With recovering economy Eves, Ecker can start services repair, OAB says

June 13, 2002

TORONTO--Ontario's economic recovery gives Premier Ernie Eves and his Finance Minister Janet Ecker the fiscal room to make good on the Throne Speech promises of public services improvements, Ontario Alternative Budget Working Group Co-Chair says.

In the OAB's annual pre-budget fiscal update, Hugh Mackenzie estimates that, based on recent provincial forecast updates by Canada's five largest chartered banks, Ontario can increase public services spending by $2 billion in 2002-3 without risk of a deficit.

"So far this year, we've seen much greater strength in the provincial economy than anyone expected last fall, and that greater strength is reflected in much more positive forecast numbers for 2002 and 2003. And the stronger economy translates directly into stronger government revenues", Mackenzie said.

In addition, the decision of the Federal Government to restore a portion of the taxes cut from tobacco in 1993 means that Ontario has the potential to raise an additional $1 billion in 2002-3 from higher taxes on tobacco products.

"Ontario should increase tobacco taxes by the full amount permitted under its agreement with the Federal Government. That would contribute $1 billion in additional revenue to the effort to rebuild public services shattered by seven years of budget cutting. And by restoring a portion of the financial disincentive for smoking that was removed in 1993, it makes sense from a public health perspective", Mackenzie said.

New investments to restore public services spending are badly needed. Public services have dropped, as a share of the economy, from 15.1% in the first year of the Harris Government to 12.1% in 2001-2. This compares with the average in the 20 years before 1995 of 14.9%.

"The rebound in the economy has given the Government the opportunity to have it both ways: to put off for another year the need to review the impact of the Harris years on this province's fiscal capacity; and to make a small but significant start on the job of repairing the damage those years caused to Ontario's vital public services", the report concludes.

The Ontario Alternative Budget is a project of the Canadian Centre for Policy Alternatives.

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