Liberals must decide whether to keep reinvestment pledge or follow in Harris/Eves footsteps--report

January 12, 2004

TORONTO--The McGuinty Government cannot keep its signature campaign commitments for public services renewal without both increasing taxes and running deficits for at least part of its first term in office, according to a report released today by the Canadian Centre for Policy Alternatives.

The report, Ontario Chose Change: Will the Liberals? by economist Hugh Mackenzie, analyzes the province's current fiscal situation together with forecasts for economic growth and expenditure growth over the next four years and concludes that:

  • In order to balance the budget in fiscal year 2004-5, even with full-year revenue from all of its promised tax cut roll-backs, the Government would have to cut at least $2 billion from program spending;
  • Using current average projections for economic growth and allowing for the impact of inflation and population growth on spending, the government will be able to implement only about 40% of the public services renewal spending promised in the campaign by 2006-7;
  • Even with low-probability higher growth assumptions (1% above the consensus), the Government will be able to implement only about 75% of the changes promised;
  • If real economic growth runs even 1% per year below the consensus over the next three years, the Government will be hard pressed simply to eliminate the deficit it inherited, leaving nothing for program improvements.

In the next few months, the Government will have to choose whether to deliver on its signature campaign commitments of reinvestment, or to sacrifice those commitments in order to deliver on its pledge not to raise taxes.

"Unfortunately for those Ontarians who placed their trust in the Liberals' 'Choose Change' slogan, it appears that the Premier's political instincts are to bat clean-up for Mike Harris and Ernie Eves, using the Conservatives' mismanagement as the justification for another round of cuts to Ontario's already-weakened public services," Mackenzie concludes.

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