Quid Pro Quo: What Ontario should expect from the new federal government

October 20, 2015

2-minute read

If Ontario delivered the majority government to the federal Liberals, what should they deliver to Ontario?

The swath of red across Toronto meant the loss of many NDP MPs who spoke out for a strong federal role in rebuilding and modernizing our aging social and physical infrastructure and reducing income inequality.

It’s not unreasonable to expect the new and returning Liberal MPs to follow through with the desire for change and good government that got them elected.

But Ontario’s stake in the new government doesn’t end there. Premier Kathleen Wynne put a lot on the line for Justin Trudeau, actively campaigning for him and potentially threatening her relationships with the two other potential Prime Ministers in what had been a three-way race.

Through almost a decade of Conservative government, Ontarians have seen rising economic insecurity, deteriorating labour market conditions, and rising income inequality. The outgoing government’s single-minded focus on resource extraction, its contempt for the role of the state in the economy, and its post-recession austerity agenda has meant that the federal government exacerbated Ontario’s economic and fiscal woes.

The Ontario government is in a fiscal bind, elected on the promise of activist government while staring down a fiscal deficit now pegged at $8.5 billion. The province’s refusal to meaningfully increase taxes means it needs another revenue lifeline. It has resorted to selling off a prized public asset, Hydro One, to raise funds, but that is proving to be both a politically contentious move and one that doesn’t solve longer-term fiscal pressures.

Justin Trudeau’s platform promises include a new health accord and fast-paced infrastructure investment, including social investments in areas like housing — all of which are badly needed in Ontario. The provincial government would do well to make some key demands on that spending: to ensure the province receives its fair share, which should take into account both its share of the population and its fiscal situation.

In 2013, the Mowat Centre calculated that there was an $11 billion gap between what Ontarians pay to the federal government and what they receive back. This gap is almost entirely a result of federal spending and program decisions that leave Ontarians receiving less than their per capita share of spending and transfers.

We might remember that we have seen progressive promises from red books in the past that were then replaced with federal cutbacks and downloading of responsibilities to the provinces. There is no excuse for similar offloading in 2015. Federal debt-to-GDP ratios are at half the levels compared to then. Federal spending and revenues are at historic lows, as are interest rates for borrowing. The new federal government has the fiscal room and is well positioned to make good on its promises and to provide badly needed support to Ontario and Toronto; to allow these jurisdictions to make great strides on much-needed infrastructure renewal, affordable housing development, and health care delivery.

Increased fairness in transfers for the Ontarians who elected the incoming federal government would yield a number of benefits. It would provide stimulus to Ontario’s slow growth economy, both through direct spending and by increasing efficiency over the longer term. It would address some facets of income inequality by increasing the “social wage” through stronger public services, including improved access to affordable housing and better transportation options.

But the federal government should go beyond the quid pro quo of delivering on the money. It should also keep its commitment to evidence-based decision making and transparency, both of which were promised in the Liberal platform. And both of which make a strong case for smart, strategic investments in Canada’s most populous province, Ontario.

Sheila Block is a senior economist at the Canadian Centre for Policy Alternatives’ Ontario Office. Follow her on Twitter  @SheilaBlockTO.

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