US embassy cable - 07TORONTO125

2007 Ontario Budget Focuses Social Deficit in Election Year

Identifier: 07TORONTO125
Wikileaks: View 07TORONTO125 at
Origin: Consulate Toronto
Created: 2007-03-23 20:26:00
Redacted: This cable was not redacted by Wikileaks.
DE RUEHON #0125/01 0822026
R 232026Z MAR 07
E.O.12958: N/A 
SUBJECT: 2007 Ontario Budget Focuses Social Deficit in Election 
Sensitive But Unclassified - protect accordingly. 
1. (SBU) SUMMARY:  Ontario's 2007 budget, unveiled on March 22, 
focuses on reducing poverty, increasing services for modest-income 
families, and reducing property tax increases.  It contains little 
additional funding for infrastructure investments and continues 
funding programs previously announced by the McGuinty government. 
Conservative opposition leader John Tory criticized the Liberal 
government for inefficiency and waste, breaking its promises from 
the 2004 election campaign, and for not doing enough to help hard 
working middle class Ontarians.  This was a political budget laying 
the Liberal Party campaign foundation for the October 10 provincial 
election.  END SUMMARY 
2. (U) On March 22, Ontario Finance Minister Greg Sorbara unveiled 
the province's 2007 budget.  Whereas previous budgets dealt with 
physical infrastructure, health, and post-secondary programs, 
Ontario's 2007 budget focuses on poverty reduction and services for 
modest-income families with children.  The centerpieces of the 
budget are social welfare programs, an Ontario Child Benefit tax 
credit, and increasing the minimum wage in Ontario from the present 
C$8.00 an hour to C$10.25 an hour, to be phased in over the next 
three years. 
Promoting Investments in Ontario Businesses 
3. (U) The budget included a cut in the Business Education Tax (BET) 
to 1.6% for both industrial and commercial properties by 2014, 
resulting in C$540 million in savings for businesses.  Businesses in 
northern Ontario will benefit most, with an average 32% reduction in 
the BET by 2014.  The budget also accelerates the elimination of the 
capital tax, from the scheduled 2012 to January 2010.  The BET cut 
and the capital tax elimination, coupled with the federal phased-in 
Corporate Income Rate reduction, once fully implemented, means that 
Ontario manufacturers will enjoy a combined average corporate income 
tax burden 6% lower than manufacturers in the U.S. Great Lake 
States.  In addition to that advantage, Canadian businesses also do 
not face the hurdle of funding employee health insurance that U.S. 
businesses face. 
4. (U) Continuing to fund past infrastructure renewal promises, 
Ontario infrastructure expenditures are expected to total C$5.9 
billion this year, down from C$6.6 billion in 2006.  Ontario will 
spend C$1.7 billion to fix or expand highways, mostly in densely 
populated southern Ontario.  In an attempt to reduce congestion, 
High Occupancy Vehicle (HOV) lanes will be constructed on some 400 
series Highways (400 and 427 as well previously announced Highway 
417) and the Queen Elizabeth Way.  Ontario also plans to widen 
Highway 10 in Caledon, Highway 401 in Kingston, and Highway 417 in 
Ottawa.  The budget announced a one-time investment of C$25 million 
that municipalities across the province may use for their roads. 
5. (U) No new border infrastructure funding was announced in this 
budget.  The government commits to continue the previously initiated 
ReNew Ontario plan, of which C$800 million is devoted to border 
infrastructure, including the C$300 million "Let's Get Windsor-Essex 
Moving Strategy."  The budget asks the federal government to help 
Ontario and Quebec complete work on their plan to develop a 
transportation infrastructure system encompassing Ontario and Quebec 
called the "North America Gateway Strategy." 
Environment and Justice 
6. (U) Most environmental funding, C$51 million, is destined for 
research and development in alternative energies and clean car 
technologies, given as grants to universities and research centers. 
The Finance Minister pledges to complement this modest funding with 
C$200 million for further climate change initiatives, drawing from 
the federal trust for clean air and climate change.  Ontario plans 
to spend C$30 million to restore the polluted shores of the Great 
Lakes, under the Canada-Ontario Agreement Respecting the Great Lakes 
Basin Ecosystem. 
7. (U) The budget set aside C$1 million for a one-year pilot project 
in the town of Stratford to target producers and traffickers of 
methamphetamine and dismantle their labs.  Stratford and the 
encompassing Perth County in Southern Ontario have a large number of 
clandestine methamphetamine labs. 
8. (U) This is a balanced budget with a modest projected surplus of 
C$310 million.  Strong revenue gains, despite a very low real GDP 
growth below 2%, allowed McGuinty to commit to multiple priorities. 
Own-source revenues have climbed 28% and federal transfers are 
forecast to jump 13.6%.  The government plans to slash program 
spending growth next year to 2.5%.  Though the government is 
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spending 5.2% more on health, education, and social assistance 
spending in the coming year, they have cut spending for all other 
areas by 8.2%.  The Ministry of Finance predicts that Ontario will 
be able to run surpluses for the next three years. 
Critique from the Opposition 
9. (U) On March 23 Ontario Progressive Conservative leader John Tory 
told an Economic Club audience in Toronto that Ontario is slipping 
on Liberal Premier McGuinty's watch.  Tory said the Liberal budget 
should have included a health tax cut, a long term plan for transit 
improvements (instead of one-off projects), support for displaced 
manufacturing workers, a plan to solve municipal finance woes, a 
"real plan" to help economically depressed northern Ontario, and 
efforts to achieve greater government efficiency and stop waste 
(such as paying C$6 million to change the provincial Lottery logo). 
Tory cited broken promises made by the government since the 2003 
parliamentary campaign such as the promise to close all coal plants 
and improve air quality in Ontario by 2007.  He said Ontario needs 
to empower entrepreneurs to rebuild Ontario as the economic engine 
of Canada. 
10. (SBU) COMMENT:  With the provincial election approaching on 
October 10, this was a politically important budget, resembling the 
federal budget in its attempt to please voters.  Recent by-election 
results, in which the Liberals lost to the New Democrats in 
traditionally Liberal-ridings, undoubtedly contributed to the 
budget's focus on social programs and the minimum wage increase. 
Despite a slowdown in growth in the last two quarters and a 
difficult year for the manufacturing and forestry sectors, the 
strength of Ontario's revenue stream is notable.  If voters do not 
take the Liberals to task for "broken promises," the Liberals seem 
to have positioned themselves well for the coming election campaign. 

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