Making Ontario Great Again

It should come as no surprise that successful business people tend to do their homework. They look for strengths and weaknesses in every opportunity, weighing risk against reward. As a result, they generally have an excellent sense of the economic climate in any given market.

What does an investor like this see when they turn their attention to Ontario? High taxes. High hydro rates. Flat job numbers. Residents and businesses leaving to more appealing jurisdictions — and a government that’s not enticing and enabling new businesses the way it should.

We can do better.

The Ontario PC Caucus places a premium on being fiscally responsible. We also recognize that it’s not enough to simply trim spending — you also have to create jobs. Having the right environment for growth is everything. You can’t grow a garden in the desert.

Disciplined government spending is a key part of creating a growth-positive environment. By the same token, reckless spending paired with reduced revenue is a dangerous mix.

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The money we’ve seen wasted under this government is simply staggering. Roughly a billion swallowed by Ornge. Close to two billion by eHealth. A fortune in green energy FiT subsidies, which are tucked into your hydro bill as the Global Adjustment Rate – the difference between what the government is paring people to produce the power and what they’re selling the power for. (It’s what number-crunchers would call an “operational loss.”)

We’ve also seen two power plants in Halton-Peel that were cancelled at the eleventh hour and at enormous cost. The price tag on the Mississauga plant has been estimated at $190 million. We know it will cost $300 million or more for the new sole-sourced site in Lambton alone. And that doesn’t include the costs associated with the cancellation of their Oakville plant.

On and on it goes. The Energy Minister’s recent refusal to disclose the full cost of cancelling these power plants has meant that he could soon be charged with contempt of parliament. That charge is rare and extremely troubling, and it begs the question: What secret could be worth that much?

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Free-flowing spending has been a long-time calling card of the current government. The provincial debt has doubled since the Liberals took office in 2003. Ontario’s debt servicing costs are currently more than $10 billion a year, and that’s with historic low interest rates. For every 1% rise in the interest rate, a half-billion dollars is added to the cost of servicing our debt.

If the province had a Ministry of Debt Servicing, it would be our third largest ministry, after Health and Education. And, of course, it’s growing. In the spring Budget, the Ministry of Finance projected that by 2015 it would reach $15 billion a year.

Two days after that spring Budget passed, we got word from credit rating agency Standard and Poor’s that Ontario’s outlook had been downgraded from stable to negative. The day after that, Moody’s downgraded the province’s credit rating.

This government is still burning through money that it doesn’t have. It’s spending $1.8 million an hour more than it takes in. That simply can’t continue. If we don’t sort out the province’s books, the way we borrow money — whether we can borrow, how much it will cost us — will be impacted at some point in the future. And that’s going to drain scarce resources from essential programs.

Former U.S. president Bill Clinton recently spoke at the Democratic National Convention, and he tackled the issue of government debt head-on.

“Today, interest rates are low, lower than the rate of inflation,” he said. “But it will become a big problem when the economy grows and interest rates start to rise. We’ve got to deal with this big long-term debt problem or it will deal with us. It will gobble up a bigger and bigger percentage of the federal budget we’d rather spend on education and health care and science and technology.”

And that’s the dilemma we’re facing in Ontario today. As I said, debt servicing is currently our government’s third largest expense after health care and education. We’re now carrying a $267 billion debt. Without proper corrective action, that will become a $411 billion debt just five years from now. And for the first time in history, Ontario is now receiving equalization payments. We’ve become a have-not province. If that doesn’t stop you cold, I don’t know what will.

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Why would someone – an individual or a business – voluntarily go where their taxes are high, the debt and the structural deficit seem as huge and permanent as the Niagara Escarpment, where hydro rates are crushing and where red tape chokes out new growth?

Capital is mobile. Bay Street knows it. Investors and innovators go where they feel they stand the greatest odds of being successful. Just as skilled trades workers can. Just as new Canadians can. That place might be Ontario, or it might be BC, Manitoba, Saskatchewan, Alberta or Quebec.

As it turns out, the Fraser Institute recently came out with its annual report, Measuring Labour Markets in Canada and the United States, and all of those five provinces had a higher average private sector employment growth than Ontario for the period 2007 to 2011. Alberta was tops at 2.3%. Any guesses as to how Ontario rated? According to the study, the average private sector employment growth in this province from 2007-2011 was 0%.

High-paying jobs are leaving Ontario for provinces and states with lower energy costs, lower tax rates and less regulation. A net total of 300,000 jobs have been lost in manufacturing under this government. We’ve got 600,000 Ontarians out of work at the moment. 25,000 of them lost their jobs last month alone. The unemployment rate for the Hamilton CMA is around 7.3%, and it’s more than twice that among young people. In July, the unemployment rate for those aged 15 to 25 hit 17.2%. One in six young people jobless — that’s our future on hold.

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Whatever else is happening in the world, Canada is generally seen as an attractive destination for foreign investment. Thanks to our country’s resilient financial system, credible monetary policy and sound public finances, there’s relatively limited downside risk compared to some other more turbulent areas of the world.But within our borders, every province has a different level of appeal. Think of how cities compete for businesses to locate in their market. Siemens closes a facility in Hamilton, expands one in Burlington. Navistar plans to move from Burlington to Hamilton to a larger facility.

The same is true of provinces. Each must make its case for prosperity. There’s always going to be a push-pull. It’s a competitive world.

Late last week, the province’s Ministry of Finance came out with some revised budget estimates. They announced that their deficit figure for 2011-12 was $13B. That’s $3B less than originally forecast in March 2011 budget. It’s partly because the interest on our debt stayed low. And it’s partly because Chrysler unexpectedly repaid a half-billion loan from the 2009 auto bailout.

In amongst all the numbers was an interesting detail: Personal income tax revenue was 4% less than forecast in the previous budget. The government has blamed “slower economic growth” than expected.

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So where do we go from here? How do we make things better?

My caucus colleagues have been developing new strategies that we feel are going to be able to make a difference not just in our economy and competitiveness, but also in our quality of life here in Ontario.

Over the last few months we’ve been releasing a series of white papers, part of a series called Paths to Prosperity (http://www.ontariopc.com/paths-to-prosperity). A handful of them have come out since the spring and you’ll be seeing more of them as the months go by.

Our Labour white paper proposes action in four key areas: putting an end to closed tendering (which gave us the TDSB’s infamous $3,000 pencil sharpener, for example) and modernizing tendering rules to open government work to private sector competition; giving individual workers a choice on becoming or remaining a union member; making union leaders more accountable to unionized employees; and reforming Ontario’s workplace agencies for a more flexible workforce and job creation.

Our Energy white paper lays out a plan for bringing energy prices under control, so that small businesses aren’t going out of business because they can’t pay their hydro. Affordable energy is a bedrock element of Ontario’s future economic success. Power prices should be a job creator, not a job barrier.

Ontario currently pays people to take surplus energy off our hands (it’s hard to even call it an export when we’re selling it at a loss). We think a better idea would be setting up trade agreements with neighboring jurisdictions like Quebec, Manitoba and New York so that we can export predictable surpluses of power at a fair price and use imports as competitive alternatives to new provincial generation.

We would phase out FiT contracts that give suppliers 20-year guarantees at prices two to ten times the cost of conventional sources of power. And any future industrial wind or solar projects would have to meet three key tests: Do we need the power? Is the price competitive? And is the host community willing to accept the project?

And later this month we’ll be coming out with a Jobs & Economy white paper, where we’ll lay out our plan to create jobs in this province again, to grow the good-paying jobs that will put Ontario back to work.

We know that not all of these ideas will be popular, but we think that the province has reached a turning point. Urgent action and bold ideas are needed to grow our economy and balance the budget.

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I firmly believe that we can turn things around. If I didn’t, I wouldn’t be here. Ontario can still have a bright, inspiring future. But in order for us to get there, we’re going to have to deliver more than the same-old, same-old policy response. We’re going to have to step up our game and have some honest conversations about the challenges we face as a province in the 21st century.

Getting back to balance is one thing. Getting back to our A-game is another challenge entirely. But challenges aren’t barriers. They’re opportunities to do things differently and better. They’re a chance to reconsider what’s most important to us as Ontarians and how we can ensure that those things remain sustainable for generations to come.

I want to live in an Ontario that can afford the things we need – great health care, world-class education, reliable infrastructure. The PCs will not mortgage our children’s future to fix the problems of today. Rather, we will work to reduce unemployment, attract investment and spark innovation.

We all want to return to a more competitive and dynamic Ontario. I know from talking to constituents here in Burlington, as well as people in other ridings and visitors at Queen’s Park, that there is widespread appetite for a lot more than the same-old, same-old response.

With new ideas and the commitment to make them work, Ontario can return to its place of pride as an economic powerhouse, but we absolutely need to get the fundamentals right.

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