Contents
Foreword
Introduction xiii
Economic Outlook Improving xiii
Meeting Fiscal Targets xiv
A Balanced Path to a Balanced Budget xv
Pursuing Program Review, Renewal and Transformation xvi
Managing Compensation Costs xvii
Ensuring Everyone Pays their Fair Share of Taxes xvii
Unlocking the Value of Provincial Assets xviii
Our Plan for Building Ontario Up xix
Investing in People’s Talents and Skills xix
Building Modern Infrastructure and Transportation xx
A Dynamic and Supportive Business Environment xxi
Building a Secure Retirement xxii
A Strong Ontario within a Strong Canada xxiii
A Fair Society xxiii
Conclusion xxiv
Chapter I: Building Opportunity, Securing Our Future
Section A: Making Every Dollar Count
A Balanced Path to a Balanced Budget 3
Ontario’s Plan to Eliminate the Deficit 4
Progress on Actions to Eliminate the Deficit 7
Pursuing Program Review, Renewal and Transformation 7
Managing Compensation Costs 9
Ensuring Everyone Pays their Fair Share of Taxes 11
Unlocking the Value of Provincial Assets 15
Section B: Investing in People’s Talents and Skills
Ontario’s Skilled Workforce Is a Key Competitive Advantage 21
Building on Previous Achievements 22
Investing in Early Career Experience 22
Ontario’s Specialist High Skills Majors Program 23
Advancing Postsecondary Education 23
Supporting Partnerships, Creating Jobs 25
Ontario Youth Jobs Strategy 25
Improving Skills Training 27
Ontario’s Integrated Employment and Training System 27
Canada–Ontario Job Grant 28
Promoting the Skilled Trades 29
Section C: Building Modern Infrastructure and Transportation Networks
Continuing to Move Ontario Forward 32
Dedicated Funding for Priority Projects in the GTHA 32
Dedicated Funding for Priority Projects Outside the GTHA 33
Improving Public Transit 34
Investing in Provincial Highways 36
Building Better Places to Learn 37
Increasing Access to Postsecondary Institutions 37
Investing in Modern Health Infrastructure 38
Innovative Approaches to Infrastructure Investment 38
Section D: Creating a Supportive and Dynamic Business Climate
Maintaining a Competitive Tax Environment 42
Building Strategic Partnerships 44
Reducing Regulation for Business 47
Growing Small Businesses in Ontario 47
Helping Businesses Manage Electricity Costs 48
Modernizing and Strengthening Financial Services 49
Strengthening Ontario’s Financial Services Sector 50
Modernizing Ontario’s Financial Services Sector 51
Going Global 53
Growing Ontario Exports 53
Strengthening Partnerships with Provinces and Territories 54
Attracting Foreign Direct Investment 55
Supporting a Vibrant Tourism and Culture Sector 55
Section E: Strengthening Retirement Security
A Leader in Retirement Income Security 57
The Ontario Retirement Pension Plan 57
Pooled Registered Pension Plans 60
Target Benefit Pension Plans 60
Ongoing Retirement Income Security Reforms 61
A Strong Pension Regulator 61
Pension Reforms Underway 62
Sustainable and Cost-Effective Public-Sector Defined Benefit Plans 64
Pooled Asset Management 64
Framework for Conversion to Jointly Sponsored Pension Plans 64
Section F: A Fair Society
Building Opportunity for All Ontarians 65
Moving Forward on the Poverty Reduction Strategy 65
Breaking the Cycle of Poverty for Children and Youth 66
Moving towards Greater Employment and Income Security 67
Investing in Affordable Housing and Ending Chronic Homelessness 68
Using Evidence to Develop Policy and Measure Success 69
Supporting Ontarians with Developmental Disabilities 69
Increased Legal Aid Eligibility 70
Protecting Ontario Consumers 71
Taking Steps to Keep Auto Insurance Affordable 71
Transparency and Accountability 72
Electricity Rate Mitigation for Low-Income Ontarians 73
Chapter II: Economic Outlook
Overview 77
Economic Expansion Continues 79
Ontario’s Economy Continues to Create Jobs 80
Global Economic Developments and Outlook 82
Outlook for Ontario Economic Growth 91
Details of the Ontario Economic Outlook 99
Private-Sector Forecasts 100
Change in the Economic Outlook 101
Comparison to the 2014 Budget 102
Chapter III: Fiscal Outlook
Section A: Overview 105
Section B: 2014–15 Fiscal Performance
2014–15 Revenue Changes since the 2014 Budget 108
Details of 2014–15 In-Year Revenue Changes 109
2014–15 Expense Changes since the 2014 Budget 110
Details of 2014–15 In-Year Expense Changes 110
Section C: Medium-Term Fiscal Outlook
Ontario’s Recovery Plan 113
Medium-Term Revenue Outlook 114
Medium-Term Revenue Outlook Has Declined since the 2010 Budget 116
Medium-Term Expense Outlook 117
Fiscal Prudence 117
Section D: Details of Ontario’s Finances
Fiscal Tables and Charts 119
Chapter IV: National Leadership — Strong Ontario, Strong Canada
Overview: Time for Federal–Provincial Partnership 131
Need for Responsible Federal Actions 132
Addressing Fiscal Imbalance in the Federation 132
Modernizing the Fiscal Arrangements 134
Investing to Improve the Lives of Ontarians 137
Infrastructure Investment 137
Support for the Automotive Sector 138
Support for Labour Market Development 139
Attracting Skilled Immigrants 140
Partnership on Poverty Reduction 140
Ensuring Old Age Security 141
Ensuring Everyone Pays their Fair Share of Taxes 142
Chapter V: A Fair and Efficient Tax System
Income Tax Changes for People 145
Personal Income Tax Rates 145
Tax Changes for Business 146
Review of the Ontario Interactive Digital Media Tax Credit 146
Tax on Aviation Fuel — Relief for Vulnerable Communities 147
Registration Requirements for Certain Road-Building Machines 147
Small Business Deduction 148
Other Measures 148
Enhanced Administration of the Estate Administration Tax 148
Tax Credit for Farmers Who Donate to Community Food Programs 148
Power Dam Special Payment 149
Implementation of the Special Purpose Business Property Assessment Review Recommendations 149
Chapter VI: Borrowing and Debt Management
Long-Term Public Borrowing and Green Bonds 153
Debt and Net Debt-to-GDP 157
Residual Stranded Debt Update 158
Total Debt Composition 160
Cost of Debt 161
Risk Exposure 162
Chapter VII: Pre-Budget Consultations
How to Participate in the 2015 Pre-Budget Consultations 165
Tables
Chapter II: Economic Outlook
Table 2.1 Ontario Economic Outlook 77
Table 2.2 Outlook for External Factors 89
Table 2.3 Impacts of Sustained Changes in Key External Factors on Ontario’s Real GDP Growth 90
Table 2.4 The Ontario Economy, 2012 to 2017 99
Table 2.5 Private-Sector Forecasts for Ontario Real GDP Growth 100
Table 2.6 Changes in Ministry of Finance Key Economic Forecast Assumptions: 2014 Budget Compared to 2014 Fall Economic Statement 102
Chapter III: Fiscal Outlook
Table 3.1 2014–15 In-Year Fiscal Performance 108
Table 3.2 Summary of Revenue Changes since the 2014 Budget 109
Table 3.3 Summary of Expense Changes since the 2014 Budget 110
Table 3.4 Ontario’s Recovery Plan 113
Table 3.5 Summary of Medium-Term Revenue Outlook 115
Table 3.6 Ontario’s Recovery Plan 119
Table 3.8 Total Expense 121
Table 3.9 Details of Other Expense 122
Table 3.10 2014–15 Infrastructure Expenditures123
Table 3.11 Ten-Year Review of Selected Financial and Economic Statistics 124
Chapter VI: Borrowing and Debt Management
Table 6.1 2014–15 Borrowing Plan 155
Table 6.2 Medium-Term Borrowing Outlook 156
Charts
Chapter I: Building Opportunity, Securing Our Future
Chart 1.1 Ontario’s Plan to Eliminate the Deficit 4
Chart 1.2 Ontario’s Record against Deficit Targets 5
Chart 1.3 Ontario’s Internationally Competitive CIT Rate 42
Chapter II: Economic Outlook
Chart 2.1 Ontario’s Economic Expansion 79
Chart 2.2 Employment Gains Concentrated in Full-Time, Private-Sector, Above-Average Wage Jobs 80
Chart 2.3 Ontario Job Recovery Ahead of U.S. and OECD Average 81
Chart 2.4 Global Economic Growth to Improve 83
Chart 2.5 Strengthening U.S. Recovery 84
Chart 2.6 Oil Prices to Remain High 85
Chart 2.7 Interest Rates to Rise Gradually 87
Chart 2.8 Canadian Dollar to Remain Below Parity 88
Chart 2.9 Ontario’s Growth Outlook Led by Exports and Investment 91
Chart 2.10 Employment Expected to Rise over the Medium Term 92
Chart 2.11 Housing in Ontario to Remain Affordable 94
Chart 2.12 Although Elevated, Canadian Household Debt Remains Affordable 95
Chart 2.13 Ontario Business Machinery and Equipment Investment Expected to Rise in Line with Profits 96
Chart 2.14 Exports Expected to Increase 98
Chart 2.15 Private-Sector Outlook for Growth Down Slightly 101
Chapter III: Fiscal Outlook
Chart 3.1 Medium-Term Revenue Outlook Has Declined since the 2010 Budget 116
Chart 3.2 Composition of Revenue, 2014–15 126
Chart 3.3 Composition of Total Expense, 2014–15 127
Chart 3.4 Composition of Program Expense, 2014–15 128
Chapter IV: National Leadership — Strong Ontario, Strong Canada
Chart 4.1 Fiscal Disparity in the Federation — Projected Budget Balances across Orders of Government 132
Chart 4.2 Ontario’s Net Contribution to the Federation in 2009–10 134
Chart 4.3 Net Contribution to Equalization (2014–15) 135
Chart 4.4 Declining Federal Housing Investment in Ontario 141
Chapter VI: Borrowing and Debt Management
Chart 6.1 2014–15 Borrowing 154
Chart 6.2 Net Debt-to-GDP 157
Chart 6.3 Residual Stranded Debt since April 1, 1999 158
Chart 6.4 Total Debt Composition as at September 30, 2014 160
Chart 6.5 Effective Interest Rate (Weighted Average) on Total Debt 161
Chart 6.6 Net Interest Rate Resetting and Foreign Exchange Exposure 162
Foreword
Introduction
The purpose of this Ontario Economic Outlook and Fiscal Review is to update the people of Ontario on the progress their government has made on their behalf since the passage of the 2014 Budget. Normally this is intended to be a mid-year assessment, coming about six months after the budget. But with intervening events, most notably the spring election, our budget only passed on July 24, less than four months ago.
With a strong and clear mandate from the people and spurred on by a sense of urgency created by the compressed time frame, the government has since been moving ahead with speed, determination and diligence.
Our purpose is clear: to create opportunity and security for people, and to build Ontario up, while eliminating the deficit in a responsible and balanced way. Our commitment to balancing the budget by 2017–18 will ensure that, over the long term, we can provide the programs and services that Ontarians expect and rely on.
Economic Outlook Improving
The global economic environment remains challenging and contributed to relatively weak growth for Ontario through 2013. However, there are positive signs that Ontario’s economic expansion is gaining momentum this year, supported by a resurgent U.S. economy. Major economic indicators, including real gross domestic product (GDP), exports and household consumption, have posted solid gains since the beginning of 2014. Ontario’s unemployment rate has declined to 6.5 per cent in October, down from 7.5 per cent at the beginning of the year and the lowest rate of unemployment since 2008.
Meeting Fiscal Targets
The Ontario government is working to meet its fiscal targets, despite the challenges of the relatively modest pace of economic growth. Lower economic growth means less-than-expected revenue.
The Province’s total revenue projection for 2014–15 of $118.4 billion is $509 million lower than the 2014 Budget forecast. This largely reflects weak 2013 economic growth and lower-than-expected tax revenues in 2013–14 that carry forward over the medium term.
Yet the government has overachieved on its fiscal targets in spite of a decline in the revenue outlook since the 2010 Budget and is continuing to move forward towards balance. This is happening thanks to sound management of government expenses.
From 2010–11 through to 2013–14, growth in program spending was held to an average of 1.2 per cent per year. This growth rate resulted from disciplined action to find efficiencies in the delivery of public services while still making critical investments in the programs and services that people depend on, such as health care and education.
As a result of responsible management, program spending was 16.6 per cent of Ontario’s GDP in 2013–14. In contrast, program spending was 17.9 per cent of Ontario’s GDP in 2009–10. From 2013–14 through to balance in 2017–18, program spending is projected to grow at an average annual rate of 0.8 per cent.
The government supported the economy during the recession and is now taking a responsible and balanced approach to eliminating the deficit. Indeed, Ontario consistently has the lowest per capita program spending among all Canadian provinces.
A Balanced Path to a Balanced Budget
The foundation of a strong economy is a balanced budget. The government is committed to achieving a balanced budget by 2017–18. Balancing the budget is a sign of prudent management that is consistent with this government’s core values.
Simply put, we want to make sure that every dollar counts. Good management of the government’s finances allows us to enact the progressive agenda for action that Ontarians have given us a strong mandate to implement.
Balancing the budget by 2017–18 is a challenge, but we are meeting that challenge by taking a deliberate and thoughtful approach to the tough choices we face.
The key elements of our plan to achieve a balanced budget are:
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Pursuing program review, renewal and transformation;
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Managing compensation costs;
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Ensuring everyone pays their fair share of taxes; and
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Unlocking the value of provincial assets.
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Through these actions, the government is making sure that each and every dollar goes further to achieve value for taxpayers’ hard-earned money. However, should economic conditions persist that result in the Province’s revenue outlook falling further below the 2014 Budget projection, the government will consider other tools, as necessary, to balance the budget by 2017–18. This would be done while continuing to make critical investments in the programs and services that people depend on, such as health care and education.
Pursuing Program Review, Renewal and Transformation
The government is committed to transforming and modernizing public services by finding new and smarter ways to deliver the best value for every dollar spent.
The Honourable Deb Matthews, President of the Treasury Board, is leading a careful review of every government program. Government programs will be reviewed through four lenses for relevance, effectiveness, efficiency and sustainability.
A focus on evidence and measurable results is a critical element of the review. The objective is to ensure that sustained funding goes to initiatives that work. Opportunities will be identified to transform and modernize public services so that every dollar goes further to achieve value for taxpayers’ hard-earned money.
In addition to better outcomes, the government is committed to meeting its annual program review savings target of $250 million for 2014–15 and $500 million for each of the next two years, as announced in the 2014 Budget.
Managing Compensation Costs
The government is continuing to take action to control compensation costs. The government introduced Bill 8, the Public Sector and MPP Accountability and Transparency Act, 2014, which, if passed, would authorize it to directly control compensation of senior executives in the broader public sector. The legislation would authorize the government to obtain all compensation-related information and set compensation frameworks — including hard caps.
In August, the government reached a four-year collective agreement with the Association of Management, Administrative and Professional Crown Employees of Ontario (AMAPCEO). The agreement includes a wage freeze in the first two years and a 1.4 per cent wage increase in each of the third and fourth years. The agreement is consistent with the fiscal plan outlined in the 2014 Budget, which includes no new funding for compensation increases. The cost of wage increases in 2016 and 2017 is being offset over the four-year term through changes to benefits and entitlements, making it a net zero agreement. This new agreement follows a two-year deal that included no wage increases in either 2012 or 2013 — totalling four consecutive years without an increase.
Ensuring Everyone Pays their Fair Share of Taxes
Over the past several years, our government has cut many taxes for business to encourage business growth and investment. As a result, Ontario has a lower combined federal–provincial general corporate income tax rate than the combined federal–state tax rate in any of the U.S. states.
An effective tax administration system also requires businesses to pay their fair share of taxes. When businesses do not pay their fair share, provincial revenues are compromised. This has a direct impact on the programs and services Ontarians expect and rely on. Further, when businesses do not pay their fair share of taxes, they disadvantage other businesses that do follow the rules. Often, businesses that do not pay taxes also ignore the rules that protect employees and ensure that products and services are reliable and safe. This activity fosters an underground economy.
The government is taking action against the underground economy by:
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Launching pilot initiatives to better coordinate and strengthen compliance activities in high-risk sectors;
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Expanding tax verification for procurements in the broader public sector, Crown corporations, and financial assistance provided to businesses; and
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Examining additional measures that would enable better information sharing across government ministries, agencies and jurisdictions.
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In addition, we are taking further measures to address the supply of contraband tobacco.
Unlocking the Value of Provincial Assets
Unlocking the value of provincial assets is a way to help our economy grow while creating jobs and sustaining government services. It is also a way to create new revenue that can be put towards improving public infrastructure, including transit.
Maintaining provincial ownership of many of these assets remains a priority to deliver key services to the public, while holding on to other assets, such as the Liquor Control Board of Ontario (LCBO) head office lands, may no longer serve a public policy purpose.
The Premier’s Advisory Council on Government Assets has been asked to find ways to increase efficiencies and unlock the full value of Hydro One Inc., Ontario Power Generation and the LCBO, including other aspects of Ontario’s beverage alcohol retail system.
The Council’s findings include opportunities to provide consumers with improved access, enhanced customer service at the LCBO, as well as negotiating with suppliers to achieve higher returns for Ontarians. The Council says Hydro One should retain its core transmission business. Also, the fragmented system of about 70 local electricity distributors should be encouraged to consolidate and bring in private capital to improve the efficiency of the electricity distribution sector.
The government is supportive of the Council’s initial findings and has tasked it to build on its work by entering into a second phase. In this next phase, the Council will broaden its commitment to a collaborative and transparent process and deepen the relationships it has established with all parties, bringing the Council closer to its goal of reaching agreements with the appropriate parties. The Council’s final recommendations will help inform the 2015 Budget.
Our Plan for Building Ontario Up
The government’s agenda for progressive action is supported by our plan:
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Investing in people’s talents and skills;
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Building modern infrastructure and transportation networks;
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Creating a dynamic and supportive environment that allows business to thrive; and
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Ensuring a strong retirement income system so everyone can afford to retire.
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The evidence shows that our plan is working. Ontario’s unemployment rate has declined from a recessionary high of 9.4 per cent in June 2009 to 6.5 per cent in October 2014. Since the recessionary low in June 2009, Ontario has added 551,300 jobs, erasing the 265,800 job loss during the recession. The majority of the jobs added are full time and in the private sector. Employment is now 4.3 per cent or 285,500 above the pre-recession peak.
Investing in People’s Talents and Skills
While Ontario’s economy continues to create jobs, more remains to be done. We will take steps to ensure that Ontarians, particularly young Ontarians, have the skills and training they need for high-paying, rewarding jobs.
To that end, the government is launching new initiatives and enhancing established programs so that high school students reach their full potential. For example, in 2015, the government will launch Experience Ontario, which will allow all high school graduates to gain valuable work experience before they choose their career path.
Our actions continue beyond high school. The Province continues to strengthen postsecondary education through initiatives such as online learning tools that give students the flexibility to control how, when and where they learn.
The government also launched a $295 million Ontario Youth Jobs Strategy in September 2013. A key element of that strategy, the Ontario Youth Employment Fund, has already helped more than 23,000 young people gain work experience and find jobs.
Ontario’s skilled trades are fundamental to ensuring continued economic growth across the province. We are continuing to strengthen the skills training system and have appointed a reviewer for the College of Trades.
Building Modern Infrastructure and Transportation
The Province’s plan for the economy is founded on world-class infrastructure that will enhance the quality of life for Ontarians, support economic growth, increase productivity and meet future demographic needs.
Ontario is planning to invest more than $130 billion in public infrastructure over the next 10 years, including $12.8 billion in 2014–15.
In July, we introduced legislation that, if passed, would require current and future governments to regularly prepare long-term infrastructure plans and further improve the way the Province prioritizes infrastructure needs.
In the 2014 Budget, the government provided details of the Moving Ontario Forward plan to make nearly $29 billion in dedicated funding available over the next 10 years for public transit, highways and other priority infrastructure projects across the province. Moving Ontario Forward is investing $15 billion in transit projects in the Greater Toronto and Hamilton Area and nearly $14 billion in critical infrastructure projects elsewhere in Ontario in a fair, accountable and transparent manner.
It is an ambitious plan that looks beyond the four-year election cycle that can cause government vision to be shortsighted. This government is taking a long-term view. By investing in infrastructure today, we are helping create jobs and grow our economy so we can meet the infrastructure needs of tomorrow.
A Dynamic and Supportive Business Environment
Key initiatives under our plan include:
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Maintaining a competitive tax environment that encourages business to invest and grow;
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Building strategic partnerships with business, including investments through the $2.5 billion Jobs and Prosperity Fund;
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Reducing regulation for business;
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Growing small businesses in Ontario;
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Helping business manage electricity costs;
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Modernizing financial services; and
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Moving forward with the government’s Going Global Trade Strategy, to encourage Ontario business to expand their exports internationally.
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Through these initiatives, the Province will encourage productivity-enhancing investments by business, improve Ontario’s capital markets, and support growth in key sectors, such as advanced manufacturing.
The government is fostering economic growth in all parts of the province. We have created regional economic development funds like RED — the Rural Economic Development Program. Recently, RED provided support to the Hensall District Co-operative, which processes and markets high-value field crops for over 2,000 farmers. This support created and maintained 14 local jobs and leveraged $4.3 million in private investment.
Premier Kathleen Wynne recently led a trade mission to China that attracted almost $1 billion in new investments by Chinese companies, which will create more than 1,800 jobs across Ontario.
The government is also modernizing and strengthening Ontario’s financial services sector. We are working with other jurisdictions, domestic and global, on new initiatives such as a trading hub in the Chinese currency in Canada, collaborating with the Chinese, federal and British Columbia governments.
We are working, in collaboration with other provinces and territories and the federal government, to establish a Cooperative Capital Markets Regulatory System to help make securities markets safer. We are reviewing the mandates of the Financial Services Commission of Ontario and the Deposit Insurance Corporation of Ontario to ensure there continues to be strong oversight in this sector.
We have already begun a review of the legislative framework for credit unions and caisses populaires led by Laura Albanese, MPP, Parliamentary Assistant to the Minister of Finance.
The government is also undertaking a review of the regulation of financial planning. An expert committee will be appointed to look at more tailored regulation of financial advisers and financial planners.
Ontario’s tourism and culture industries not only create jobs and economic growth, they enhance Ontarians’ quality of life. A key upcoming event in the tourism and culture sector is the commemoration of the 400th anniversary of the Francophone presence in Ontario, scheduled to take place from June to October 2015. On September 25, 2014, the government announced funding of $5.9 million for a wide range of commemorative events for the anniversary. Specific tourism, cultural, educational and legacy projects will be announced in the coming weeks and months.
Building a Secure Retirement
The Province is committed to a strong and secure retirement income system to help ensure that Ontarians are better able to enjoy their retirement years. As a result, the 2014 Budget announced the government’s new mandatory provincial pension plan — the Ontario Retirement Pension Plan (ORPP). The government intends to implement the ORPP in 2017, coinciding with expected reductions in Employment Insurance premiums.
The ORPP is an integral part of the government’s plan to invest in people and help working Ontarians build a more secure retirement future. The ORPP is being designed to target those most at risk of undersaving, particularly middle-income earners without workplace pension coverage, and will need to effectively balance retirement income security with impact on business.
The Honourable Mitzie Hunter, Associate Minister of Finance responsible for the ORPP, has begun work towards the pension plan’s launch in 2017.
A Strong Ontario within a Strong Canada
When the global economic recession struck in 2009, the federal and Ontario governments worked in concert to ease the worst effects of the downturn. Collaboration is still needed to secure long-term productivity and prosperity and build a strong Ontario within a strong Canada.
Ontario is taking important steps to deliver on its plan and build a strong and sustainable fiscal foundation. It is critical that the federal government avoid further unilateral actions that would negatively impact the people of Ontario, and avoid actions that put the Province’s fiscal plan at risk. The federal government needs to treat Ontario fairly, and support economic growth in the province.
As the federal government is expected to be in a position to realize significant and growing surpluses beginning in 2015–16, it will have an opportunity to invest in partnerships with the Ontario government in a way that will support job creation and economic growth.
Ontario calls on the federal government to reform the transfer payment system to treat Ontarians fairly. In addition, given the fundamental role infrastructure plays in Canada’s economic growth, the Province is calling on the federal government to match Ontario’s investments in the Ring of Fire region, and significantly increase its investments in public infrastructure.
A Fair Society
The government is determined to build a fairer and healthier Ontario. To that end, it has launched a reinvigorated Poverty Reduction Strategy that aims to end chronic homelessness, as well as support and encourage people to find meaningful employment at a fair wage. Allowing people to realize their full potential reduces poverty and makes good economic sense.
The government is taking action to help low-wage workers who struggle to make ends meet, including by raising the minimum wage to $11 per hour, the highest of any province.
Many Ontarians need to own and drive a car to and from work. That is why government reforms are aimed at fighting insurance fraud and abuse in order to make auto insurance more affordable for Ontarians.
As a result of the government’s Auto Insurance Cost and Rate Reduction Strategy, rates declined by more than six per cent on average from August 2013 to August 2014.
Conclusion
Looking forward from now until our next budget in 2015, this government will continue to pursue its mandate for action.
We will continue to invest in people’s skills and talents, build modern infrastructure and transportation networks, create a supportive and dynamic business climate, and strengthen retirement income security for all Ontarians.
These government priorities and our determined efforts to make every dollar count will help support eliminating the deficit by 2017–18.
We will continue to create opportunity and security for people, to build Ontario up, while at the same time eliminating the deficit in a responsible and balanced way.
The government is committed to balancing the budget by 2017–18, and will do so in a way that is both fiscally responsible and fair.
The Province will continue to invest in people’s skills and talents; build modern infrastructure and transportation networks; create a supportive and dynamic business climate; and strengthen retirement income security for all Ontarians. This will help grow the economy, protect revenue and create jobs. The government will also continue to responsibly manage spending. From 2013–14 through to balance in 2017–18, program spending is projected to grow at an average annual rate of 0.8 per cent.
Together, these government priorities and actions to make every dollar count will help support eliminating the deficit and improve the Province’s fiscal sustainability.
Although the global economic environment remains challenging, there are signs that Ontario’s economic expansion is gaining momentum in 2014, following weak growth in 2013. However, should economic conditions persist that result in the Province’s revenue outlook falling further below the 2014 Budget projection, the government will consider other tools, as necessary, to balance the budget by 2017–18. This would be done while continuing to make critical investments in the programs and services that people depend on, such as health and education.
Ontario’s Plan to Eliminate the Deficit
Ontario’s plan to eliminate the deficit builds on its past success. For five years in a row, the government has beaten the deficit targets it established after the 2008–09 global recession. Ontario is one of the only governments in Canada to have achieved this level of success. By beating its fiscal targets, the Province’s accumulated deficit is $25 billion lower than it otherwise would have been.
The Province has overachieved on its fiscal targets in spite of a decline in the revenue outlook since the 2010 Budget. This overachievement reflects government actions to manage growth in program spending. In fact, Ontario consistently has the lowest per capita program spending among all Canadian provinces.
Ontario has been able to achieve this record against its deficit targets despite a vertical fiscal imbalance between provinces and the federal government. Both the federal Parliamentary Budget Officer and the Conference Board of Canada confirm that while the federal government is expected to be in a position to realize significant and growing surpluses in the future, the provinces and territories as a whole will face increasing challenges to achieve fiscal balance while providing essential programs and services to Canadians. Notwithstanding recent unilateral federal actions that have negatively impacted Ontarians, Ontario is taking important steps forward to deliver on its plan and build a strong and sustainable fiscal foundation.
Between 2010–11 and 2013–14, growth in Ontario’s program spending was held to an average of 1.2 per cent per year. Responsibly managing spending resulted in program spending being 16.6 per cent of gross domestic product (GDP) in 2013–14, lower than the 17.9 per cent reached in 2009–10. This has been the result of disciplined action to find efficiencies in the delivery of public services while still making critical investments in the programs and services that people depend on, such as health and education. In fact, projected program expense in 2014–15 is essentially unchanged from the 2014 Budget.
Balancing the budget by 2017–18 requires a thoughtful approach to making tough choices. Steps towards delivering on the government’s plan to balance are centred on:
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Program Review, Renewal and Transformation;
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Managing compensation costs;
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Ensuring everyone pays their fair share of taxes; and
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Unlocking the value of provincial assets.
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Progress on Actions to Eliminate the Deficit
Pursuing Program Review, Renewal and Transformation
Achieving budget balance and improving outcomes for Ontarians will require changes in how government works. One of the ways the Province is bringing about change is through Program Review, Renewal and Transformation — a fundamentally new approach to multi-year planning and budgeting.
The Program Review, Renewal and Transformation planning process is designed around key principles, including looking at how every dollar across government is spent; using evidence to inform better choices and improve outcomes; working across government to best deliver services around the client; and taking a multi-year approach to identifying program transformation opportunities and achieving savings.
There will be a careful review of every government program through four lenses:
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The relevance of the program in realizing government priorities;
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The program’s effectiveness in achieving desired outcomes;
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The efficiency in converting resources into results; and
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The sustainability of the program over the long term.
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Program Review, Renewal and Transformation opportunities will be identified to improve services and outcomes based on measurable results, to ensure that sustained funding goes to initiatives that work. At the same time, the government will also have to make tough choices about services that are not performing, do not link to government priorities, or no longer serve a clear public interest.
In addition to improving outcomes for Ontarians, the government will meet its annual program review savings target of $250 million for 2014–15 and $500 million for each of the next two years, as announced in the 2014 Budget.
The President of the Treasury Board has convened a Program Review, Renewal and Transformation Sub-Committee of Treasury Board to ensure all of the government is working together towards the same objective.
A group of experts will be brought together to provide advice to the President of the Treasury Board as the government moves forward with the Program Review, Renewal and Transformation process. The group will be composed of experts from government, business, the broader public sector and other sectors with experience in leading organization change initiatives. The President of the Treasury Board will also provide an opportunity for Ontario government staff and the public to share their transformation and savings ideas.
Program Review, Renewal and Transformation will build on actions already underway to transform and modernize government programs and services, such as:
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Acting on the recommendations of the Commission on the Reform of Ontario’s Public Services;
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Implementing the Action Plan for Health Care; and
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Providing targeted electricity rate mitigation.
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Acting on the Recommendations of the Commission on the Reform of Ontario’s Public Services
The government is continuing to move ahead with the Commission’s recommendations — over 80 per cent are being acted on. In addition, the Province has been able to hold annual average growth in program spending to 1.2 per cent over the past three fiscal years — much lower than the 3.5 per cent growth that the Commission projected would occur if the government took no action, and in line with the recommended growth rate of around one per cent.
As part of Program Review, Renewal and Transformation, the government will continue to look at the Commission’s recommendations that present opportunities for service improvement and savings, and will report back on progress.
Implementing the Action Plan for Health Care
Since announcing the Action Plan for Health Care in 2012, the government has made fundamental improvements to the delivery of health care services while managing down the rate of growth in health spending from an average annual rate of about six per cent since 2003–04. Implementing the Action Plan’s transformational initiatives helped slow the rate of growth in health care spending to about 2.5 per cent on average over the last two years. Through targeted investments and further implementation of the Action Plan, the government is improving access to high-quality care and creating a more sustainable health care system.
Providing Targeted Electricity Rate Mitigation
The Ontario Clean Energy Benefit (OCEB) will end on December 31, 2015. To help low-income Ontarians with electricity costs, the Minister of Energy has asked the Ontario Energy Board to develop options for an Ontario Electricity Support Program (OESP), which will start on January 1, 2016. Ending the OCEB will save the government approximately $1 billion annually compared to the current level of spending on the program. The government is also moving forward with removing the Debt Retirement Charge (DRC) cost from residential users’ electricity bills after December 31, 2015, saving a typical residential ratepayer about $70 per year. As well, the government is expanding the Industrial Conservation Initiative and introduced a new stream of the Industrial Electricity Incentive program to help large
businesses with their electricity costs.
Managing Compensation Costs
The government is taking a consistent, fair and principle-based approach to manage compensation costs in the Ontario Public Service (OPS) and across the broader public sector, while ensuring that service levels meet public needs.
The 2013 Budget stated that “all public-sector partners will need to continue to work together to effectively manage compensation costs within Ontario’s existing fiscal framework, which includes no funding for incremental compensation increases for new collective agreements.”
The 2014 Budget confirmed that “any modest wage increases that are negotiated must be absorbed by employers within available funding and within Ontario’s existing fiscal plan through efficiency and productivity gains or other tradeoffs so that service levels continue to meet public needs.”
Over half of the government’s program spending is on salaries and benefits.
Broader public-sector partners need to come together to manage compensation costs and control spending while protecting public services that Ontarians rely on and working towards balancing Ontario’s budget.
Labour Agreements in the Ontario Public Service
A collective agreement was reached with the Association of Management, Administrative and Professional Crown Employees of Ontario (AMAPCEO), which was ratified by both parties on August 28, 2014.
The AMAPCEO agreement includes a wage freeze in the first two years and a 1.4 per cent wage increase in each of the third and fourth years. This new agreement follows a two-year deal that included no wage increases in either 2012 or 2013 — totalling four consecutive years without an increase.
The agreement is consistent with the fiscal plan outlined by the government, which includes no new funding for compensation increases. The cost of wage increases in 2016 and 2017 is being offset over the four-year term through changes to benefits and entitlements, making it a net zero agreement. One of these changes is the elimination of exit pay, which will reduce future costs and save taxpayers approximately $55 million this year.
The government respects the collective bargaining process and values the work of Ontario Public Service employees. The government looks forward to continuing to work with its bargaining agent partners to reach agreements that are fair and equitable to employees and to the people of Ontario in the current fiscal and economic climate.
Changes to Benefit Entitlements
As part of the 2013–14 expenditure review, the government introduced changes to bring post-retirement benefit entitlements in the public service in line with practices in the private sector and other jurisdictions, which will save the government over $1.4 billion by 2017–18.
Reforming Executive Compensation in the Broader Public Sector
The government is continuing to take action to control executive compensation costs in the broader public sector and building on the work that has already been done to manage executive compensation.
In 2014, Ontario introduced Bill 8, the Public Sector and MPP Accountability and Transparency Act, 2014, which included the Broader Public Sector Executive Compensation Act, 2014, as Schedule 1.
If passed, the legislation would allow the government to take a principle-based, long-term approach to reform executive compensation. It would apply to designated executives at hospitals, community care access corporations, school boards, colleges, universities, and the hydro entities.
The proposed legislation would authorize the government to issue a directive to collect compensation information such as salaries and salary ranges, pay at risk, and benefits. It would also authorize the implementation of compensation frameworks that could set limits on all elements of compensation — including hard caps.
The legislation would permit the audit of relevant records at a designated employer, and could require the employer to repay any amount paid to a designated executive in excess of the applicable compensation framework.
Further, on October 29, 2014, the President of the Treasury Board announced that the government plans to bring forward amendments to the proposed legislation that would further enhance the government’s authority over executive compensation by extending it to an additional 64 broader public-sector organizations.
Ensuring Everyone Pays their Fair Share of Taxes
Ontario has created a competitive and fair tax system that supports the funding of critical public services for Ontarians. When some businesses do not pay their fair share of taxes, it compromises the viability of legitimate businesses and puts them at a competitive disadvantage. Businesses that do not pay their fair share of taxes often ignore other rules, such as protecting employees and ensuring that products and services are reliable and safe. That is why it is important for Ontario to ensure a level playing field for businesses and require all taxpayers to play by the rules.
The government has taken concrete steps to address those situations where a deliberate effort is made to avoid or evade paying a fair share of taxes. Based on recommendations from the Commission on the Reform of Ontario’s Public Services, in 2013–14 Ontario’s efforts to enhance the integrity of the tax system generated over $380 million in additional revenue. Recent examples include:
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Enhanced compliance activities (e.g., auditing) to address the underground economy and corporate tax avoidance in Ontario through a multi-year agreement with the Canada Revenue Agency. Over the four-year agreement, approximately $700 million in additional tax revenue is expected to be generated.
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Launching a Tender Contract Tax Compliance initiative to ensure businesses engaged in procurement activity with the government of Ontario demonstrate they have complied with their tax obligations before being awarded government contracts.
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Enhancing enforcement measures under the Tobacco Tax Act, including increased fines and impounding vehicles for those who break the law.
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Building on this progress, Ontario is committed to moving forward with new measures to ensure an effective tax administration system that addresses the underground economy, corporate tax avoidance and contraband tobacco.
Underground Economy
In a tax context, the underground economy is the deliberate under-reporting or not reporting of income to avoid paying taxes required by law. It is an issue for governments around the world, and Ontario is no exception. It results in significant loss of revenues to government and compromises the viability of legitimate businesses by creating an unlevel playing field.
Ontario is committed to addressing this challenge and is proceeding with a number of concrete measures, including:
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Launching pilot initiatives to better coordinate and strengthen compliance activities in high-risk sectors. The focus will be on strengthening consumer protection, enhancing worker safety and curtailing tax loss.
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Building on its Tender Contract Tax Compliance initiative launched in February 2014, the government will develop a plan to expand tax verification to financial assistance provided by government, and procurements in the broader public sector and Crown corporations.
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Examining new methods of information-sharing across government ministries, agencies and jurisdictions to strengthen its ability to detect and mitigate the underground economy.
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The Parliamentary Assistant to the Minister of Finance, Laura Albanese, will monitor and report on the government’s progress on these initiatives.
Ontario also needs a strong federal partner in combating pervasive and technologically sophisticated tax evasion. The government has requested for several years that the federal government release a national strategy and action plan to address the underground economy. A clear national strategy and action plan are imperative to ensuring that effective compliance efforts are effectively coordinated with provinces.
Corporate Tax Avoidance
Ontario, in conjunction with the Government of Canada, has taken substantive action to better address corporate tax avoidance.
Most recently, the Taxation Act, 2007, was amended to enhance oversight of aggressive tax avoidance transactions. The resulting new disclosure rules are similar to those put in place by the federal government and Quebec, and position Ontario to more effectively address egregious tax practices.
Ontario is committed to adopting best practices to ensure companies pay their fair share of tax and do not employ elaborate tax planning schemes that undermine the intent of the Province’s tax laws. Accordingly, the government is monitoring the Organisation for Economic Co-operation and Development’s (OECD) project on base erosion and profit shifting.
Ontario will continue to work with the federal government to identify and adopt new measures to curtail aggressive corporate tax avoidance.
Contraband Tobacco
The low price of contraband tobacco undermines the integrity of the Tobacco Tax Act and the Smoke-Free Ontario Strategy. The government is committed to addressing this challenge and will proceed with several important initiatives to do so.
It intends to establish oversight of raw leaf tobacco in the province effective January 1, 2015. To that end, a draft regulation was posted on Ontario’s regulatory registry from September 2, 2014, to October 31, 2014, to solicit feedback and suggestions. This feedback will be taken into account as the government finalizes the regulation.
This critical initiative will help to effectively impede the flow of raw leaf tobacco to contraband tobacco product manufacturers and address some of the concerns raised by law enforcement agencies.
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First Nation Partnership
Ontario respects the ceremonial value and economic development importance of tobacco to First Nation communities. The government recognizes this as it works to build a strong, sustainable partnership with First Nation communities.
In this regard, two pilot projects with the Chippewas of the Thames First Nation and the Mohawk Council of Akwesasne continue to advance, with the goal of reaching agreements on community-based tobacco regulation on-reserve and revenue-sharing.
Ontario will also launch a formal review of the First Nation Cigarette Allocation System in early 2015. As part of this review, the government will appoint a facilitator who will work with First Nation communities and other stakeholders across the province, such as industry and public health experts. It will listen to stakeholder perspectives, identify issues with the current system, and make recommendations for improving and modernizing the allocation system.
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Unlocking the Value of Provincial Assets
The government is continuing to pursue opportunities to unlock economic value from its assets, including shares in General Motors; an extensive real estate portfolio that includes the Liquor Control Board of Ontario (LCBO) head office lands, Ontario Power Generation’s (OPG) head office building and Seaton and Lakeview lands; and assets under review by the Premier’s Advisory Council on Government Assets — LCBO, OPG and Hydro One.
Net revenue gains from sales of qualifying assets will help build a new generation of public infrastructure to improve the Province’s long-term competitiveness and the well-being of all Ontarians.
Premier’s Advisory Council on Government Assets
In April 2014, the government appointed the Premier’s Advisory Council on Government Assets to provide balanced and transparent recommendations as it takes action to maximize the value of key provincial assets; generate a better return; and invest in the new transit and transportation infrastructure to help expand the economy, boost productivity, improve competitiveness and create jobs for Ontarians.
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“We asked the council to find ways to improve customer service, increase efficiencies and unlock the full value of Hydro One, Ontario Power Generation (OPG) and the Liquor Control Board of Ontario (LCBO), which includes other aspects of Ontario's alcohol retail landscape. These assets are important to the people of Ontario. They help fund core services such as health care and education, and must continue to do so for decades to come.”
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The Council’s work has been guided by three key principles:
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The public interest remains paramount and protected;
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Decisions align with maximizing value to Ontarians; and
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The decision process remains transparent, professional and independently validated.
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In an October 17th speech, the Council’s Chair, Ed Clark, laid out the Council’s initial findings on ways to maximize the value of these Government Business Enterprises (GBEs) to the Province. The Council provided its initial report earlier in November. The Council agreed with the government’s overall strategy to consider divesting non-core assets if it was in the public interest to do so. Reducing ownership would provide the government with funds to further invest in infrastructure that could deliver high societal and economic returns to the province without adding to Ontario’s overall debt or increasing the deficit.
With respect to OPG, Hydro One and the LCBO, the Council was of the view that the government should retain ownership of these core strategic GBEs. At the same time, the Council found that these companies could significantly improve their performance and that the Province could dilute its interest in some non-core assets where government ownership is not critical. Doing so would bring greater returns to Ontarians and ensure the long-term sustainability of the assets, allowing Ontario to grow faster, create jobs and increase productivity.
Beverage Alcohol: The Council examined the three quasi-monopolies that dominate Ontario’s liquor distribution system: the LCBO, the privately owned Beer Store and off-site Winery Retail Stores.
It found the LCBO does not sufficiently use its buying power to lower costs and recommended gradually introducing a new pricing strategy to achieve higher negotiated margins that benefit Ontarians through higher dividends to the Province. The Council also recommended that the LCBO enhance the customer experience through a focus on new store formats and creating an online marketplace to make a broader selection of products available to retail consumers.
The Council found that Ontarians and brewers benefit from the Beer Store’s low-cost quasi-monopoly but that Ontarians deserve a fair share of the profits generated by the beer producers. It also recommended that changes be made to provide greater transparency and to ensure that all producers, including craft breweries, be treated equitably at the Beer Store. In addition, the Council was of the view that the sale of 12-packs of beer should be extended to LCBO stores.
The off-site Winery Retail Stores are a smaller quasi-monopoly owned by six producers, and the stores are grandfathered under international trade agreements. The Council proposed engaging the owners to achieve a fairer tax system so that, again, Ontarians get a fair share of the profits realized from this quasi-monopoly as well as finding ways to allow domestic producers to have outlets, or access to new private outlets consistent with international trade agreements.
OPG: Ontario Power Generation has two distinct businesses: a complex nuclear business and a more stable hydro/thermal business. The Council recommended that OPG focus on ensuring that the Darlington nuclear refurbishment project be delivered safely, on budget and on schedule. The Council found that OPG should consider, in future, creating an internal structure as if they were two separate entities focused on very different businesses — one nuclear, the other, non-nuclear. The Council also suggested that the government consider strengthening project management experience on OPG’s board to help support the Darlington refurbishment.
Hydro One: Hydro One’s transmission and distribution services are important to the province’s electricity system. The Council found that Hydro One should pursue operational efficiencies and retain the transmission business as a core asset, but separate the electricity distribution business currently integrated in Hydro One Networks. The Council also recommended bringing in private-sector capital to facilitate consolidation of local distribution companies and have the Province dilute its interest in the distribution business in Hydro One Networks and Hydro One Brampton.
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“The Province should take action now to act as a catalyst and achieve savings over the longer-term. Two entities that are key to unlocking this jam are Hydro One Brampton and the distribution business in Hydro One Networks. We would propose using them both to spur industry consolidation. Not force consolidation. Consolidation will facilitate efficiencies, reducing costs which will reduce electricity rates from what they would have been. It will also improve adaptability of the system and create companies which can grow and create jobs.”
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The Council’s initial findings also indicate areas for improvement in relation to total compensation practices at these GBEs. Sustainable arrangements are in the best interest of all, as indicated by the Council. The Council has stated it believes that it is very important to have the right process, to talk through and understand possible solutions.
The government agrees with the Council’s initial findings, and is asking the Council to move to the second phase of its review, during which it will broaden its commitment to a collaborative and transparent process and deepen the relationships it has established with all parties. This will bring the Council closer to its goal of reaching agreement with the appropriate parties.
The Ministry of Finance and the LCBO will work with the Council to develop a system of negotiated mark-ups that would replace the LCBO’s current fixed mark-up structure and would obtain further value from its suppliers on behalf of Ontarians. These parties will also work to develop additional store formats that deliver an enhanced customer experience.
The Council will represent the interests of the Crown in discussions with the Beer Store and its owner-brewers to determine how additional value might be obtained on behalf of Ontarians while protecting the consumer interest. The Council will also explore how additional growth and retail opportunities for craft brewers could be created.
Similarly, the Council will represent the interests of the Crown in discussions with the wine industry and owners of off-site Winery Retail Stores to determine how additional value might be obtained from the stores on behalf of Ontarians and how additional growth as well as retail opportunities for other small wineries could be created.
The Council will be guided in its work by advice from government and other external experts. In particular, the Council will seek to ensure the social responsibility mandate that accompanies the sale of beverage alcohol is upheld. As well, the Council will work with the Ministry of Finance and the Ministry of Economic Development, Employment and Infrastructure to ensure that all recommendations respect Ontario’s obligations and requirements under various trade agreements and trade laws.
In this second phase, the Council will be working on developing an implementation plan for Hydro One’s distribution businesses, which also includes Hydro One Brampton.
The Council will also look at options such as:
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Considering sales, mergers or amalgamations that allow the Province to dilute or reduce its interest in Hydro One Brampton and the distribution business currently in Hydro One Networks;
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Bringing in private capital to help spur consolidation to build economies of scale; and
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Facilitating efficiencies with local distribution companies that benefit ratepayers while also allowing the Province to extract financial value from its assets.
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With respect to separating the core transmission business from the distribution segment currently contained in Hydro One Networks, an implementation plan would include addressing the potential transition implications and costs of separating the distribution and transmission businesses, with the goal of extracting financial value of Hydro One’s distribution assets and maintaining the value of Hydro One’s transmission assets to the Province.
The Council will also work in a constructive manner with its partners across these three GBEs to ensure that agreements and employment terms are sustainable, fair to all parties and incorporate the recommendations provided in previous reports.
The Council will work with the Ministries of Finance and Energy as well as other affected ministries to keep the government apprised of its progress. Its activities and recommendations will inform the Province’s 2015 Budget process.
Optimizing the Value of the Province’s Real Estate Portfolio
The government has now moved forward with the process to sell the LCBO’s head office lands by releasing a Request for Proposals (RFP) on September 4, 2014, and expects the transaction to close in 2015. This sale will ensure that Ontarians get greater value out of this public asset.
The government is also performing due diligence and exploring opportunities for moving forward with the sale of the OPG head office. Other real estate assets continue to be revitalized, including the former Lakeview generating station property in southeastern Mississauga and the Seaton Lands in Pickering.
Net revenue gains from the divestiture of qualifying assets will allow the Province to fund the Trillium Trust to invest in infrastructure, including roads, bridges and transit. These would help expand the economy, improve competitiveness and productivity, and create jobs for Ontarians.
Section B: Investing in People’s Talents and Skills
Ontario’s Skilled Workforce Is a Key Competitive Advantage
One of Ontario’s greatest strengths is its people’s talents and skills. By investing in them today, the Province continues to enhance its ability to meet the demands of the evolving economy and nurture its highly skilled and adaptive workforce. Investing in skills will help foster a dynamic economy, stimulate innovation and increase prosperity for all Ontarians.
The Province is focusing on its greatest asset by strengthening its world-class education system through Achieving Excellence, a new vision that will take public education in Ontario to the next level. The government is also partnering with stakeholders to create innovative programs that support Ontario’s families and youth; building on its solid employment and skills training network to maximize labour market participation; and investing in the retention and recruitment of skilled professionals who provide care for some of society’s most vulnerable.
Some of Ontario’s recent initiatives have included:
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Completing the rollout of full-day kindergarten and investing in child care modernization so that every child has the best start in life;
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Providing the 30% Off Ontario Tuition grant, which helped over 230,000 students start college or university last year;
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Extending the Ontario Youth Jobs Strategy, giving more young people the chance to gain a foothold in the job market. This strategy is on track to create 30,000 job opportunities, including more than 23,000 placements to date under the Youth Employment Fund;
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Signing Strategic Mandate Agreements with all 45 publicly assisted universities and colleges, which will help guide future growth by encouraging more focus on unique strengths, while avoiding or limiting expansion in academic areas where programs already exist to meet demand; and
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Investing $150 million over three years in technology and learning tools such as digital tablets, software and professional development for teachers to further advance Ontario’s high-performing education system.
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Building on Previous Achievements
The 2014 test scores from the Education Quality and Accountability Office (EQAO) provide evidence that Ontario students continue making progress. On average, 72 per cent of all Grade 3 and 6 students are meeting or exceeding provincial literacy and numeracy standards — an increase of one percentage point compared to 2012–13 levels and 18 percentage points compared to 2002–03. The government is continuing to strengthen students’ math skills by:
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Investing $4 million to support workshops for teachers and principals as well as Additional Qualification courses to provide new learning supports in mathematics for educators;
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Supporting Homework Help, a live, interactive online math resource, which provides free, real-time math tutoring to students in Grades 7 to 10 in all English-language school boards;
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In French-language school boards across the province, providing, through SOS DEVOIRS, one-on-one student support and interactive online resources in math as well as in a variety of other subjects; and
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Awarding more than 2,200 Parents Reaching Out (PRO) Grants during the 2014–15 school year to help school councils identify local barriers to parent engagement and find solutions to get more parents involved in their children’s education at home and school, particularly in math.
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Investing in Early Career Experience
The government is helping high school students reach their full potential by making it easier for them to find their career passion and develop the skills they need for jobs in the 21st century. Compared to a decade ago, 75 per cent of high school students are now graduating in four years, up from 56 per cent, and 83 per cent of students now graduate in five years, an increase of 15 percentage points. Investing in these graduates’ early career experience helps them achieve excellence, a key goal of Ontario’s renewed vision for education.
Ontario’s Specialist High Skills Majors Program
The Province is enhancing its Specialist High Skills Majors program to help more high school students find their career passion and obtain the skills and knowledge they need for the global economy. This innovative program allows students to choose a specific sector, such as health care or aerospace, and develop essential knowledge and skills to better prepare them for life after high school. As of the fall of 2014, more than 44,000 students will be enrolled in 1,685 programs, an increase of 2,000 students and 125 programs compared to the 2013–14 school year.
Experience Ontario
Through partnerships with communities and private-sector businesses, the government will also be launching Experience Ontario, a nine-month paid community work and service program that allows high school graduates to gain valuable work experience before they enrol in postsecondary education or choose their career path. In 2015, the first rollout of Experience Ontario will offer students new opportunities for experiential learning. Led by the Ministry of Training, Colleges and Universities, it will also support participants with better and more accessible information on career options and training pathways as they go on to apprenticeship, paid employment or postsecondary education.
Advancing Postsecondary Education
Ontario has increased funding to postsecondary education by 83 per cent over the past 10 years and has made postsecondary education more accessible by providing more than $1 billion in grants and loans to students, including the 30% Off Ontario Tuition grant. These investments have helped Ontario maintain a higher share of adults (aged 25–64) with completed postsecondary education than any country in the Organisation for Economic Co-operation and Development (OECD). In 2013, 66 per cent of adults had a postsecondary credential, up from 56 per cent in 2002, positioning Ontario to meet or exceed its target of a 70 per cent attainment rate by 2020.
To increase the value Ontarians receive from the significant investment they make in colleges and universities, the government will work with postsecondary education partners to find ways to more meaningfully link public funds to specific outcomes.
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Key Postsecondary Education Achievements
· Compared to 2002–03, there are over 170,000 more full-time students eligible for funding at Ontario colleges and universities, an increase of 43 per cent.
· Sixty-six per cent of adults (aged 25–64) had a postsecondary credential in 2013, up from 56 per cent in 2002 and a higher share than in any country in the OECD.
· In 2013–14, over 230,000 undergraduate students received the 30% Off Ontario Tuition grant, with most students who receive it paying less in net tuition than a decade ago.
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The Province continues to strengthen Ontario’s postsecondary education through a number of initiatives that will help transform the postsecondary system. Most recently, the government and all 45 universities and colleges signed Strategic Mandate Agreements that will help these institutions build on their unique strengths, avoid unnecessary duplication and guide future growth.
In January 2014, the government also committed $42 million over three years to establish Ontario Online, a Centre of Excellence for online learning that will give students access to flexible courses and greater control over how, when and where they learn. This innovative initiative will offer high-quality online courses that are recognized for credit across many of Ontario’s colleges and universities. To date, over 100 online courses have been developed, with more to follow in the coming year. The next step is to launch a web portal that creates one-window access to online university and college courses across the province, with course offerings starting in the fall of 2015.
Supporting Partnerships, Creating Jobs
The government is committed to working with its community partners and private-sector businesses to create new opportunities for Ontario’s youth. The Province is also partnering with colleges and universities to create innovative programs that would help students find jobs and young entrepreneurs gain business skills, mentorship opportunities and work experience to start and grow a business.
Ontario Youth Jobs Strategy
Ontario has made significant progress on the implementation of the $295 million Ontario Youth Jobs Strategy announced in the 2013 Budget.
A key element of the strategy, the Ontario Youth Employment Fund, has already helped more than 23,000 young people gain work experience and find jobs since its launch in September 2013. Together with the Youth Entrepreneurship Fund, Youth Innovation Fund and Youth Skills Connections Fund, the strategy is on track to create 30,000 mentorship and job opportunities for today’s youth.
On-Campus Entrepreneurship Activities and Campus-Linked Accelerators
As part of the Ontario Youth Jobs Strategy, the government is partnering with colleges and universities to foster student entrepreneurship and help young people develop the skills they need to launch rewarding careers. The Province is providing $5 million over two years to the On-Campus Entrepreneurship Activities (OCEA) program and $20 million over two years to the Campus-Linked Accelerators (CLA) program to help students develop entrepreneurial skills and transfer academic expertise and knowledge to the marketplace. Today, almost all postsecondary institutions across Ontario have on-campus entrepreneurship programs. These platforms help connect Ontario’s young entrepreneurs with the tools, experience and business supports they need to develop skills and take their business ideas to the next level.
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Examples of On-Campus Entrepreneurship Activities (OCEA) and Campus-Linked Accelerators (CLA) at work:
· The University of Toronto is establishing a central Office of Entrepreneurship to strengthen on-campus entrepreneurship activities and further build ties with the regional innovation ecosystem. It plans to expand its entrepreneurship programs to accommodate increased demand for on-campus accelerators.
· The University of Windsor’s EPICentre will support job creation and economic development opportunities by encouraging on-campus entrepreneurship and innovation, with strong ties to entrepreneurial mentors.
· Seneca College is launching the Health Entrepreneurship and Lifestyle Innovation Xchange (HELIX). A youth entrepreneurship initiative, HELIX is an opportunity for students and community youth to develop entrepreneurial skills.
· Conestoga College’s Entrepreneurship@Conestoga helps students explore entrepreneurship as a career option and develop their entrepreneurial skills. The Advanced Manufacturing Technology (AMT) Catalyst will support entrepreneurs in advanced manufacturing and related trades.
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Magnet
The Province is helping university and college students find good jobs by investing almost $1.2 million to expand Magnet, an innovative career-networking platform that helps match employers with qualified students and graduates. The government has already helped expand Magnet to 18 colleges and universities across the province.
Founded in partnership with Ryerson University’s Digital Media Zone and the Ontario Chamber of Commerce, this leading-edge technology fills a need by helping people find work, gathering labour market information, and linking opportunities for small and medium-sized businesses. To date, more than 25,000 job seekers have created profiles through Magnet, generating over 40,000 invitations for job seekers and employers to connect.
Improving Skills Training
Ontario’s Integrated Employment and Training System
Ontario invests over $1 billion annually in employment, training and labour market programs and services through Employment Ontario, which serves more than one million Ontarians.
To make it easier for Ontarians to access these services, the Province is continuing to move forward with government-wide modernization and integration of employment and training programs with Employment Ontario. This will better support Ontario’s most vulnerable, including those receiving social assistance, people with disabilities, long-term unemployed individuals, Aboriginal peoples, new Canadians and at-risk youth.
To ensure success, the Province will improve the coordination and integration of its employment and training system by:
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Developing a comprehensive Labour Market Information Strategy to improve access to high-quality labour market information. This will make it easier for job seekers, students and their families to make informed decisions about their education, training and careers;
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Piloting Local Employment Planning Councils, the next generation of local boards, to promote place-based approaches to support the workforce and generate and analyze local labour market information. These councils will connect employers, different levels of government, service providers, trainers and other local partners;
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Launching employer-driven skills training pilot programs and testing different ways of partnering with employers to address gaps in skills training;
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Putting in place a common assessment framework to make sure individuals in search of training or employment get the supports they need to access the right services; and
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Establishing a new Ontario Centre for Workforce Innovation that will drive innovation and evidence-based service delivery across the province.
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Canada–Ontario Job Grant
In March 2014, the Province signed the Canada–Ontario Job Fund Agreement (COJFA) with the federal government. This agreement provides a key source of funding for initiatives like the Canada–Ontario Job Grant to encourage more employers to train employees. As of September 26, 2014, the Province began accepting employer applications for the Canada–Ontario Job Grant, which will help meet the needs of businesses of all sizes, industries and regions.
This program provides up to $15,000 per person for training costs, such as tuition and training materials, including up to $10,000 in government contributions. Although the new agreement is a good step towards supporting those who are attached to the workforce, there is a critical need for funding to support skills development for the most vulnerable. The federal government has not come far enough to address this critical need. Any funding gap potentially creates pressures and could direct funding away from support for vulnerable workers in Ontario.
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Canada–Ontario Job Grant-Funded Skills Training Pilots
As part of the Canada–Ontario Job Grant program, the Province introduced two new employer-driven skills training pilots. These pilots will test different ways of working with employers to provide short-term, flexible training. They include the:
· Customized Training pilot, which will provide support for firm-specific training solutions; and
· UpSkill pilot, which will support essential and technical skills training tailored to specific sectors and targeted for potentially vulnerable workers in low- and medium-skilled occupations.
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Promoting the Skilled Trades
Ontario’s well-qualified skilled trades are fundamental to ensuring continued growth in key sectors. That is why the Province created the Ontario College of Trades, which protects the public by regulating and promoting the skilled trades.
To support the success of the College, Ontario appointed former Secretary of Cabinet and Head of the Ontario Public Service, Tony Dean, to review key areas of Ontario’s skilled trades system that fall within the mandate of the Ontario College of Trades.
Mr. Dean will review issues related to the scopes of practice — or type of work performed in a trade — as well as the trade classification review process, which determines whether certification to practise a trade should be compulsory or voluntary. The trade classification review process will be paused during Mr. Dean's work. The College will continue to fulfil its mandate while this work is underway.
Mr. Dean will consult with stakeholders and receive support from the Ministry of Training, Colleges and Universities and the College of Trades, but will function independently of both. The appointment began in October 2014 and will continue for one calendar year. Mr. Dean will then deliver his report to the College of Trades and the ministry. The College will have the opportunity to review his findings and implement key recommendations.
Section C: Building Modern Infrastructure and Transportation Networks
The Province’s plan for the economy is founded on world-class infrastructure that will enhance the quality of life for Ontarians, support economic growth, increase productivity and meet future demographic needs.
Ontario is planning to invest more than $130 billion in public infrastructure over the next 10 years, including $12.8 billion in 2014–15. These investments will focus on transportation, health care and education, and are expected to support over 110,000 jobs on average each year.
This commitment builds on nearly $100 billion in infrastructure investments by the Province since 2003, which have helped make Ontario safer, more competitive and more productive.
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The Case for Investing in Public Infrastructure Is Strong
Experts agree that to remain economically strong and competitive, governments must invest in maintaining, renewing and developing infrastructure. Experts also agree that public infrastructure provides a good return on investment. For example:
· The International Monetary Fund’s (IMF) October 2014 World Economic Outlook report shows that productive and efficient infrastructure investment can provide a much-needed boost to productivity and output.1
· In June 2014, former Bank of Canada governor David Dodge stated that with low interest rates, now is the right time for governments and the private sector to invest in infrastructure.2
· An April 2013 report by the Conference Board of Canada found that each dollar invested in public infrastructure in Ontario raises gross domestic product by $1.14 in the near term.3
1 International Monetary Fund, “World Economic Outlook: Legacies, Clouds, Uncertainties,” (October 2014).
2 David Dodge, Richard Dion and John Weekes, “Bennett Jones Spring 2014 Economic Outlook,” (June 2014).
3 Pedro Antunes and Jacqueline Palladini, “The Economic Impact of Ontario’s Infrastructure Investment Program,” Conference Board of Canada, (April 2013).
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Ontario remains committed to long-term infrastructure planning to make investments that benefit Ontarians and the economy. That is why, on July 7, 2014, the Province introduced Bill 6, the proposed Infrastructure for Jobs and Prosperity Act, 2014. The proposed legislation would require current and future governments to regularly prepare long-term infrastructure plans and further improve the way the Province prioritizes infrastructure needs.
Continuing to Move Ontario Forward
In the 2014 Budget, the Province provided details of the Moving Ontario Forward plan to make nearly $29 billion in dedicated funding available over the next 10 years for public transit, highways and other priority infrastructure projects across the province. This is part of Ontario’s plan to invest over $130 billion in infrastructure over the next 10 years.
Moving Ontario Forward will invest $15 billion in transit projects in the Greater Toronto and Hamilton Area (GTHA) and nearly $14 billion in critical infrastructure projects elsewhere in Ontario in a fair, accountable and transparent manner.
Dedicated Funding for Priority Projects in the GTHA
The dedicated funding for the GTHA will be invested in public transit priorities that address congestion and improve mobility throughout the region.
A key priority for the Province is transforming the GO Transit network to a Regional Express Rail (RER) service. Regional Express Rail will give residents significant new travel choices along the GO corridors, including electrified service running at up to 15-minute frequencies. The Ministry of Transportation and Metrolinx are working closely together to develop and implement a plan to realize the RER vision over the next 10 years.
In addition to RER, dedicated funding will be used to build priority rapid transit projects connecting to GO Transit and other transit systems across the GTHA. These projects will largely be drawn from the Next Wave of projects in The Big Move, Metrolinx’s Regional Transportation Plan.
The Province is working with Metrolinx to undertake rigorous business-case analysis to inform how best to prioritize these projects in the GTHA. This will ensure that decisions are based on the best evidence available.
Dedicated Funding for Priority Projects Outside the GTHA
Outside the GTHA, the dedicated funding will be used to support priority infrastructure projects. The Province will work with Ontario regions and communities to identify projects that enhance economic growth and address critical infrastructure needs through an evidence-based process.
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Modernizing Infrastructure in Communities across Ontario
As a key early step in implementing Moving Ontario Forward, the Province announced its continuing support for strong communities with the launch of the new permanent Ontario Community Infrastructure Fund on August 18, 2014.
The fund will provide $100 million per year for investments in roads, bridges and other critical infrastructure projects in small, rural and northern communities. This includes $50 million per year in application-based funding and another $50 million per year in stable, predictable formula-based funding.
The fund’s design was informed by consultations with more than 500 municipal delegates in the summer of 2013.
The Province also launched an intake process to identify priority infrastructure projects for the federal government’s Small Communities Fund. Through this fund, Ontario and the federal government will each provide $272 million to support community projects in municipalities with populations of less than 100,000. The Small Communities Fund is part of the federal government’s 10-year New Building Canada Fund.
Funding decisions are expected to be made early in 2015.
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Other priority projects outside the GTHA could include local and regional transit; roads, bridges and other critical infrastructure; funding for bus and rail infrastructure delivered by the Ontario Northland Transportation Commission; strategic highway improvements; infrastructure development in the Ring of Fire; and other projects to be identified through the Building Canada Plan negotiations with the federal government.
The Ring of Fire
The Province’s Ring of Fire area, located about 540 kilometres northeast of Thunder Bay, is rich with chromite, nickel, gold and other deposits. This region has the potential to create business and growth opportunities for mining and supporting industries in northern
Ontario.
Ontario is playing a leadership role in the development of the Ring of Fire, committing up to $1 billion for strategic transportation infrastructure development in the region.
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In addition, given the fundamental role infrastructure plays in Canada’s economic growth, the Province is calling on the federal government to match Ontario’s investments in the Ring of Fire region, and significantly increase its investments in public infrastructure.
See Chapter IV: National Leadership: Strong Ontario, Strong Canada for more details.
Improving Public Transit
The Moving Ontario Forward initiative builds on the significant investments that the Province is already making in public transit to support economic growth and improve the quality of life for people across the province.
Ontarians are already beginning to see the results of these significant investments. For example:
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GO Transit now has 250,000 boardings — 197,000 on the train system and 53,000 on the bus system — on a typical weekday, and recently added the 500th bus to its fleet.
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Construction has begun on the Waterloo Rapid Transit project. This 36-kilometre corridor will link Kitchener, Waterloo and Cambridge, and connect commuters to GO Train service between the Region of Waterloo and the Greater Toronto Area (GTA).
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New accessible Toronto Transit Commission (TTC) streetcars are rolling into service in Toronto. By 2019, over 200 new streetcars will be brought in to replace the TTC’s current fleet, making them the first new generation of streetcars in Toronto in 30 years. PRESTO fare card readers will also be installed on the new streetcars starting this fall, with PRESTO operating on all streetcar lines once the new fleet is in full service. This will allow commuters to travel seamlessly and more conveniently on the TTC and across the GTHA.
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The TTC opened a second subway platform at Union Station in August, helping to reduce overcrowding and improve passenger circulation.
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In addition, progress continues on the first wave of projects in Metrolinx’s Regional Transportation Plan, the Big Move. Recent examples include the following:
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In Markham, a new segment of bus rapid transit (rapidway) opened in August, extending Viva rapid transit service along Highway 7 from Highway 404 to South Town Centre Boulevard. With the opening of this segment, approximately 18 per cent of the vivaNext bus rapid transit project is in service.
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The first Union Pearson Express trains have arrived in Toronto and are undergoing testing and commissioning. The Union Pearson Express remains on track to begin service in the spring of 2015, in time to serve as a critical transportation link for the Pan/Parapan American Games.
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Construction of the tunnels for the Eglinton Crosstown Light Rail Transit (LRT) continues to progress. As of October 30, 2014, tunnelling of about 3.4 kilometres was completed.
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Expanding GO Transit
Ontario recently took a key step towards doubling train service between Kitchener and Toronto in 2016 by finalizing the purchase of a 53-kilometre rail corridor between Kitchener and Georgetown. Increasing Metrolinx’s ownership along the Kitchener rail corridor will allow GO Transit to improve service, control operations and make infrastructure upgrades needed to support service expansion.
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Investing in Provincial Highways
Investments in the provincial highway network support the movement of goods to market and commuters between their homes and workplaces. Ontario is investing $2.5 billion in provincial highway and bridge projects this year.
Examples of highway expansion projects include:
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Opening a 13-kilometre extension on Highway 404 from Green Lane to Ravenshoe Road that will make it faster to travel into and out of the GTA and take up to 22,000 vehicles a day off local roads;
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Continuing to four-lane key highway corridors in northern Ontario, including widening Highway 69 between Parry Sound and Sudbury, and Highway 11/17 between Thunder Bay and Nipigon. A new four-lane stretch of Highway 11/17 between Highway 527 and McKenzie Road was opened to traffic this fall;
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Widening a 12-kilometre stretch of Highway 410 from south of Highway 401 to Queen Street in Brampton, which includes building a high-occupancy vehicle (HOV) lane in each direction. The contract has been awarded and construction is targeted for completion by the fall of 2018;
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Widening and improving the Highway 417 corridor through Ottawa, including opening the Hunt Club Road extension and new interchange at Highway 417 in the summer of 2014; and
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Widening Highway 7/8 from Fischer‐Hallman Road to Courtland Avenue in Kitchener, scheduled to be completed in 2016. Work completed to date includes the rehabilitation and widening of over- and under-passes and the installation of noise barrier walls.
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Building Better Places to Learn
As of September 2014, full-day kindergarten was available to all four- and five-year-olds in Ontario. Since 2010, the government has provided $1.5 billion in capital funding to support the rollout of full-day kindergarten across the province. This funding supported the creation of close to 3,500 new kindergarten classrooms, through additions and major retrofits.
The government plans to provide funding of more than $11 billion over the next 10 years for elementary and secondary education infrastructure to continue building better places to learn and support consolidations of schools. Capital investments will help build new schools to address growth pressures in areas such as Milton, Brampton, Barrhaven and Ancaster. These infrastructure investments will align with demographic trends and help meet the needs of changing communities.
Increasing Access to Postsecondary Institutions
Ontario will continue to expand its postsecondary education infrastructure in areas where student demand is strong and where there are gaps in access.
The Province released its Major Capacity Expansion Policy Framework in December 2013 to guide the development of new or expanded campuses in underserved areas. In March 2014, the Province issued a call for proposals to universities and colleges focused on future large-scale expansion of postsecondary education capacity in Ontario.
Proposals will be evaluated through the Major Capacity Expansion Policy Framework, which highlights the need to ensure that decisions reflect provincial priorities, future demand needs and regional capacity gaps.
Investing in Modern Health Infrastructure
Building a sustainable public health care system supports Ontario’s Action Plan for Health Care by ensuring that patients get the right care, at the right time, in the right place.
Over the next 10 years, Ontario plans to invest over $11.4 billion in hospital capital grants to provide adequate infrastructure capacity in the health care sector. Across Ontario, more than 40 major hospital projects are under construction or in various stages of planning, including the recently announced plans to move forward with a new hospital in Markdale and the expansion and redevelopment of Cambridge Memorial Hospital.
The Province will also provide an additional $300 million over the next 10 years to help shift care from hospital to community settings. This includes doubling its annual investment over the next three years for Community Health Centres, Aboriginal Health Access Centres, and community-based mental health and addictions agencies.
Innovative Approaches to Infrastructure Investment
Ontario is one of the leading jurisdictions for Alternative Financing and Procurement (AFP) projects. Infrastructure Ontario (IO) and its private-sector partners consistently deliver valuable public infrastructure assets on time and on budget.
The Ontario government, through IO, is delivering over 80 projects valued at about $35 billion in capital construction costs using the AFP model. These include completed projects and projects under construction, with over $3 billion in estimated value-for-money savings. A recent review of 37 projects that have reached substantial completion found that 36 were completed on or below budget and 27 were completed on, ahead of, or within one month of schedule.
Infrastructure Ontario is committed to applying lessons learned, developing best practices, and being open and transparent by providing information online and consulting with partners.
As part of its “Spring 2014 Market Update,” IO identified a series of upcoming projects, estimated project sizes and procurement timelines to allow firms to better organize their resources. Examples of AFP projects currently in procurement or underway include:
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The Seneca College King Campus expansion project, which involves the design and construction of new academic and other facilities that will allow Seneca to increase the range of programs offered and provide space for an additional 1,450 students; and
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McMaster Children’s Health Centre, which involves the construction of a new children’s treatment centre that will consolidate a number of services under one roof and improve access for children and families.
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In 2013–14, seven AFP projects reached substantial completion, including:
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Waypoint Centre for Mental Health Care, a state-of-the-art mental health care facility in Penetanguishene that will offer a larger, more modern space for treatment and care of people with mental health disorders who have been involved with the criminal justice system; and
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Elgin County Courthouse, which brings together existing court facilities within one location in St. Thomas, improving justice services for local residents.
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The Province is also enhancing the AFP model to help improve the delivery of large and complex projects, particularly integrated transit systems with significant risk and scope. These enhancements are starting with the Eglinton Crosstown, Metrolinx’s largest transit project, now under procurement.
These enhancements will enable companies of various sizes to compete and participate while maintaining the commitment to on-time and on-budget delivery. In addition, bidders will incorporate community benefits such as job and supplier fairs into their bids. The procurement will also include a pilot initiative to increase the participation of registered apprentices.
Section D: Creating a Supportive and Dynamic Business Climate
Ontario provides a supportive environment for business development and growth. The Province’s investments in skills and infrastructure have made Ontario an attractive place to start and grow a business. Overall business costs in Ontario are very competitive within Canada and internationally.
In the 2014 Budget, the government committed to creating a supportive and dynamic business climate. Key initiatives under the plan include:
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Investing in people’s talents and skills. See Chapter I, Section B: Investing in People’s Talents and Skills for more details;
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Building modern infrastructure and transportation networks. See Chapter I, Section C: Building Modern Infrastructure and Transportation Networks for more details;
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Maintaining a competitive tax environment that encourages businesses to invest and grow;
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Building strategic partnerships with businesses, including investments through the 10-year, $2.5 billion Jobs and Prosperity Fund;
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Reducing regulation for businesses;
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Growing small businesses in Ontario;
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Helping businesses manage electricity costs;
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Modernizing financial services; and
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Moving forward with the government’s Going Global Trade Strategy, to encourage Ontario businesses to expand their exports internationally.
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Through these initiatives, the government will support growth across all regions of the province, encourage productivity-enhancing investments by business, and improve Ontario’s capital markets.
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KPMG’s 2014 “Competitive Alternatives” report ranks Toronto’s overall business costs as second lowest among 34 large cities in Canada and the United States, and fifth lowest among 48 large cities in North America, Europe, Australia and Japan.
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Maintaining a Competitive Tax Environment
Ontario has significantly improved its tax competitiveness, making the province a more attractive location for business investment.
Ontario’s general Corporate Income Tax (CIT) rate has been reduced from 14 per cent to 11.5 per cent, resulting in a combined federal–Ontario general CIT rate of 26.5 per cent. This combined rate is lower than the combined federal–state CIT rate in any of the U.S. states and lower than the average CIT rate of G8 and G20 member countries.
The reduction in Ontario’s general CIT rate, together with other tax changes, has cut Ontario’s marginal effective tax rate on new business investment in half since 2009. This encourages productivity-enhancing investments that enable Ontario businesses to improve their competitiveness and create more well-paying jobs.
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Measures Taken to Maintain a Competitive Tax System
· Introducing several tax reforms that deliver over $9 billion annually in tax cuts to businesses:
· The Harmonized Sales Tax (HST), a more modern value-added tax, removes $4.7 billion a year in embedded sales taxes paid by businesses when fully implemented;
· Cutting Corporate Income Tax (CIT) rates for businesses provides $2.3 billion of tax relief per year; and
· Eliminating Capital Tax, which corporations pay whether or not they had a profit, provides $2.1 billion of tax relief per year.
· Implementing significant cuts to high Business Education Tax rates has resulted in savings of over $200 million per year for Ontario businesses.
· Providing a benefit of $265 million over three years by paralleling the 2013 federal budget measure to extend the 50 per cent accelerated depreciation rate for manufacturing and processing machinery and equipment to December 31, 2015.
· Reducing business compliance costs by more than $635 million per year from the HST and streamlined CIT administration.
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Building Strategic Partnerships
Private-sector investment is a catalyst for economic prosperity through enhanced productivity, strengthened innovation, increased exports, and better job opportunities. The government’s economic plan sets the stage for more business investment and long-term economic growth through strategic partnerships between government and business. These partnerships can take many different forms, including grants, loans, equity investments and fostering industry-academic collaboration.
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Honda Canada (2014)
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An investment of $857.4 million to support production at the company’s manufacturing facilities in Alliston.
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OpenText (2014)
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An investment of up to $2 billion to expand operations across Ontario, including new jobs in research and development. OpenText is Canada’s largest software company, specializing in enterprise information management software.
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Cisco (2013)
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An investment of up to $4 billion that will establish Ontario as one of the company’s research and development hubs. This project will support the development of technology used in mobile computing and video technology.
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Based on an ongoing review of Ontario’s business support programs, the Province is adopting a more rigorous approach to evaluating potential strategic partnership opportunities with business. As part of this new approach, strategic partnerships will have an added focus on increasing business investment, particularly in productivity-enhancing activities such as research and development (R&D) and exports. Partnerships in strategic sectors such as advanced manufacturing foster enhanced business investment and long-term economic growth in the province. A strategic partnership investment should also align with the goals of a cluster or sector plan to increase growth and competitiveness. If passed, the Better Business Climate Act, 2014, would enable the Minister of Economic Development, Employment and Infrastructure to prepare plans for the development of economic clusters, which would help to inform strategic partnerships.
In the 2014 Budget, the government announced a 10-year, $2.5 billion Jobs and Prosperity Fund. The Fund is focusing on supporting strategic private-sector investments in innovation, productivity and export opportunities. All business projects supported by the Jobs and Prosperity Fund will undergo a rigorous assessment to ensure substantial economic benefits, cost-effectiveness for government, and a return on investment for Ontarians.
Across the province, communities have unique strengths upon which businesses from many different industries rely. Together, these local economies are the foundation of a resilient Ontario economy. For this reason, the government is partnering with communities across the province to improve economic outcomes, through programs such as the Rural Economic Development Program, Southwestern Ontario Development Fund, Eastern Ontario Development Fund and Northern Ontario Heritage Fund Corporation.
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Supporting Jobs and Economic Development in Communities across Ontario
The government’s priority is to create jobs, growth and opportunity in every part of Ontario. Each region of the province has unique advantages to specific industries and economic activities that form a strong base to build resilient local economies. Examples include:
· GlobalMed. Inc., located in Quinte West, makes plastic tubing used in medical applications. The company received $470,000 from the Eastern Ontario Development Fund to invest in new technology that will increase production and expand the range of products. The project will leverage $4.7 million in private investment, and is targeted to create 10 new jobs while retaining 180 positions.
· CapsCanada, located in Windsor, received $1.5 million from the Southwestern Ontario Development Fund. The funding is for renovations to its Tecumseh facility to meet increasing global demand from health nutrition and pharmaceutical industries. The project will create 34 new jobs and retain 63 existing jobs.
· Morin Industrial Coatings Ltd. is receiving $1 million from the Northern Ontario Heritage Fund Corporation to expand its corrosion control business in Lively, creating eight new jobs. The project will leverage $1.5 million in private investment.
· The Rural Economic Development Program provided support to the Hensall District Co-operative (HDC), which processes and markets high-value field crops for over 2,000 Ontario farmers. The project is focusing on export growth and will create six jobs and retain eight. It will also leverage $4.3 million in private investment.
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On October 7, 2014, the government launched the new three-year, $25 million Aboriginal Economic Development Fund (AEDF), which is part of the Jobs and Prosperity Fund. The AEDF will partner with First Nation, Métis and Inuit communities to grow local businesses and create jobs. It will help Aboriginal communities develop long-term strategies to diversify their local economies, improve access to financing, and facilitate collaboration among communities for regional employment and skills training projects.
Ontario is also committing $40 million annually, under the Jobs and Prosperity Fund, to help the agri-food and agri-products processing industry create jobs and attract new investment. The Premier has challenged the broader agri-food industry to double its annual growth rate and create 120,000 new jobs by 2020.
Other strategic partnerships include initiatives to improve access to capital for business. In January 2014, in partnership with the federal government and private-sector partners, Ontario launched the Northleaf Venture Catalyst Fund (NVCF). Since its launch, the Fund has grown to more than $233 million, targeting a final close of $300 million. To date, the Fund has made eight investments in companies and other venture capital funds.
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In April 2014, the Northleaf Venture Catalyst Fund contributed to a $46 million investment in Toronto-based Wattpad, a social writing and networking company with more than 35 million users.
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The success of NVCF builds on other provincial programs, such as the Investment Accelerator Fund (IAF), which provides financing at the critical early stages of a firm’s life. In October 2014, five IAF portfolio companies raised more than $50 million in financing alone, primarily from private-sector investors. By supporting dynamic entrepreneurial firms, the government is helping to lay the foundation for future economic growth.
The Province is also exploring ways to partner with the private sector to leverage public investments in health research that will contribute to improved health outcomes and economic activity. The Ontario Health Innovation Council was established in November 2013, and is currently developing recommendations for its final report on accelerating the adoption of new health technologies and innovations.
Reducing Regulation for Business
Ontario is working to create a regulatory business environment that will help business to grow. Through the Open for Business renewal initiative, the Better Business Climate Act, 2014, if passed, would ensure that regulatory burdens are being further reduced and smarter regulatory practices are being adopted. Doing so would help business save millions of hours in time and $100 million in costs by 2016–17.
Every year, the government will report on the efforts of ministries to further reduce the regulatory burden on business by at least one initiative per ministry. The government is committed to reducing the regulatory burden while protecting the public interest, including health, safety and the environment.
Growing Small Businesses in Ontario
Small and medium-sized enterprises are the leading source of business entrepreneurship and account for more than 60 per cent of private-sector employment. In a dynamic economy, successful small and medium-sized businesses will grow and prosper as they innovate and expand into global markets.
To foster a healthy and growing small and medium-sized business sector, the Ontario government is taking action, such as:
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Employer Health Tax Exemption – supporting small employers by raising the exemption from $400,000 to $450,000 of annual Ontario payroll;
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Five-Point Small Business Energy Savings Plan – ensuring small businesses have the tools they need to understand their bill, conserve energy, manage costs and save money; and
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Venture Capital – creating a new venture capital fund in collaboration with the federal government and private-sector partners that will help innovative startups and other emerging companies get the financing they need to build competitive businesses and create tomorrow’s jobs.
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Helping Businesses Manage Electricity Costs
Successful management of electricity costs can be key in growing Ontario businesses. Ontario is moving forward with a new stream of the Industrial Electricity Incentive (IEI) program and is expanding eligibility for the Industrial Conservation Initiative (ICI).
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Industrial companies could be eligible for a significant reduction in electricity rates for incremental consumption through the IEI program if they start or expand operations. Contracts under the new stream are available for a longer term, with an end date of up to December 31, 2024.
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The ICI is being expanded by lowering the threshold for qualifying industrial sectors from five megawatts (MW) to three MW, with new eligible participants who opt-in to begin receiving billing under the ICI starting July 1, 2015. Existing participants in ICI save, on average, an estimated 10 to 20 per cent on their electricity bill. The ICI encourages electricity conservation during peak hours, saving money for the entire electricity system.
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In addition, the Province extended the Northern Industrial Electricity Rate (NIER) Program with $360 million over three years (2013–14 to 2015–16) to provide a rebate of two cents per kilowatt-hour to qualifying large northern industrials.
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The initial streams of the Industrial Electricity Incentive Program resulted in seven projects, including Pembroke MDF (estimated 140 new jobs), ASW Steel (estimated 45 new jobs), Atlantic Packaging Products (estimated 80 new jobs), and Resolute Forest Products (estimated 78 new jobs).
Vision Extrusions, an extrusions manufacturing company in York Region employing 325 workers, could expect to save approximately $560,000, or 17 per cent, on its annual electricity costs under the changes to the Industrial Conservation Initiative, assuming the company reduces its electricity consumption by 15 per cent during times of highest system demand.
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Modernizing and Strengthening Financial Services
A well-regulated financial services sector supports a dynamic business climate while protecting individual investors. As part of its plan for Ontario’s economy, the government is moving forward to strengthen its financial services sector by:
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Playing a lead role in the establishment of a Cooperative Capital Markets Regulatory System; and
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Supporting efforts to secure the designation of a Canadian renminbi trading hub.
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As well, the Province is committed to reviewing the:
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Mandates of the Financial Services Commission of Ontario and the Deposit Insurance Corporation of Ontario — key financial services regulatory agencies;
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Legislative framework for credit unions and caisses populaires; and
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Policy alternatives for more tailored regulation of financial planning.
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The financial services sector remains an engine of growth for Ontario — the economy’s second-largest major sector after manufacturing based on output. In 2014 to date, it has continued to create jobs at a rate twice as fast as the overall Ontario economy. The financial sector also enables economic growth in the rest of the economy by supporting ancillary jobs in business services and other industries, as well as savings, access to capital for small businesses and consumers, and investment.
Toronto is the financial capital of Canada and a global financial centre — home to many leading banks, securities dealers, insurers and pension funds. Toronto is also the second-largest financial sector employer in North America, after New York. As a global financial centre, Toronto ranks highly as number six on The Banker magazine ranking after London, New York, Singapore, Hong Kong and Dubai. According to the Conference Board of Canada, 43 per cent of Canada’s financial services headquarters employees are based in Toronto, triple the nearest competitor, Montreal, at 12.4 per cent.
Strengthening Ontario’s Financial Services Sector
Establishing a Cooperative Capital Markets Regulatory System
Ontario continues to work alongside its provincial and federal partners to achieve a Cooperative Capital Markets Regulatory System (CCMR) framework.
The CCMR, once implemented, would make securities markets in Canada safer, more efficient, and more competitive. It would offer real benefits to Canadians by increasing businesses’ ability to raise capital, allowing households to save and invest with confidence, and helping create jobs and economic growth.
A strong cooperative securities regulatory framework would enhance Canada’s reputation and competitiveness in global capital markets.
In September 2014, the Ontario, British Columbia, Saskatchewan, New Brunswick, and federal governments announced a Memorandum of Agreement to jointly establish the CCMR and published for comment consultation drafts of the provincial capital markets legislation and complementary federal legislation that the new common regulator would administer. Momentum continues to build for the CCMR initiative, with Prince Edward Island agreeing to participate on September 30, 2014.
Ontario is working actively with all other participating governments to achieve the key milestones for this initiative and to encourage other provinces and territories to participate in and benefit from the CCMR.
Renminbi Trading Hub
Ontario supports the agreement recently reached between the federal government and Bank of Canada with the government and central bank of China, relating to the designation of a renminbi (RMB) trading hub in Canada. The RMB is the official currency of the People’s Republic of China.
A Canadian RMB trading hub, once implemented, would facilitate increased investment and trade by allowing the Canadian financial sector to quickly and efficiently clear and settle transactions in Canada. It would also strengthen Canada’s broader economic relationship with China and its competitive position in global financial markets by allowing businesses to raise funds in RMB and the financial services sector to offer RMB products to customers. Canadian importers and exporters that trade in RMB will also benefit from reduced administrative requirements in China.
Establishing North America’s first RMB trading hub will raise Canada’s stature as a global financial centre and facilitate increased trade and investment with China, thus benefiting the entire Canadian economy.
Modernizing Ontario’s Financial Services Sector
Reviewing the Mandates of Key Financial Services Regulators
The 2014 Budget noted that mandate reviews of all government agencies will be undertaken beginning this year. The Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corporation of Ontario (DICO) play critical roles in the regulation of financial services. The FSCO is also responsible for the regulation of pensions in Ontario.
The government is undertaking reviews of both agencies’ mandates to further modernize regulation of financial services and advance ongoing work on pension reform.
The government is also committed to reducing risk in the agencies sector through strong agency oversight. The government is prepared to pursue early legislative changes to improve accountability and modernize agency governance.
Reviewing Ontario’s Legislative Framework for Credit Unions and Caisses Populaires
Credit unions and caisses populaires play an important role in Ontario’s economy. They promote a competitive financial services marketplace and some communities rely on their local credit unions and caisses populaires as their sole financial services provider. Almost 1.6 million Ontarians, more than 10 per cent of Ontario’s population, are members of a credit union or caisse populaire. The sector holds more than $40 billion in assets, employs over 6,000 people and, as of the end of 2013, had provided loans of more than $33 billion to individuals and businesses.
To ensure that Ontario’s credit union legislation remains current and in line with best practices, in the fall of 2014, the Minister of Finance appointed his Parliamentary Assistant, MPP Laura Albanese, to lead a review of the Credit Unions and Caisses Populaires Act, 1994. An Expert Advisor will be assisting Ms. Albanese in her review. As part of the review, Ms. Albanese is currently holding public consultations across the province. Her final report will take these public views into consideration. It will contain recommendations to the government on proposed changes to the existing framework to promote competition, protect consumers and their deposits, and help credit unions continue to meet their members’ needs. Ms. Albanese’s final report will be released in the fall of 2015.
Reviewing Regulation of Financial Planning
Individuals are increasingly responsible for their own income security and require sound and professional financial advice and planning services. To help consumers make informed choices and investments, the government is moving forward with the appointment of an expert committee to thoroughly consider more tailored regulation of financial advisers, including financial planners.
Over the coming months, the committee, composed of independent members, will develop a mandate in consultation with key stakeholders. The mandate will include an analysis of relevant issues surrounding the profession, such as the sufficiency of regulatory frameworks; proficiency and education requirements; the use of multiple titles; consumer access to information and complaint registration; and potential conflicts of interest. Upon a comprehensive analysis of relevant issues, the committee will provide key recommendations and submit their final report to the Minister of Finance for review by early 2016.
Going Global
Growing Ontario Exports
Ontario’s Going Global Trade Strategy will help grow exports of Ontario’s high-quality goods and services as the global economy expands. Continuing to increase provincial exports is an important source of gross domestic product (GDP) and job growth. Emerging market economies will significantly increase their share of the global economy over the next five to ten years. China’s share of global output is expected to almost double to 27 per cent by 2035. Developed economies such as the United States and Europe will continue to increase their demand for high value-added products, including Ontario’s resources, high-technology exports, and professional and technical services.
A successful trade mission to China was concluded this fall. It included the Premier of Ontario, the Premiers of Quebec and Prince Edward Island, and 60 Ontario businesses and organizations. The trade mission helped showcase Ontario’s expertise, particularly in clean tech and science and technology, while increasing the province’s international profile. The Premier’s trade mission to China has already attracted nearly $1 billion to Ontario in new deals, creating more than 1,800 new jobs. The government signed 26 agreements during this week-long mission.
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Huawei Technologies Co. Ltd. announced a major expansion to its Ontario operations, valued at $210 million, that will create 325 jobs, including approximately 250 positions for engineers and researchers and at least 75 new marketing, sales and support positions.
Yiwu North America Corporation announced a $100 million investment to establish a new trading centre in Whitchurch-Stouffville. The first phase of the project is expected to create 800 jobs.
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The government continues to expand the reach of Ontario’s exports, building on a strengthening U.S. economy, and diversifying exports towards fast-growing markets abroad. It is also helping companies of all sizes, including small and medium-sized enterprises (SMEs), increase their success in exporting to global markets and creating jobs.
Ontario is partnering with the federal government on:
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The recently negotiated Comprehensive Economic and Trade Agreement (CETA) with the European Union, a large and wealthy market of over 500 million people that holds out tremendous export and investment opportunities for Ontario firms, including SMEs; and
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Negotiating comprehensive trade agreements with many of its other major trading partners, including countries that are part of the Trans-Pacific Partnership discussions. Ontario will continue to support trade agreements that benefit its economy while supporting strategic sectors.
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Ontario is in the process of expanding its international representation to include South Korea, Chongqing in China, and Israel. This adds to the existing International Marketing Centres in New York, San Francisco, Mexico City, São Paulo, London, Paris, Munich, Beijing, Shanghai, Tokyo and New Delhi (including a satellite office in Mumbai).
The government continues to connect Infrastructure Ontario with Ontario’s international trade offices to create export opportunities for Ontario firms that have participated in Alternative Financing and Procurement (AFP) projects. Infrastructure Ontario is showcasing the made-in-Ontario AFP model through its involvement with the National Governors Association in the United States. In addition, over 40 international delegations have visited Infrastructure Ontario to better understand the made-in-Ontario AFP model.
Strengthening Partnerships with Provinces and Territories
While Ontario is expanding its global reach, it is also working to strengthen economic ties with the rest of Canada. The free flow of people, goods, services and investments within Canada helps the Ontario economy build on its strengths. Ontario strongly supports a more efficient and effective Canadian economic union. At the Council of the Federation meeting in August 2014, Premiers agreed to undertake a comprehensive renewal of the national Agreement on Internal Trade (AIT), which included aligning it with modern international trade agreements.
Ontario has been working to strengthen its relationship with Quebec in order to reinforce this key regional partnership. Both provinces are working to increase trade, expand access to public procurement and explore the viability of expanded electricity trade. As part of this initiative, the Premiers have agreed to pursue joint meetings of their Cabinets, the first of which will occur on November 21, 2014, in Toronto.
Attracting Foreign Direct Investment
Foreign direct investment (FDI) contributes to Ontario’s economy by improving productivity and competitiveness, introducing new technologies and creating new high-paying jobs for Ontarians. The Ontario government has played an important role in attracting FDI by contributing to a positive business investment climate and leveraging major capital spending projects by leading global companies.
Ontario remains the leading destination in North America for FDI.
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fDi Intelligence, a major source of research and analysis on FDI trends globally, published in its report on global FDI trends in 2013 that Ontario is the number one destination in North America for global FDI, based on capital spending projects.
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Ontario ranked second in North America in the software and information technology sector, third in autos and fourth in financial services. The province continues to punch above its weight in FDI in these major sectors, while ranking only fifth in North America in overall economic size.
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Supporting a Vibrant Tourism and Culture Sector
Ontario’s tourism and culture industries not only create jobs and economic growth, they also enhance Ontarians’ quality of life. A key upcoming event in the tourism and culture sector is the commemoration of the 400th anniversary of the Francophone presence in Ontario, scheduled to take place from June to October 2015.
On September 25, 2014, the government announced funding of $5.9 million for a wide range of commemorative events for the anniversary. Specific tourism, cultural, educational and legacy projects will be announced in the coming weeks and months. The Province will be supporting projects that are geared towards job creation, attracting visitors, and celebrating the contributions of Franco-Ontarians to the social, cultural and economic development of Ontario.
Section E: Strengthening Retirement Security
A Leader in Retirement Income Security
Introduction
The government is committed to a strong and secure retirement income system to help ensure that Ontarians are better able to enjoy their retirement years. Several studies have shown that, unless action is taken, a significant portion of today’s workers will face a decline in their living standard in retirement.1 These studies also indicate that this problem will likely worsen over time.
As noted in Ontario’s 2014 Budget, the government recognizes that increasing retirement savings in the province is a complex challenge that requires a multi-faceted approach and close collaboration with all parties, including individuals, employers, labour, the financial services industry, and all orders of government. That is why Ontario is continuing with its three-pronged strategy, first outlined in the 2013 Ontario Economic Outlook and Fiscal Review, to strengthen and modernize the retirement income system. This multi-faceted strategy will strengthen the retirement income security of all Ontarians, including:
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Those without workplace pension plans;
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Those with self-directed retirement savings; and
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Those with defined benefit plans.
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The Ontario Retirement Pension Plan
Canada’s publicly administered Canada Pension Plan (CPP) is fundamental to the retirement income security of all Canadians, but its benefits are too low to meet the needs of many workers.
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Recent studies that have examined the adequacy of retirement savings in Canada include: Keith Horner, “Retirement Saving by Canadian Households,” (2009); Kevin D. Moore, William Robson and Alexandre Laurin, C.D. Howe Institute, “Canada’s Looming Retirement Challenge,” (2010); Michael C. Wolfson, “Projecting the Adequacy of Canadians’ Retirement Incomes,” (2011); McKinsey & Company, “Are Canadians Ready for Retirement?” (2012); and CIBC, “Canadians’ Retirement Future: Mind the Gap,” (2013).
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Ontario has long played a leadership role in retirement income security and has been advocating for an enhancement to the CPP since 2010.
In 2013, the federal government unilaterally shut down discussion on options for an enhancement to the CPP, against the consensus of provinces and territories to continue working on this issue.
Ontario’s preferred solution remains an enhancement to the CPP; however, the cost of inaction is simply too high. As a result, the government intends to introduce a new mandatory provincial pension plan — the Ontario Retirement Pension Plan (ORPP) — that will offer a secure benefit for life. The implementation of the ORPP is intended to coincide with the expected reductions in Employment Insurance premiums in 2017. The ORPP will be designed to facilitate the possibility of its integration with the CPP, in the event that an agreement is reached on a CPP enhancement.
The ORPP is an integral part of the government’s plan to invest in people, and to help working families build a more secure retirement future.
A provincial pension plan of this scale would be the first of its kind in Canada. Once introduced, the ORPP would be a significant step in addressing the retirement undersaving challenge, particularly for middle-income earners without workplace pension coverage.
As outlined in the 2014 Budget, the ORPP would have the following features:
Design
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Replicate many of the CPP’s design features in order to build on the success of the CPP.
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Benefits
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Provide a predictable stream of retirement income for life by pooling longevity and investment risk, and indexing benefits to inflation.
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Aim to provide a replacement rate of 15 per cent of an individual’s earnings, up to a maximum annual earnings threshold. The ORPP benefits would be earned as contributions are made to ensure that the system is fair, and younger generations are not burdened with additional costs.
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Contributions
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The ORPP would require equal contributions shared between employers and employees, not exceeding 1.9 per cent each (3.8 per cent combined) on earnings up to a maximum earnings threshold of $90,000 (in 2014 dollars). This threshold would increase every year, consistent with increases to the CPP maximum earnings threshold.
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Earnings below a low earnings threshold would be exempt from contributions. The government will consult on whether the ORPP’s low earnings threshold will mirror the CPP’s threshold of $3,500.
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Participation
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The ORPP would be mandatory for all employees working in Ontario who do not currently benefit from a comparable workplace pension plan.
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Employees participating in a comparable workplace pension plan and self-employed individuals would not participate in the ORPP. The government will consult on what constitutes a comparable workplace pension plan and how to best assist self-employed individuals in achieving a secure retirement future.
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Administration
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The ORPP would be publicly administered at arm’s length from government with a strong governance model and be responsible for managing the plan’s investments.
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Recognizing that retirement income security is critically important to Ontario families and for the future prosperity of the province, the government is committed to implementing the ORPP as a priority in 2017. Enrolment of employers and employees would occur in stages, beginning with the largest employers, and contribution rates would be phased in over two years.
In June, Premier Kathleen Wynne appointed a new Associate Minister of Finance responsible for the ORPP. The Associate Minister of Finance, the Honourable Mitzie Hunter, has begun to engage a variety of stakeholders — meeting with businesses, labour, organizations, associations, as well as individuals, families and communities across the province — to ensure that the ORPP properly balances retirement income security with the impact on business, and meets the needs of a 21st century workforce.
The government will also be supported by Michael Nobrega in his role as the Implementation Lead, providing guidance and support to the Minister of Finance, the Associate Minister of Finance and Ministry officials on the implementation of the ORPP. In particular, this role will involve providing advice on the creation of the arm’s-length administrative entity and the development of the administrative and operational capacity necessary to ensure a smooth transition to 2017 and manage the ORPP on a long-term basis.
The Province will continue to work with the Technical Advisory Group on Retirement Security, relying on a range of pension expertise and perspectives as it develops the ORPP.
The government intends to introduce legislation shortly to begin the process of fulfilling its commitment to introduce the ORPP and will formally consult on key plan design issues in early 2015. Feedback from the government’s consultations will inform the ORPP’s design and structure.
Pooled Registered Pension Plans
Voluntary savings tools, such as registered retirement savings plans (RRSPs) and pooled registered pension plans (PRPPs), will continue to play an important role in Ontario’s retirement income security system. Pooled registered pension plans will offer employees and the self-employed a voluntary, low-cost, tax-assisted option to increase retirement savings.
After a successful consultation process in early 2014, the 2014 Budget committed to introducing a legislative framework for PRPPs that is broadly consistent with the model introduced by the federal government and adopted by various provinces. The government intends to introduce this legislation shortly.
Target Benefit Pension Plans
Ontario’s three-pronged strategy to enhance retirement income security includes pension reforms to allow for more flexible models such as target benefit pension plans. These plans offer employers an innovative new option by combining features of defined benefit pension plans and defined contribution pension plans. Target benefit pension plans “target” a specific pension, funded by fixed contributions. Unlike defined benefit pensions, target benefit pensions may be reduced to address funding shortfalls.
As outlined in the 2014 Budget, the government will be consulting on a regulatory framework for target benefit pension plans in Ontario. Initial consultations, including the release of a consultation paper, will focus on a framework for target benefit multi-employer pension plans.
Ongoing Retirement Income Security Reforms
A Strong Pension Regulator
A key factor in ensuring retirement income security is effective and responsive pension regulation and oversight. The regulator, the Financial Services Commission of Ontario (FSCO) and its Superintendent, must have sufficiently effective powers to ensure compliance with pension minimum standards legislation.
In response to the Report of the Expert Commission on Pensions, in 2010 the government made a number of amendments to the Pension Benefits Act, which have yet to be proclaimed, to expand the Superintendent’s powers. The government intends to move forward with the necessary regulations to proclaim these amendments.
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“To bring compliance as near to 100% as can be achieved, the regulator ought to have a number of strategies at its disposal. Disseminating information, dispelling misunderstandings, resolving ambiguities, developing open and cooperative relationships, providing positive incentives for willing compliance and forgiveness for innocent and minor transgressions are — and should be — part of any regulator’s repertoire. Nonetheless, significant and intentional violations will occur and must be dealt with.”
Report of the Expert Commission on Pensions, “A Fine Balance: Safe Pensions, Affordable Plans, Fair Rules,” (2008), 139.
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Pension Reforms Underway
The government continues to strengthen and modernize Ontario’s retirement income system through the development of regulations to implement the amendments to the Pension Benefits Act introduced in 2010.
In November 2014, the government passed a regulation to extend the exemption that certain pension plans have from the “solvency concerns” test. This test determines when defined benefit pension plans must file annual valuation reports with the pension regulator. The exemption has now been extended from December 31, 2014, to December 31, 2017, to allow enough time to consult on an appropriate test for those pension plans that are exempt from solvency funding requirements.
In addition, earlier this fall regulatory proposals on the following issues were posted for public consultation:
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Information statements for retired and former pension plan members;
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Disclosure of environmental, social and governance factors in pension investment decisions; and
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The transfer of pension benefits from Ontario registered pension plans to plans in other jurisdictions.
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After incorporating feedback, regulations will be considered for approval later this year.
The government continues to work on other areas of reform, including:
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Updating filing requirements to reflect changes to accounting standards: After initial consultations, the government remains committed to implementing the necessary regulatory reforms once it has had an opportunity to incorporate stakeholder feedback.
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Payment of variable benefits directly from defined contribution plans: Initial consultations in April highlighted areas where legislative amendments would be required to promote consistency between the treatment of variable benefits and the current framework for Life Income Funds (LIFs). The government has considered stakeholder responses to the consultation and is proceeding with the necessary amendments to the Pension Benefits Act. The amendments will support greater flexibility, so that retired members receiving variable benefits would have more portability and withdrawal options in dealing with their retirement funds. Once these amendments have been passed, the government will move forward with regulations to implement its commitment to permit direct payments from defined contribution pension plans.
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Exemption from the “30 per cent rule” for pension investments in Ontario infrastructure: As announced in the 2013 Ontario Economic Outlook and Fiscal Review, the government is committed to removing obstacles to investments in Ontario infrastructure by Ontario’s pension plans. The 30 per cent rule limits the ability of pension plans to take large voting interests in a corporation, potentially restricting pension investments in infrastructure projects. With the removal of this restriction, pension plans may represent a significant new source of capital to support economic growth and job creation in Ontario. A description of proposed regulatory amendments providing for an exemption from the 30 per cent rule for pension investments in Ontario infrastructure was posted for consultation earlier this fall. The government will consider stakeholder responses as it develops regulations to implement the
proposed exemption.
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Sustainable and Cost-Effective Public-Sector Defined Benefit Plans
Pooled Asset Management
The 2014 Budget announced that the government will be moving forward with a framework to enable the pooling of pension plan assets in the broader public sector as well as endowment and other funds of public entities. Larger pools of capital enable access to a broader range of investments, which is key to improving risk-adjusted returns.
The government is working closely with key stakeholders to develop the framework for the pooled asset management entity. The Workplace Safety and Insurance Board and Ontario Pension Board have expressed their interest in being involved as initial participants in the entity.
Framework for Conversion to Jointly Sponsored Pension Plans
The government will facilitate conversions or mergers of employer-sponsored, single-employer pension plans (SEPPs) into new or existing jointly sponsored pension plans (JSPPs). On July 24, Bill 14, the Building Opportunity and Securing Our Future Act (Budget Measures), 2014, received Royal Assent. This legislation makes changes to the Pension Benefits Act that, once proclaimed, will provide authority for regulations to facilitate these transactions.
Work is well underway to develop the necessary regulations required for the legislative provisions to be proclaimed. Issues to be addressed in regulations include the level of consent required for active members and retirees, as well as the degree of protection that employers must provide if the SEPP converts to, or merges with, a JSPP. The government has assigned a high priority to the development of these regulations and intends to post regulatory proposals on the Regulatory Registry in the coming months. Comments received will be considered in the development of the regulations, which are anticipated to take effect on July 1, 2015.
Section F: A Fair Society
Building Opportunity for All Ontarians
The Province’s future prosperity depends on every Ontarian being able to participate in its economy.
Ontario has a reputation for promoting greater fairness by investing in people; ensuring equal access to key public services such as health care and education; and supporting the needs of low‐income families and the most vulnerable. By providing enhanced protection, security and equal opportunity for Ontarians, the government provides individuals with a greater sense of dignity and independence.
The Province’s path to a balanced budget will help ensure that services and supports for the most vulnerable are protected and sustainable over the long term. These services and supports play a critical role in ensuring that every Ontarian has the opportunity to participate in employment and contribute to the prosperity of their province.
Moving Forward on the Poverty Reduction Strategy
In September, the government released a renewed Poverty Reduction Strategy – Realizing Our Potential – to expand its efforts to reach more vulnerable people. A sustained, flexible and results-driven approach to poverty reduction is needed to continue building opportunities for all Ontarians.
Ontario’s renewed Poverty Reduction Strategy focuses on four objectives:
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Breaking the cycle of poverty for children and youth;
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Moving towards greater employment and income security;
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Investing in affordable housing and ending chronic homelessness; and
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Using evidence to develop policy and measure success.
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As part of the renewed Poverty Reduction Strategy, the government is recommitting to its target to reduce child poverty by 25 per cent, and has set a new goal to end chronic homelessness.
Breaking the Cycle of Poverty for Children and Youth
From 2008 to 2011, the most recent years for which data are available, the Strategy has helped lift 47,000 children out of poverty. The children’s poverty rate has fallen from 15.2 per cent in 2008 to 13.6 per cent in 2011. Without the efforts of the Strategy, the child poverty rate would have been 15.9 per cent in 2011.
This progress in reducing poverty is all the more important because it happened during a global economic recession and ensuing slow recovery.
The Ontario Child Benefit (OCB) has made a direct and lasting impact by helping lift children out of poverty.
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In July, the maximum annual benefit increased by $100 to $1,310 per child, enhancing the incomes of over half a million families.
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Beginning in July 2015, the OCB’s maximum benefit, and the income threshold at which the OCB starts to be reduced, will be indexed to annual increases in the Ontario Consumer Price Index, safeguarding the purchasing power of the OCB from erosion due to inflation.
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The government will build on the first Poverty Reduction Strategy by expanding access to health benefits for children in low-income families, including prescription drugs, assistive devices, vision care and mental health services. These benefits will help ensure that no parent has to choose between work and social assistance to improve health outcomes for their child or children.
The government will also expand Ontario’s Student Nutrition Program so that children and youth in more low-income neighbourhoods and on First Nation reserves have access to nutritious breakfasts, snacks and lunches. During the 2012–13 school year, the program served nearly 700,000 school-aged children and youth; the expansion of this program will serve an estimated 56,000 more children and youth in higher-needs communities. An initial investment of $32 million over the next three years will establish 340 new breakfast programs in elementary and secondary schools and enhance some existing student nutrition programs.
Moving towards Greater Employment and Income Security
While government supports play a role in reducing poverty, employment remains key to further gains.
As of 2011, in households where no one is employed, the poverty rate is 60 per cent. With one full-time worker, working all year, the poverty rate drops to about 10 per cent. With two or more full-time workers, working all year, the poverty rate falls to about one per cent.
The renewed Poverty Reduction Strategy aims to support and encourage people to find meaningful employment at a fair wage, and continues to focus on providing opportunities for youth and vulnerable populations so that they develop the skills and experience needed to enter the labour market.
To help low-wage workers who struggle to make ends meet, the government has raised the minimum wage to $11 per hour, the highest among the provinces. The government has also passed legislation to index the minimum wage to the Consumer Price Index so it keeps pace with the cost of living.
The Ontario Youth Apprenticeship Program gives youth the skills, training and experience that enable them to graduate with a high school diploma and partial completion of a qualification in a trade. In 2013–14, 21,603 students in Grades 11 and 12 were participating in the program.
As well, Ontario is improving on employment and training services to better assist the most vulnerable, including those receiving social assistance, persons with disabilities, the long-term unemployed, Aboriginal peoples, newcomers and at-risk youth.
Because of the importance of employment to poverty reduction, the government will monitor and report on three new indicators:
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Youth not in employment, education or training;
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Adults in long-term unemployment; and
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A vulnerable-persons poverty rate.
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Investing in Affordable Housing and Ending Chronic Homelessness
The government’s commitment on ending homelessness will require a multi-faceted approach that includes investing in effective programs and services today and developing strategies to help end chronic homelessness over the long term. The Province’s approach includes a particular focus on affordable housing and homelessness prevention.
Ontario’s Long-Term Affordable Housing Strategy continues to be the basis for a more efficient and effective local approach to investment decision-making in affordable housing and supports. As part of the Strategy, the government is ensuring that vulnerable Ontarians remain appropriately housed by investing in homelessness prevention, expanding access to supportive housing, and investing in more affordable housing.
The government is updating its Long-Term Affordable Housing Strategy by 2015–16 so that housing and homelessness-related policies and programs are relevant to current realities and reflect new research and a best-practice approach to poverty reduction.
One example of this approach is the Community Homelessness Prevention Initiative (CHPI). Established in 2013, CHPI allows local governments to use flexible funding approaches, tailored to community needs, to develop programs and supports for those who are homeless or at risk of becoming homeless. An increase of $42 million for CHPI was announced in the 2014 Budget, bringing total investment in this program to $294 million annually. This was rolled out in October 2014. This investment will further improve access to adequate, suitable and affordable housing for those in need.
At the same time, in August 2014, the government signed a renewed Investment in Affordable Housing cost-matching agreement with the federal government. This agreement is expected to provide a total of more than $801 million in new funding for affordable housing across Ontario over the next five years and provide flexibility to local governments to meet local needs and priorities, such as the creation and repair of affordable housing, down-payment assistance for homeownership and rental assistance to households in need. The program also provides dedicated funding assistance tailored to the needs of the off-reserve Aboriginal community as well as remote areas in northern Ontario.
Using Evidence to Develop Policy and Measure Success
The government’s renewed Poverty Reduction Strategy highlights the importance of measuring the impact of programs on people’s lives and using evidence to develop programs and services. To ensure the best allocation of government resources, investments in poverty reduction programs and interventions should be based on evidence, lessons learned and best practices.
Poverty is a complex issue, and establishing the right measures to assess programs requires careful planning. The government will work with its partners among community organizations, service providers and academia to develop approaches that are comprehensive and results-focused.
As initial steps, the government will undertake initiatives to enhance its ability to collect and use evidence.
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In the 2014 Budget, the government announced that it would be investing more than $50 million over five years to create a new Local Poverty Reduction Fund. This fund will support, among other things, the development of strategies for collecting evidence to identify poverty reduction initiatives that work.
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The government will also be seeking expert advice, including from those with lived experience of homelessness, to help define the problem, understand how to measure it, and set a target related to ending chronic homelessness.
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Supporting Ontarians with Developmental Disabilities
In the 2014 Budget, the government committed to investing an additional $810 million over three years to improve supports for adults with developmental disabilities — and their families — to help these adults live as independently as possible and fully integrate into society.
As of October 2014, the government has made progress implementing these initiatives, including:
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Expanding direct funding to more than 6,000 children and their families through the Special Services at Home program and nearly 1,900 adults through the Passport program;
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Expanding residential supports to 350 additional adults, including vulnerable young adults who are transitioning from children’s services;
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Creating a Developmental Services Employment and Modernization Fund to modernize service delivery and increase employment opportunities for people with developmental disabilities; and
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Forming a Housing Task Force, consisting of key stakeholders in the developmental services and housing sectors, to recommend innovative housing solutions for adults with developmental disabilities.
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Increased Legal Aid Eligibility
All Ontarians, regardless of income level or ability, should have access to an effective and fair justice system. Ontario is committed to ensuring low-income families and vulnerable groups have access to the legal supports they need.
The government is committed to expanding access to legal aid by raising the income eligibility threshold to qualify for legal aid assistance. The income eligibility threshold has not increased since the 1990s. As a result, more and more low-income Ontarians have been unable to afford legal representation in the court system.
As announced on October 30, 2014, the government is moving forward with a plan that, when fully phased in, will allow over one million more people to qualify for legal aid services. By increasing the eligibility threshold, more than double the number of low-income individuals will have access to legal aid services. This initiative would result in approximately 75,000 additional certificates — which allow low-income Ontarians to be represented by a lawyer — to be issued by Legal Aid Ontario each year.
The 2014 Budget included an initial investment of $95.7 million to increase the income eligibility threshold by six per cent in each of the first three years of the plan. The first increase took place on November 1, 2014.
Protecting Ontario Consumers
The government’s role in building opportunities for all Ontarians includes taking measures that protect consumers and their hard-earned money. Protecting consumers strengthens Ontario’s economy by helping them keep their daily expenses affordable.
Taking Steps to Keep Auto Insurance Affordable
Government reforms aimed at fighting fraud and abuse are making auto insurance more affordable for Ontarians. As a result of the government’s Auto Insurance Cost and Rate Reduction Strategy, rates declined by more than six per cent on average from August 2013 to August 2014.
To date, the government has taken action to address over half of the recommendations made by the Auto Insurance Anti-Fraud Task Force, including key proposals to enhance the Financial Services Commission of Ontario’s (FSCO) investigation and enforcement authority and make it easier for individuals to report suspected auto insurance fraud. Licensing of health service providers in the auto insurance system, a key Task Force proposal, will become fully effective on December 1, 2014.
The government is also committed to establishing a Serious Fraud Unit, whose initial mandate would include addressing auto insurance fraud. Establishing such a dedicated investigation and prosecution unit would be consistent with the Task Force’s conclusion that cases of suspected auto insurance fraud should be vigorously pursued and prosecuted where evidence warrants.
Bill 15, the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, continues the government’s efforts to protect consumers and combat fraud as part of the Auto Insurance Cost and Rate Reduction Strategy. If passed, Bill 15 would:
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Transform Ontario’s auto insurance dispute resolution system to help injured drivers settle disputed claims faster;
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Regulate the towing and vehicle storage industries through measures that tackle questionable practices; and
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Give the government authority to change the current 60-day period that a vehicle can be stored after an accident, accruing charges, without notice to the owner.
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Rates are directly linked to claims costs, and further action to reduce costs and uncertainty in the auto insurance system is needed to achieve the government’s 15 per cent average rate reduction target. The government will continue to review additional possible reforms, but it is also important for the insurance industry to help keep auto insurance affordable. Insurance companies have a responsibility to manage claims fairly while operating efficiently and investing in new processes and tools, such as data analytics technology, to help crack down on fraud and abuse.
Transparency and Accountability
In the 2013 Budget, the government committed to creating annual independent expert reviews of the impact of auto insurance reforms to date. In late 2013, the Province retained an independent third party to deliver these reviews in the form of annual Automobile Insurance Transparency and Accountability Expert Reports. In addition to these annual reports, an Interim Report was requested and released in April 2014. In November 2014, the first annual report was delivered to the Minister of Finance.
The 2014 Annual Report confirmed that the September 2010 auto insurance reforms reduced claims costs, stabilized premiums and prevented further rate increases. The report also noted that while the government’s current strategy has resulted in an average rate reduction of over six per cent since August 2013, there are still other sources of considerable uncertainty that are preventing rates from being reduced further. Additional actions will be required to reach the average rate reduction target.
The 2014 Annual Report also included specific recommendations targeted at reducing costs, as well as more general recommendations aimed at improving the auto insurance system as a whole. These include improving consumer representation; and enhancing sharing and monitoring of information, such as insurer claims practices, the impact of legal costs, and other measures to improve transparency. The recommendations and observations in the report clearly demonstrate that all stakeholders have a role in creating a more sustainable, affordable and fair system.
Electricity Rate Mitigation for Low-Income Ontarians
The government recognizes that Ontario’s low-income households typically spend a proportionately higher percentage of disposable income on electricity compared to high-earning households.
The Minister of Energy has asked the Ontario Energy Board to develop options and provide a report by December 1, 2014, on a sustainable, long-term electricity support program, the Ontario Electricity Support Program (OESP), specifically designed for low-income Ontarians, to be in place by January 1, 2016. The OESP would replace the Ontario Clean Energy Benefit (OCEB) once it ends December 31, 2015.
The government is also moving forward with removing the Debt Retirement Charge (DRC) cost from residential users’ electricity bills after December 31, 2015. This will save a typical residential ratepayer about $70 per year. Implementation details will be set out in a draft regulation, expected in early 2015.
Economic Expansion Continues
Ontario experienced a relatively weak pace of economic growth in 2013. Real GDP in 2013 rose by just 1.3 per cent, well below Ontario’s potential, and the weakest pace of growth since the global recession. Slow economic growth in 2013 reflected lower residential construction, weaker business investment and slower growth in exports. However, recent indicators are providing solid evidence that Ontario’s economic expansion gained momentum in 2014 and is well positioned for continued growth over the forecast period.
Economic growth rebounded 0.9 per cent in the second quarter of 2014 after an unusually harsh winter slowed the pace of economic activity in the first quarter. Including the second-quarter 2014 rebound, Ontario real GDP is now 11.3 per cent above its recessionary low. Ontario’s post-recession expansion has been supported by strong gains in household spending, investment and exports.
The Ontario economy is gaining strength as rising exports and manufacturing output benefit from solid U.S. growth and a lower Canadian dollar.
The view among private-sector economists, supported by recent economic data, suggests Ontario’s economy is well positioned for continued growth over the remainder of 2014 and throughout the forecast period.
Ontario’s Economy Continues to Create Jobs
Employment has rebounded strongly from the recessionary low. Since June 2009, Ontario has gained over half a million net new jobs, mostly in full-time positions and in the private sector. In addition, the majority of the increase has been in industries paying above-average wages, including professional, scientific and technical services and construction. As of October 2014, Ontario had 285,500 more jobs than at the pre-recession peak in September 2008. Ontario’s unemployment rate has also declined from a recessionary high of 9.4 per cent in June 2009 to 6.5 per cent in October 2014.
The pace of job creation in Ontario since the end of the recession has been stronger than in most developed economies, including the United States and the average for member countries in the Organisation for Economic Co-operation and Development (OECD).
Global Economic Developments and Outlook
The global economy continues to expand at a moderate but uneven pace. Global real GDP growth is expected to remain unchanged at 3.3 per cent this year. In the United States, stronger growth in recent quarters has been driven by household spending and business investment. In Japan, economic activity is expected to improve modestly in the second half of 2014, following a contraction in the second quarter. China’s economy has been transitioning away from investment-led development towards more balanced but sustainable growth. In the eurozone, economic growth remains uneven, with several countries struggling with prolonged downturns. Inflation has remained persistently low, prompting the European Central Bank (ECB) to embark on a quantitative easing program aimed at lifting economic growth.
Global growth is projected to improve in 2015, led by stronger economic activity in the United States. Economic growth in China is expected to stabilize at a more moderate pace, in part due to continued support from government-targeted stimulus measures. In the eurozone, growth is expected to gradually improve as the lower euro and more stimulative monetary policy support a modest recovery. However, many European countries still face a number of significant structural and fiscal challenges that could pose a risk to the expected improvement in global growth.
U.S. Economy
The U.S. economy has rebounded strongly in 2014, following a largely weather-induced contraction in the first quarter of the year. Underlying momentum appears to be broadening, with several key sectors of the economy improving. Employment gains, averaging about 230,000 jobs per month so far this year, have supported stronger household consumption. Motor vehicle sales have been very strong this year and the housing market continues to improve.
Long-term interest rates remain historically low as slow economic growth and low inflation globally have offset the end of the Federal Reserve’s quantitative easing program. The U.S. dollar has appreciated against most major currencies this year, largely a reflection of the relative strength of the U.S. economy.
Steady employment gains and higher housing and equity prices have helped repair consumer balance sheets in the United States. Household net worth has more than recovered from the impact of the recession, helping to support consumer spending and residential investment. Meanwhile, improved financial conditions and solid business confidence are expected to support growth in business investment.
According to the consensus forecast,1 U.S. real GDP growth is projected to strengthen from 2.2 per cent this year to 3.1 per cent in 2015. The U.S. labour market is expected to continue improving steadily, with the unemployment rate declining from 6.2 per cent in 2014 to 5.3 per cent by 2017.
|
1
|
Blue Chip Economic Indicators (October 2014).
|
Oil Prices
The price of West Texas Intermediate (WTI) crude oil averaged $98 US per barrel in 2013. Geopolitical conflicts in Ukraine and the Middle East moved the WTI price to $107 US by mid-June 2014. Since then, the price of WTI has declined sharply to below $80 US, a reflection of rising supply and softer global demand.
Downward pressure on crude oil prices could intensify if supply growth, especially in the United States, remains strong. So far in 2014, U.S. oil production has surged to its highest level since 1986 and is expected to increase further in 2015. However, ongoing geopolitical tensions and high recovery costs will provide some support for prices. Lower oil prices, if sustained, will provide a boost to Ontario’s economic outlook.
Financial Markets
In the United States, the Federal Reserve began reducing its purchases of U.S. treasury bonds and mortgage-backed securities in January of this year and ended these purchases in October. With the end of its quantitative easing program, most market participants expect the U.S. Federal Reserve to begin increasing its policy interest rate by mid-2015.
The Bank of Canada continues to maintain its policy interest rate at the historically low level of 1.0 per cent, unchanged since September 2010. Although inflation in Canada is close to the Bank’s two per cent target and GDP growth was strong in the second quarter, significant downside risks for Canada’s inflation and growth outlook remain. Interest rate increases in Canada, as in the United States, are expected to be gradual. The yield on three-month Canadian treasury bills is expected to average 1.2 per cent in 2015, up from an expected 0.9 per cent in 2014. Yields are forecast to reach 3.0 per cent in 2017.
Despite the withdrawal of the exceptional monetary stimulus in the United States, long-term government yields have trended lower this year, reflecting low inflation in advanced economies and ongoing global economic concerns. Many market observers believe that interest rates in advanced economies may remain lower for a longer period, and could remain lower than has been the case historically. The yield on 10-year Government of Canada bonds is expected to rise gradually from an average of 2.2 per cent in 2014 to 2.9 per cent in 2015 and to 4.2 per cent by 2017.
Canadian Dollar
The Canadian dollar has traded at around 90 cents US for much of 2014 and is expected to average about 91 cents US for the year as a whole, down from 97 cents US in 2013 and parity in 2012. Recently, the dollar has been impacted by the relative strength of the U.S. economy and the stance of monetary policy. As a result of the recent strong U.S. economic performance and reductions in monetary stimulus, the U.S. dollar has appreciated against many currencies including the Canadian dollar. In addition, slow global growth has lowered commodity prices, further weakening the Canadian dollar. The lower dollar should help Ontario businesses compete globally and encourage export growth.
There are divergent views on the direction of the Canadian dollar. Private-sector forecasters expect the dollar to average close to 89 cents US in 2015, with forecasts ranging from 86 cents US to 92 cents US for the year. The dollar is forecast to rise modestly in 2016 and 2017, averaging 92 cents US in 2017.
Forecasts for key external factors are summarized in the table below. These are used as the basis for the Ministry of Finance’s forecast for Ontario’s economic growth.
|
TABLE 2.2 Outlook for External Factors
|
|
| |
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
|
2014 |
p |
|
|
2015 |
p |
|
|
2016 |
p |
|
|
2017 |
p |
|
World Real GDP Growth
(Per Cent)
|
|
|
4.1 |
|
|
|
3.4 |
|
|
|
3.3 |
|
|
|
3.3 |
|
|
|
3.8 |
|
|
|
4.0 |
|
|
|
4.1 |
|
|
U.S. Real GDP Growth
(Per Cent)
|
|
|
1.6 |
|
|
|
2.3 |
|
|
|
2.2 |
|
|
|
2.2 |
|
|
|
3.1 |
|
|
|
2.9 |
|
|
|
2.7 |
|
|
West Texas Intermediate
Crude Oil ($US/bbl.)
|
|
|
95 |
|
|
|
94 |
|
|
|
98 |
|
|
|
98 |
|
|
|
93 |
|
|
|
95 |
|
|
|
98 |
|
|
Canadian Dollar (Cents US)
|
|
|
101.1 |
|
|
|
100.1 |
|
|
|
97.1 |
|
|
|
90.8 |
|
|
|
89.5 |
|
|
|
91.0 |
|
|
|
92.0 |
|
|
Three-Month Treasury Bill Rate1 (Per Cent)
|
|
|
0.9 |
|
|
|
0.9 |
|
|
|
1.0 |
|
|
|
0.9 |
|
|
|
1.2 |
|
|
|
2.0 |
|
|
|
3.0 |
|
|
10-Year Government Bond Rate1 (Per Cent)
|
|
|
2.8 |
|
|
|
1.9 |
|
|
|
2.3 |
|
|
|
2.2 |
|
|
|
2.9 |
|
|
|
3.5 |
|
|
|
4.2 |
|
|
p = Ontario Ministry of Finance planning projection based on external sources.
1 Government of Canada interest rates.
Sources: IMF World Economic Outlook (October 2014), U.S. Bureau of Economic Analysis, Blue Chip Economic Indicators (October 2014), U.S. Energy Information Administration, Bank of Canada, Ontario Ministry of Finance Survey of Forecasts (October 2014) and Ontario Ministry of Finance.
|
|
Table 2.3 provides current estimates of the impact of sustained changes in key external factors on the growth of Ontario’s real GDP, assuming other external factors remain unchanged. The relatively wide range for the impacts reflects uncertainty regarding how the economy would be expected to respond to these changes in external conditions.
|
TABLE 2.3 Impacts of Sustained Changes in Key External Factors on Ontario’s Real GDP Growth
(Percentage Point Change)
|
| |
First Year
|
Second Year
|
|
Canadian Dollar Depreciates by
Five Cents US
|
+0.1 to +0.8
|
+0.2 to +0.9
|
|
Crude Oil Prices Decrease by
$10 US per Barrel
|
+0.1 to +0.3
|
+0.1 to +0.3
|
|
U.S. Real GDP Growth Increases by
One Percentage Point
|
+0.3 to +0.7
|
+0.4 to +0.8
|
|
Canadian Interest Rates Increase by
One Percentage Point
|
–0.1 to –0.5
|
–0.2 to –0.6
|
|
Source: Ontario Ministry of Finance.
|
Outlook for Ontario Economic Growth
The Ministry of Finance is forecasting continued growth in Ontario’s economy, with real GDP projected to rise by 1.9 per cent in 2014 and 2.4 per cent annually in 2015, 2016 and 2017. This compares to a forecast for real GDP growth at the time of the 2014 Budget of 2.1 per cent in 2014, 2.5 per cent in both 2015 and 2016, and 2.6 per cent in 2017.
Gains in exports and business investment will lead economic growth over the forecast period. Household spending will also rise moderately, in line with gains in household income.
Ontario employment is expected to grow by 57,000 jobs in 2014. Employment growth is projected to pick up in 2015 alongside improving output growth and business confidence. Employment is forecast to rise by 90,000 jobs or 1.3 per cent in 2015 and then increase by an average of 103,000 jobs or 1.4 per cent per year over 2016 and 2017. Ontario’s unemployment rate is expected to average 7.3 per cent in 2014 and fall steadily to an average annual rate of 6.3 per cent in 2017.
Household disposable income is projected to grow by 3.6 per cent in 2014, up from 2.7 per cent in 2013, and then increase by an average of 4.8 per cent annually over the 2015 to 2017 period.
Following two years of increases below 2.0 per cent, the Ontario Consumer Price Index (CPI) is expected to increase by 2.1 per cent in 2014. Sharp increases in world food and energy prices at the beginning of the year, a reflection of harsh winter weather and geopolitical tensions, contributed to higher inflation in 2014. The lower Canadian dollar also contributed to higher consumer prices by increasing the price of imported goods. Consumer prices are expected to increase by an average of 2.0 per cent each year over the 2015 to 2017 period.
Housing starts are expected to total 58,000 units in 2014, down slightly from 61,100 units in 2013. Existing home sales are expected to increase modestly in 2014, following a 0.5 per cent increase in 2013. Demand for new homes in Ontario will continue to be sustained by growth in the population. Housing starts are expected to average 65,300 units per year between 2015 and 2017, largely in line with underlying demographic requirements.
The average Ontario resale home price is expected to increase by nearly 4.0 per cent in 2014. Going forward, a more balanced housing market is expected to contribute to stable average home prices. Although interest rates are predicted to rise gradually over the medium term, mortgage carrying costs are expected to remain affordable.
Canada’s household debt-to-income ratio was 163.6 per cent in the second quarter of 2014. Although the debt-to-income ratio changed little over the past five quarters, the level of household debt in Canada remains elevated. Debt service costs as a per cent of household disposable income, a measure of the affordability of interest payments, declined from a high of 9.2 per cent in the fourth quarter of 2007 to 7.0 per cent in the second quarter of 2014, its lowest level on record and a reflection of low interest rates.
Business investment is expected to be one of the drivers of Ontario economic growth over the forecast period. After underperforming over the past two years, private-sector investments in machinery and equipment are expected to increase in the near term, supported by rising corporate profits and improving demand conditions. The Bank of Canada Business Outlook Survey, published in October 2014, supports this outlook for rising business investment over the next 12 months.
The net operating surplus of corporations increased 4.4 per cent in the first half of 2014 compared to the same period a year earlier and is projected to grow by an average of 5.2 per cent annually over the next three years. As a share of Ontario GDP, the net operating surplus of corporations increased to 11.5 per cent in the second quarter of 2014, its highest reading in seven quarters.
The composition and destination of Ontario’s exports have evolved and diversified over the last decade. The share of Ontario’s exports destined for the United States has declined from 91.5 per cent in 2003 to 78.5 per cent in 2013. Over the same period, the share of Ontario’s exports to the European Union and other countries has more than doubled.
The shift in Ontario’s trade has included strong gains in exports to the rest of Canada and in exports of high value-added services. From 2003 to 2013, Ontario’s total exports to other provinces increased by 37 per cent. Over the same period, exports of services increased by about 58 per cent, while exports of goods declined 1.7 per cent.
Although markets for Ontario exports have become more diversified in recent years, the United States remains by far Ontario’s largest trading partner. Solid growth in the United States will support strong demand for Ontario exports. U.S. motor vehicle sales are expected to rise 5.8 per cent in 2014 and 2.4 per cent in 2015. Other key sectors of the U.S. economy that are important for Ontario exports, including residential construction and industrial production, are also projected to increase strongly over the next few years.
Overall, Ontario’s total exports in real terms are projected to increase by 3.6 per cent in 2014 and by an average of 3.7 per cent between 2015 and 2017.
Details of the Ontario Economic Outlook
The following table provides details of the Ministry of Finance’s economic outlook for 2014 to 2017.
|
TABLE 2.4 The Ontario Economy, 2012 to 2017
(Per Cent Change)
|
|
| |
|
Actual
|
|
|
Projection
|
|
| |
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
Real Gross Domestic Product
|
|
|
1.7 |
|
|
|
1.3 |
|
|
|
1.9 |
|
|
|
2.4 |
|
|
|
2.4 |
|
|
|
2.4 |
|
|
|
|
|
1.5 |
|
|
|
2.1 |
|
|
|
2.0 |
|
|
|
2.2 |
|
|
|
2.6 |
|
|
|
2.7 |
|
|
|
|
|
4.7 |
|
|
|
(2.3 |
) |
|
|
0.0 |
|
|
|
1.1 |
|
|
|
1.6 |
|
|
|
2.0 |
|
Non-residential Construction
|
|
|
7.8 |
|
|
|
(5.2 |
) |
|
|
(1.5 |
) |
|
|
4.8 |
|
|
|
3.0 |
|
|
|
3.4 |
|
|
Machinery and Equipment
|
|
|
(2.8 |
) |
|
|
(8.2 |
) |
|
|
2.0 |
|
|
|
6.1 |
|
|
|
5.3 |
|
|
|
5.1 |
|
|
|
|
|
3.3 |
|
|
|
1.8 |
|
|
|
3.6 |
|
|
|
4.4 |
|
|
|
3.5 |
|
|
|
3.2 |
|
|
|
|
|
1.8 |
|
|
|
0.1 |
|
|
|
2.5 |
|
|
|
3.3 |
|
|
|
2.5 |
|
|
|
2.6 |
|
|
Nominal Gross Domestic Product
|
|
|
3.2 |
|
|
|
2.4 |
|
|
|
3.5 |
|
|
|
4.4 |
|
|
|
4.4 |
|
|
|
4.4 |
|
|
Other Economic Indicators
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.6 |
|
|
|
2.3 |
|
|
|
4.2 |
|
|
|
4.1 |
|
|
|
4.3 |
|
|
|
4.4 |
|
|
|
|
|
76.7 |
|
|
|
61.1 |
|
|
|
57.9 |
|
|
|
60.0 |
|
|
|
67.0 |
|
|
|
69.0 |
|
|
|
|
|
(1.9 |
) |
|
|
0.5 |
|
|
|
1.0 |
|
|
|
(0.5 |
) |
|
|
0.5 |
|
|
|
2.1 |
|
|
|
|
|
3.6 |
|
|
|
2.9 |
|
|
|
3.7 |
|
|
|
4.4 |
|
|
|
4.7 |
|
|
|
4.6 |
|
Compensation of Employees
|
|
|
3.5 |
|
|
|
2.8 |
|
|
|
3.4 |
|
|
|
4.6 |
|
|
|
4.6 |
|
|
|
4.6 |
|
Net Operating Surplus — Corporations
|
|
|
(0.6 |
) |
|
|
0.0 |
|
|
|
4.7 |
|
|
|
5.2 |
|
|
|
5.7 |
|
|
|
4.8 |
|
|
|
|
|
1.4 |
|
|
|
1.0 |
|
|
|
2.1 |
|
|
|
2.0 |
|
|
|
2.0 |
|
|
|
2.0 |
|
|
|
|
|
0.8 |
|
|
|
1.4 |
|
|
|
0.8 |
|
|
|
1.3 |
|
|
|
1.4 |
|
|
|
1.5 |
|
|
|
|
|
52 |
|
|
|
96 |
|
|
|
57 |
|
|
|
90 |
|
|
|
98 |
|
|
|
107 |
|
Unemployment Rate (Per Cent)
|
|
|
7.8 |
|
|
|
7.5 |
|
|
|
7.3 |
|
|
|
7.1 |
|
|
|
6.6 |
|
|
|
6.3 |
|
|
Key External Variables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Real Gross Domestic Product
|
|
|
2.3 |
|
|
|
2.2 |
|
|
|
2.2 |
|
|
|
3.1 |
|
|
|
2.9 |
|
|
|
2.7 |
|
WTI Crude Oil ($ US per Barrel)
|
|
|
94 |
|
|
|
98 |
|
|
|
98 |
|
|
|
93 |
|
|
|
95 |
|
|
|
98 |
|
Canadian Dollar (Cents US)
|
|
|
100.1 |
|
|
|
97.1 |
|
|
|
90.8 |
|
|
|
89.5 |
|
|
|
91.0 |
|
|
|
92.0 |
|
3-month Treasury Bill Rate1
|
|
|
0.9 |
|
|
|
1.0 |
|
|
|
0.9 |
|
|
|
1.2 |
|
|
|
2.0 |
|
|
|
3.0 |
|
10-year Government Bond Rate1
|
|
|
1.9 |
|
|
|
2.3 |
|
|
|
2.2 |
|
|
|
2.9 |
|
|
|
3.5 |
|
|
|
4.2 |
|
|
1 Government of Canada interest rates (per cent).
Sources: Statistics Canada, Canada Mortgage and Housing Corporation, Canadian Real Estate Association, Bank of Canada, U.S. Bureau of Economic Analysis, Blue Chip Economic Indicators (October 2014), U.S. Energy Information Administration and Ontario Ministry of Finance.
|
|
Private-Sector Forecasts
The Ministry of Finance consults with private-sector economists and tracks their forecasts to inform the government’s planning assumptions. Additionally, in the process of preparing the 2014 Ontario Economic Outlook and Fiscal Review, the Minister of Finance met with private-sector economists to discuss their views on the economy. All private-sector economists are projecting continued growth for Ontario over the forecast horizon. On average, private-sector economists are projecting growth of 2.0 per cent in 2014 and 2.5 per cent annually in 2015, 2016 and 2017. For prudent fiscal planning, the Ministry of Finance’s real GDP growth projections are slightly below the average private-sector forecast.
|
TABLE 2.5 Private-Sector Forecasts for Ontario Real GDP Growth
(Per Cent)
|
| |
2014
|
2015
|
2016
|
2017
|
|
BMO Capital Markets (October)
|
2.0
|
2.4
|
–
|
–
|
|
Central 1 Credit Union (September)
|
1.7
|
2.2
|
2.5
|
3.3
|
|
Centre for Spatial Economics (July)
|
2.0
|
2.5
|
2.5
|
2.4
|
|
CIBC World Markets (September)
|
2.3
|
2.8
|
2.4
|
–
|
|
Conference Board of Canada (July)
|
1.5
|
2.5
|
2.1
|
2.2
|
|
Desjardins Group (October/June)
|
2.0
|
2.4
|
2.5
|
2.1
|
|
IHS Global Insight (July)
|
2.0
|
2.4
|
2.7
|
2.4
|
|
Laurentian Bank Securities (August)
|
1.9
|
2.1
|
–
|
–
|
|
National Bank (September)
|
2.1
|
2.4
|
–
|
–
|
|
RBC Financial Group (September)
|
2.1
|
2.8
|
–
|
–
|
|
Scotiabank Group (October)
|
2.0
|
2.5
|
2.3
|
–
|
|
TD Bank Financial Group (October)
|
2.2
|
2.7
|
2.3
|
–
|
|
University of Toronto (October)
|
2.0
|
2.8
|
2.9
|
2.8
|
|
Private-Sector Survey Average
|
2.0
|
2.5
|
2.5
|
2.5
|
|
Ontario’s Planning Assumption
|
1.9
|
2.4
|
2.4
|
2.4
|
|
Sources: Ontario Ministry of Finance Survey of Forecasts (October 2014) and Ontario Ministry of Finance.
|
Change in the Economic Outlook
The current private-sector average outlook for Ontario real GDP growth is 2.0 per cent in 2014, down from the 2.2 per cent projected at the time of the 2014 Budget. The softer outlook reflects weak growth in the first quarter of the year due in large part to harsh winter weather. Forecasts for 2015 through 2017 have also been revised down slightly compared to forecasts at the time of the 2014 Budget.
Comparison to the 2014 Budget
Compared to the 2014 Budget, key forecast changes include:
|
†
|
lower real GDP growth in 2014, 2015 and 2016;
|
|
†
|
stronger CPI inflation in 2014 and 2015; and
|
|
†
|
slower employment growth in 2014, 2015 and 2016.
|
|
TABLE 2.6 Changes in Ministry of Finance Key Economic Forecast Assumptions:
2014 Budget Compared to 2014 Fall Economic Statement (FES)
(Per Cent Change)
2014p 2015p 2016p
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2014
Budget
|
|
|
2014
FES
|
|
|
2014
Budget
|
|
|
2014
FES
|
|
|
2014
Budget
|
|
|
2014
FES
|
|
|
Real Gross Domestic Product
|
|
|
2.1 |
|
|
|
1.9 |
|
|
|
2.5 |
|
|
|
2.4 |
|
|
|
2.5 |
|
|
|
2.4 |
|
|
Nominal Gross Domestic Product
|
|
|
3.5 |
|
|
|
3.5 |
|
|
|
4.4 |
|
|
|
4.4 |
|
|
|
4.4 |
|
|
|
4.4 |
|
|
Retail Sales
|
|
|
4.1 |
|
|
|
4.2 |
|
|
|
4.0 |
|
|
|
4.1 |
|
|
|
4.4 |
|
|
|
4.3 |
|
|
Housing Starts (000s)
|
|
|
58.0 |
|
|
|
57.9 |
|
|
|
60.0 |
|
|
|
60.0 |
|
|
|
67.0 |
|
|
|
67.0 |
|
|
Primary Household Income
|
|
|
3.3 |
|
|
|
3.7 |
|
|
|
4.4 |
|
|
|
4.4 |
|
|
|
4.7 |
|
|
|
4.7 |
|
|
Compensation of Employees
|
|
|
3.5 |
|
|
|
3.4 |
|
|
|
4.6 |
|
|
|
4.6 |
|
|
|
4.6 |
|
|
|
4.6 |
|
|
Net Operating Surplus — Corporations
|
|
|
4.4 |
|
|
|
4.7 |
|
|
|
4.2 |
|
|
|
5.2 |
|
|
|
5.0 |
|
|
|
5.7 |
|
|
Employment
|
|
|
1.1 |
|
|
|
0.8 |
|
|
|
1.5 |
|
|
|
1.3 |
|
|
|
1.6 |
|
|
|
1.4 |
|
|
Job Creation (000s)
|
|
|
73 |
|
|
|
57 |
|
|
|
107 |
|
|
|
90 |
|
|
|
110 |
|
|
|
98 |
|
|
Consumer Price Index
|
|
|
1.5 |
|
|
|
2.1 |
|
|
|
1.9 |
|
|
|
2.0 |
|
|
|
2.0 |
|
|
|
2.0 |
|
|
Key External Variables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Real Gross Domestic Product
|
|
|
2.7 |
|
|
|
2.2 |
|
|
|
3.0 |
|
|
|
3.1 |
|
|
|
2.9 |
|
|
|
2.9 |
|
|
WTI Crude Oil ($ US per Barrel)
|
|
|
97 |
|
|
|
98 |
|
|
|
96 |
|
|
|
93 |
|
|
|
96 |
|
|
|
95 |
|
|
Canadian Dollar (Cents US)
|
|
|
90.0 |
|
|
|
90.8 |
|
|
|
91.0 |
|
|
|
89.5 |
|
|
|
92.0 |
|
|
|
91.0 |
|
|
3-month Treasury Bill Rate1
(Per Cent)
|
|
|
1.0 |
|
|
|
0.9 |
|
|
|
1.3 |
|
|
|
1.2 |
|
|
|
2.4 |
|
|
|
2.0 |
|
|
10-year Government Bond Rate1
(Per Cent)
|
|
|
2.8 |
|
|
|
2.2 |
|
|
|
3.5 |
|
|
|
2.9 |
|
|
|
3.9 |
|
|
|
3.5 |
|
|
p = Ontario Ministry of Finance planning projection.
1 Government of Canada interest rates.
Sources: Blue Chip Economic Indicators (March, April and October 2014) and Ontario Ministry of Finance.
|
|
Chapter III
Fiscal Outlook
