2016 pre-budget letter to the Honourable Charles Sousa, Ontario Minister of Finance
Dear Minister Sousa,
As an association of private sector leaders and large employers from across Canada, the Business Council of Canada is strongly committed to Ontario’s economic success. We are therefore encouraged by recent signs of a pickup in provincial economic growth and job creation.
At the same time, we would like to share with you the following concerns in the hope that they will be of some value as you and your officials prepare to introduce the province’s 2016 budget.
Reducing the burden of public debt
High deficits and public debt pose a significant threat to the provincial economy. Successive governments have racked up deficits in 22 of the last 30 years, driving the province’s net debt to $284.6 billion in 2014-15. Even more worrisome is the recent increase in Ontario’s net debt-to-GDP ratio, which now stands at 39.4 per cent.
Even with interest rates at record lows, debt service payments are your government’s fastest-growing expense, crowding out spending on other priorities. When interest rates begin to climb, as they inevitably must, higher debt service costs will seriously limit the province’s ability to fund a wide range of vital public services, including education and health care.
We recognize that your government has worked hard to rein in public spending, but more must be done. We urge you to move more aggressively to reduce the burden of public debt, in part by fully implementing the recommendations of the 2012 Commission on the Reform of Ontario’s Public Services. The report is more relevant than ever today, and the plan it lays out would go a long way toward ensuring the province’s fiscal sustainability.
Improving provincial competitiveness
Over the past year, Ontario has introduced a number of initiatives that have the potential to increase the cost of doing business in the province. This includes the proposed Ontario Retirement Pension Plan (ORPP) and your government’s plan to implement a form of carbon pricing. While these initiatives are well-intentioned, the cumulative effect of such measures would be to weaken the province’s ability to compete for jobs and investment.
Canada’s business leaders fully support efforts to improve Canada’s retirement system. However, we continue to have serious concerns about the design of the ORPP, the effect of which would be to increase complexity and costs for employers across Ontario while impeding interprovincial labour mobility.
We welcome your recent agreement to delay the implementation of the ORPP and work with the federal government over the coming months to explore a range of potential enhancements to the Canada Pension Plan. Canadians would not be well served by a patchwork of separate and incompatible provincial pension plans. We urge you to strive for a national solution that builds on the strengths of Canada’s existing retirement system and works for all Canadians.
The Business Council is on record as supporting carbon pricing as the most effective and efficient means to achieve the goal of reducing greenhouse gas emissions. However, climate change policy should not become an instrument for expanding government revenues. The true test of any such policy must be its ability to achieve environmental goals at least cost, not its revenue-generation potential.
Appropriate design of the proposed cap-and-trade system is critical to ensure that Ontario firms are not simply penalized for the fact that they are emissions-intensive. Indeed, sustained success in transitioning the province toward a lower carbon future depends upon having growing and profitable businesses that have the ability to invest in energy efficiency and innovative technologies that improve both their productivity and their environmental performance. The design must also be cognizant of the reality that many of Canada’s competitors, including the United States, are not likely to implement a policy of equivalent stringency in the foreseeable future.
Modernizing the Agreement on Internal Trade (AIT)
Ontario’s future prosperity depends in part on ensuring that more Ontario-based firms have the scale and the ability to sell goods and services beyond the province’s borders. One way to achieve this is to dismantle longstanding impediments to interprovincial trade. Indeed, anything less than free trade within our country will continue to drag on Ontario’s – and Canada’s – long-term economic performance.
We therefore encourage your government to continue its efforts to modernize and strengthen the Agreement on Internal Trade (AIT). The AIT must be as comprehensive as any of Canada’s international trade agreements, and must include a robust regulatory cooperation mechanism.
I trust that you will find these recommendations useful. If my colleagues and I can be of any assistance, please do not hesitate to let us know.
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