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Saturday, Feb. 4, 2006

Bet on this: Ontario can't fund liberal promises

By JEFFREY SIMPSON
Globe and Mail
Wednesday, Oct. 1, 2003

Forget the lotteries. Stay away from the casinos. Don't touch the ponies. There's a sure bet somewhere else.Within a week, or maybe two, of being sworn into office, Ontario Liberal premier Dalton McGuinty will declare that there's something fishy about the province's books.

He will then ask an accounting firm to examine them, or straight up, reveal new budgetary numbers. Either way, the new numbers will be worse than the old Conservative ones. And you know the rest: Mr. McGuinty will insist that the Conservatives hid the facts, things are tougher than believed, so it will take longer to implement the Liberals' program.

We've seen this play before. B.C. Liberal Premier Gordon Campbell and Quebec Liberal Premier Jean Charest both followed this well-worn script after their elections. Lo and behold, each announced that the outgoing government had understated the deficit and relied on false assumptions about future revenues.

Premier McGuinty will do likewise, and with reason. The Eves Conservatives have not accurately stated, or at least updated, Ontario's books. Their fiscal assumptions were predicated on various assumptions, some of which are false, including sales of provincial assets that have not yet occurred.

The Ontario government, like other provincial governments, unwisely "booked" a federal pledge to transfer an additional $2-billion for health care. The federal government made that "promise" contingent on various assumptions about its own budget, most of which were too rosy.

The provinces, however, took the "promise" literally and included the money in their budgets. If the money is not forthcoming -- and who knows, because as with everything else we wait on Paul Martin -- a large hole will appear in provincial budgets, including Ontario's.

Mr. McGuinty will be correct therefore in asserting that nasty surprises await Ontarians courtesy of the Conservatives' failure to update and fairly state the province's books. But even if the books were accurate, Mr. McGuinty would have had a hard time squeezing his election commitments into his fiscal framework.

Mr. McGuinty was obviously spooked by the Conservatives' years of tax cutting, fearing that they had inoculated Ontarians against any additional taxes. So, he promised no new tax increases and lots of additional spending, and that will be hard to square with his spending commitments.

True, Mr. McGuinty insists on scrapping some Conservative tax giveaways: to seniors on property taxes, to homeowners on a small portion of mortgage payments, and to parents who send children to private schools. These were all part of the Conservative campaign of political bribery. They made no public-policy sense. They were designed, instead, to appeal to parts of the electorate the Conservatives thought were ripe for the bribing.

Cancel these taxes and save money -- except that Mr. McGuinty has already spent the savings by promising to reinvest the money in education, for example. Some other promises are mere eyewash.

When was the last time a campaigning opposition party did not promise to end "waste and duplication?" And when did that promise actually amount to much in office? Mr. McGuinty follows that line perfectly, but it does not easily jibe with his complaints about the Eves government having starved program after program.

Nor can anyone take seriously the wildly inflated promise to eliminate hundreds of millions of dollars in consultants' fees to help balance the books. Consultants are often cheaper than full-time staff, because they do piecework and don't receive benefits. Mr. McGuinty has overstated how much money is being spent on consultants and how much could be saved.

His policies for colleges and universities make little fiscal sense, either. He wants to increase the number of student spaces by 10 per cent over five years -- almost 50,000 spaces -- while freezing tuition fees for two years (and waiving them entirely for poor students), and hiring another 800 faculty members. This cannot possibly be accomplished without a significant increase in the yearly base budgets of the colleges and universities -- something completely overlooked in the Liberal platform.

So, too, the Liberal promises on pre-university education are not properly explained. Lowering class size for early education is an excellent idea, but it will cost plenty -- certainly more than the Liberals suggest.

Health care is the same vacuum cleaner for public funds in Ontario as elsewhere. If Mr. McGuinty shovels money into that system at higher rates than the Conservatives, who spent money in this area at rates much higher than government revenue growth, the already stretched provincial budget will be further strained.

Ontarians understandably want a change from the Conservative years. What they think they're getting with the Liberals, will turn out to be somewhat different than what they were promised.



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