TORONTO (Reuters) - The Ontario government, struggling with the impact of a slowing economy, is looking at freezing corporate tax cuts, cutting program spending and privatizing public assets to eliminate its C$16 billion ($16 billion) deficit in six years, the finance minister said on Monday.
Finance Minister Dwight Duncan told reporters that the minority Liberal government of Canada’s most populous province is considering halting plans to reduce the corporate tax rate - currently at 11.5 percent - to 10 percent by 2013, an idea raised by the left-leaning opposition New Democratic Party.
The government needs the support of at least one of the two opposition parties to pass its 2012-13 budget this spring and stay in power.
“The NDP, I thought, put forth a reasonable proposal. We’re going to take that very seriously,” Duncan said.
“Those are the kinds of trade-offs we have to make and those are the kinds of decisions that are on the table, and I’ve had an opportunity to speak to a number of corporate leaders who have suggested that freezing that rate for a period of time, given the fiscal situation, probably is something worthy of consideration.”
Earlier, Duncan said that the province would raise additional revenue by selling downtown Toronto land under the headquarters of the government-owned Liquor Control Board of Ontario, a process it expects will net more than C$200 million ($200 million) for taxpayers.
The province is also re-evaluating a C$345 million annual subsidy to the horse racing industry, and wants more private sector involvement in Service Ontario, which provides such services as issuing driver and vehicle licenses and marriage and death certificates.
Duncan told reporters the government will continue to review all publicly owned assets and will provide more details in the upcoming budget.
He spoke two days before the release of a closely watched report on public service reform written by former Toronto-Dominion Bank chief economist Don Drummond, who has warned tough measures will be needed to keep Ontario’s budget deficit from spiking.
The finance minister said he supported some of Drummond’s initial ideas, such as cutting spending growth to 1 percent per year, versus 1.4 percent outlined in last year’s budget. But he said such restraint will not apply to health and education, two priorities for the Liberals.
Duncan also made clear the government will not agree to all of Drummond’s more than 360 recommendations, including one to axe the province’s signature all-day kindergarten program.
But he did warn that with half of all government spending going to public-sector wages, the public should brace for labor disputes that could interrupt services.
If delivery of services is not transformed, Drummond has forecast that by 2017-18 - the government’s target date for balancing its budget - the deficit will be closer to C$30 billion.
Last week, the Conference Board of Canada forecast that Ontario’s deficit could still be at C$16 billion by 2017-18.
Editing by Jeffrey Hodgson and Peter Galloway