Park the ideology and protect the services, says Ontario Alternative Budget Analysis

May 7, 2001

In its annual pre-budget analysis, the Ontario Alternative Budget Working Group has a simple message for the Harris Government: "Park the ideology and call off the dogs. Put the corporate tax cuts on hold. And put a stop to the attacks on education, health care, public infrastructure and the homeless."

The Pre-Budget Analysis makes it clear that the Harris Government has a choice. It can postpone its program of corporate income tax commercial and industrial property tax cuts, and manage its way through the economic slowdown to protect what remains of Ontario's vital public services. Or it can stick to its ideological guns, and wreak further havoc on our schools and hospitals,

The "financial crisis" that forms the theme of every speech of the Premier and the Minister of Finance these days is a manufactured crisis. It is a crisis that was created by the Government's fiscal mismanagement. And it is a crisis that would go away if the tax cuts were suspended.

The Analysis reveals that:

  • By fiscal year 2000-1, the Mike Harris personal income tax cuts were reducing revenue by $9.5 billion a year, while corporate and other tax cuts reduced revenue by a further $2.2 billion a year.
  • The cost of carrying the debt directly caused by cutting taxes while the budget was still in deficit reached more than $800 million a year in 2000-1.
  • The public debt directly attributable to Ontario's premature tax cut program exceeded $14 billion.
  • Ontario could maintain the real value of all public spending (by increasing it at the rate of inflation) in 2001-2 and still balance the budget if it simply postponed planned corporate income tax cuts and cuts in the provincial portion of the commercial and industrial property tax.
  • Despite all of the hoopla about health care cost escalation and Ontario's reinvestment in health care, health care spending has barely caught up with its pre-Harris level, when inflation, population and the effects of ageing are taken into account.
  • Funding for elementary and secondary education has been cut by $2.4 billion, in real, per-student terms, since the Harris Government was elected.

While the Analysis shows that the Harris Government could easily avoid the services blood-letting to which it seems to be committed, it also identifies in other areas of the budget the likely impacts of sticking with the tax cut schedule:

A base-line surplus (no tax cuts, spending increase at rate of inflation, normal reserve allowances) -- (+$0.5 billion)

  • Implementation of previously announced tax - (-$1.5 billion)
  • New tax cuts - (-$1.0 billion)
  • Budget freeze except for health and education; lower-than-inflation increases for health and education -- (+1.0 billion).
  • Reduced reserve allocations -- (+$0.25 to 0.5 billion)
  • Increased education property taxes -- (+0.1 to 0.25 billion)
  • Reduced capital spending -- (+$0.25 to $0.5 billion)
  • Asset sales - (+$0.1 to $0.25 billion)

The Pre-Budget Analysis is the fourth in a series of pre-budget papers released by the Ontario Alternative Budget Working Group in 2001.

The others in the series are: OAB Technical Paper #10 - Fiscal Options; OAB Technical Paper #11 - Health Care Funding; OAB Technical Paper #12 - Housing.

The Ontario Alternative Budget will be available the day after the official budget day, together with an analysis of the official budget. The release is scheduled for the Queen's Park media studio at 11:00 a.m. Thursday May 10, 2001.

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