Ontario targets labor costs in bid to cut deficit

Tue Mar 27, 2012 5:53pm EDT
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By Claire Sibonney

TORONTO (Reuters) - Ontario's minority Liberal government put corporate tax cuts on hold and pledged a renewed effort to rein in public sector labor costs in an austerity budget designed to eliminate the deficit in six years and convince rating agencies the province is fiscally sound.

Canada's most populous province, which accounts for about 40 percent of the country's economy, will run a budget deficit of C$15.3 billion ($15.4 billion)in 2011-12 under the budget plan unveiled by Finance Minister Dwight Duncan, down C$700 million from November's forecast and below the record C$19.3 billion deficit three years ago.

The shortfall is seen edging down to C$15.2 billion in the coming fiscal year and disappearing by 2017-18. But this requires that the center-left government, which lost its majority in a hard-fought 2011 election, holds rising health care costs to just 2.1 percent annually.

This means they must convince powerful public-sector unions to accept a wage freeze when contracts with teachers, doctors and other public-service workers expire this year.

Duncan has faced off against the unions before with only middling success - stymied in part by sympathetic arbitrators. But he pledged this time to rewrite legislation if that is what it takes to control compensation costs that account for over half of Ontario's program spending.

"Compensation is our greatest single cost and we can't carry out our plan to strengthen our economy and create jobs without addressing it and we need everyone to do their part to balance the budget," Duncan told a news conference.


The ruling Liberals will need support of either opposition party - the right-leaning Conservatives or the left-leaning New Democrats - to pass the budget into law. While the suspension of additional corporate tax cuts may appease the NDP, taking aim at the left's traditional union allies will not.   Continued...