, Progressive Conservative Leader John Tory said in an interview from Lindsay, Ont.
McGuinty, he said, is starting to sing a different tune after years of ridiculing Conservative ideas to reduce business taxes and squandering provincial surpluses.
“The fact that he’s now rolling out the welcome mat for businesses investment is a new song for him to sing, but it’s a welcome song,” Tory said.
“I just hope he gets to know the tune and the song much better than he has in past years.”