November 22, 2011 / 10:30 PM / 6 years ago

Ontario vows to balance budget, despite spending

<p>Ontario Premier Dalton McGuinty and Minister of Finance, Dwight Duncan (R) stand after Lieutenant Governor of Ontario David Onley delivered the throne speech inside the Legislative chamber at Queen's Park in Toronto November 22, 2011. REUTERS/Mike Cassese</p>

TORONTO (Reuters) - The Liberal government of Ontario, Canada’s industrial heartland, renewed its vow on Tuesday to eliminate its C$16 billion ($15.4 billion) budget deficit in six years, while also affirming some expensive spending promises made in the recent provincial election.

In the Speech from the Throne, which opened the first session of the legislature since the October 6 vote, Lieutenant Governor David Onley read the government’s outline of its plans, including tuition cuts for college and university students, tax credits for seniors, and some lower taxes for families and businesses.

The Liberals, who fell one seat short of a majority government in the election, said they have rejected deep spending cuts in health and education, and will protect the province’s green energy plans. The government will issue its autumn economic statement on Wednesday.

“Confronted with today’s challenge of providing world class public services and a balanced budget in a time of slow growth, your government will act, once again,” Onley said, emphasizing the threats from a struggling U.S. economy and a European Union on the brink of a recession.

The speech did not include ideas promoted by the opposition parties, such as Conservative leader Tim Hudak’s call for a mandatory public-sector wage freeze.

Hudak told reporters he may not vote in favor of the Throne Speech if it is not amended, putting the government in danger of being brought down in the legislature and having to face another election.

The Conservatives and the left-leaning New Democrats, the other opposition party, could join forces to defeat the Liberals, either by rejecting the government’s budget or other major legislation, or by voting down the Throne Speech.

“A C$16 billion hole and not one new idea on how to bring spending under control. You know what, we have a good idea: a mandatory public sector wage freeze to help get the books back in balance. We’ll put that on the table tomorrow,” said Hudak.

“We can’t support a Throne Speech that doesn’t address the jobs crisis or the spending crisis in Ontario.”

The minority government is the first in Ontario since the mid-1980s and follows two back-to-back majority victories for the Liberals under Premier Dalton McGuinty.

Both McGuinty and NDP leader Andrea Horwath played down the threat of a snap election following Hudak’s remarks.

“I am convinced that there’s a lot of common ground in which we can work together so I choose to interpret the mandate as a four-year mandate,” said McGuinty.

Separately, Horwath said: “I think a game of brinkmanship is the last thing that people need on the first day back of the legislature.”

Another major test of the Liberals’ minority government will come on Thursday, when the NDP presents a bill to cut the sales tax on home heating bills, an idea the Conservatives also support.

The Liberals say the move is not affordable or responsible, given the large deficits the province is facing.

CUTS ON THE WAY

Ontario, which relies heavily on the manufacturing sector and other export industries, accounts for about 40 percent of Canada’s gross domestic product and was the hardest hit province in the recent downturn.

The Liberals have been ramping up their own agenda to tackle the budget shortfall, including a 7 percent reduction in the public service by 2014 and slashing some ministry budgets by one third.

Economists and credit agencies are looking for even more specifics on how Ontario intends to balance its books by 2017-18, later than any other province, and hope to see some concrete measures in Wednesday’s fiscal update.

But analysts are skeptical the province’s economic projections will remain intact. Growth rates and revenue targets have been squeezed since the last budget in March, due in part to a struggling U.S. economy, Ontario’s main export market.

While debt servicing costs are expected to be more forgiving than previously estimated thanks to low interest rates, the government will still have to hold down spending growth at historical lows.

Don Drummond, a former Toronto-Dominion Bank chief economist, now advising Ontario on spending, has already said the province will not meet its deficit targets unless it cuts program expense growth to 1 percent a year for the next six years.

The March budget estimated that program spending would grow at an annual compound rate of 1.7 percent.

Reporting by Claire Sibonney; editing by Rob Wilson

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