Measuring Liberal austerity: a detailed analysis of Budget 2014

The defeat of the Tim Hudak-led Ontario Progressive-Conservative (PC) Party in the June 12 Ontario general election was indeed remarkable. Though facing a scandal-plagued Liberal government, the PCs were unable to take advantage of the Liberals’ weaknesses and end their decade in exile from the government benches.
 
Attempting to recreate the success of their unexpected 1995 win that began the Orwellian “Common Sense Revolution,” the PCs tacked hard to the right, promising to slash spending and fire 100,000 public servants. In part due to a massive anti-Hudak pushback from organized labour and community groups, and in part due to an ideological climate in which “free market” rhetoric has lost much of its earlier lustre, the PCs lost significant numbers of votes and seats compared with their 2011 result.  
 
The Liberals, meanwhile, campaigned to the left, presenting themselves as the progressive alternative to the PCs hard-right austerity program, winning a majority government on that basis. Their apparent credibility as a genuine progressive voice was enhanced by the decision of the NDP to put forward a centrist platform void of anti-austerity rhetoric that largely focused on combatting Liberal corruption. Central to the Liberals’ claim that they were easing austerity and focusing on improving public services was their proposed Budget 2014, which increased spending and maintained a substantial deficit while promising certain reformist measures like a new Ontario pension plan.
 
Anger at the NDP’s rightward drift led some to believe the Liberal hype that their budget was a progressive alternative. But a close reading of Budget 2014 reveals that it is at its core a plan for several more years of harsh austerity across all sectors.
 
Overall austerity for at least three more years
As compared with 2013-14 – the fiscal year that ended April 1, 2014 – proposed program spending in 2014-15 is up $3 billion to $119.4 billion, an increase of about 2.5 per cent. While not a harsh contraction, this hardly constitutes a spending spree, as it means flat-lining real per capita program spending in a context where inflation is running at around 1.5 per cent and population growth at 1 per cent. In the following two years, the government proposes much harder fiscal tightening, increasing overall spending by just 0.6 per cent in 2015-16 and 0.1 per cent in 2016-17.
 
The government’s own estimates indicate it expects inflation to rise to 2.0 per cent after this year and for population growth to continue at 1.0 per cent due to natural increases and positive net migration. In other words, to maintain services at current levels (i.e. sustain current real per capita program spending), a 3.0 per cent annual spending increase is needed. In just three years, then, the government plans to slash real per capita program spending by 5.3 per cent from current levels.
 
What do these numbers mean for users of public services and the workers who provide them? The short answer: for users, poorer quality service and higher user fees; for workers, wage freezes, cuts to benefits, and higher workloads. No sector will be unaffected.
 
Health cuts hurt patients and workers
Health is the province’s largest expenditure by far, representing $50.1 billion in 2014-15, or 42.0 per cent of total program spending. The biggest line item is for the Local Health Integration Networks (LHINs), whose main task is financing hospitals.
 
Hospitals have already seen a budget freeze for two years, not having received increases in their base operating funding in either 2012-13 or 2013-14. The government confirms it will continue the freeze in 2014-15, and based on flat-lined overall program spending over the next two years it is safe to assume the freeze will continue for two additional years.
 
This means five consecutive years of 0 per cent increases for hospitals, and amounts to a massive austerity program. Not only do hospitals face the general 3 per cent annual cost increase due to inflation and population growth, but they also must contend with a range of other pressures related to the aging population and technological advances. New cancer treatments and diagnostic tools like MRIs offer benefits to patients but do not come cheap.
 
Austerity for hospitals has already meant cuts – for instance, the Ottawa Hospital has laid off hundreds of nurses and allied health professionals and administrative staff in the past two years—and these can be expected to continue for three more years. There is no way such cuts can go forward without affecting the quality of patient care and working conditions. In the event of an unforeseen disruption like a major influenza outbreak or a mass casualty incident, hospitals already running on empty could be pushed over the edge.
 
Attacks on higher education
The Ontario Liberals have consistently billed themselves as the defenders of a strong post-secondary education system. But after a modest $200 million increase in funding this year, Budget 2014 proposes freezing spending for the Ministry of Training, Colleges, and Universities at $7.8 billion in 2015-16 and 2016-17.
 
In a context of rapid enrolment growth due to population increases and higher post-secondary participation rates, this means students and workers will have to absorb the costs of the funding freeze. Ontario will likely keep the dubious honour of having the highest tuition fees in the country, while class sizes will keep growing as universities try to educate more students with fewer resources.
 
The continuing assault on free collective bargaining
Trade unionists in the public sector know that the bargaining climate in the past couple years has been particularly difficult and acrimonious. In the broader public sector, unions have made major concessions, either “voluntarily” with the threat of legislative intervention looming or, for those unions that resist, through the actual imposition of special legislation.
 
OPSEU members in the core public service fall into the former camp, having agreed last year to a two-year wage freeze. Public school teachers are an example of the latter case, having had a contract imposed on them through Bill 115 that handed them a two-year wage freeze alongside rollbacks to sick leave benefits.
 
Present and future retirees are under attack across the public sector too—the government recently announced it would save $1.2 billion over five years on the backs of retired civil servants by forcing them to pay for health benefits.
 
Budget 2014 explicitly plans for a concessions climate for at least three more years. The government is putting no money in the budget for negotiated compensation increases, even to allow salaries to keep up with inflation and even though the major unions have already made major concessions or had them imposed over the last several years. Since no union is likely to agree to a five-year wage freeze, particularly on top of other concessions, Wynne’s claim to respect free collective bargaining will no doubt be revealed once again to be a charade as the government moves to impose austerity on workers by force.
 
Who pays for the global economic crisis?
The government’s political strategy to move forward with austerity is to pit public sector workers against private sector workers, blaming the former for the falling living standards of the latter. Any time public sector workers attempt to negotiate better working conditions—or, more commonly in the current climate, maintain what they already have—the government argues that greedy workers are to blame for the declining quality of public services. Nothing could be further from the truth.
 
Ontario has a substantial deficit not because of profligate spending or skyrocketing public sector salaries but because the 2008 financial crisis depressed government revenues while forcing the province to increase spending to prevent complete economic collapse. Ontario boasted a budget surplus in 2007-8 before the crisis hit, with the deficit ballooning to nearly $20 billion in 2009-10 as the crisis deepened. Y
 
et the Ontario state remains incredibly lean compared to its counterparts across the country: the government brags in Budget 2014 that it takes in the least revenue and spends the least on programs per capita out of all ten provinces.  It also advertises that it has been a tough employer at the bargaining table, with wage increases in the broader public sector averaging around 0.6 per cent per year over the past two years.
 
The reality is that workers in both the public and private sectors are paying for the crisis capitalists—and capitalism—caused. Corporations operating in Ontario are enjoying record-low taxes due to years of federal and provincial rate cuts, as well as lucrative subsidies, while workers are being told the cupboards are bare when it comes to important public services.
 
From anti-Hudak to anti-austerity
The left should be proud that it successfully contributed to preventing Tim Hudak from becoming Premier. But now we are faced with the sober reality that defeating Hudak did not defeat the austerity agenda he championed.
 
While claiming progressive credentials, the Liberals like the PCs are a party of a capitalist class that is fully committed to the neoliberal austerity project. Our task is to build on the momentum the fight against Hudak has generated, as well as the inevitable disappointment of those still hoping the Liberals will offer a real alternative, to make the case that we need not passively accept the austerity agenda. Campaigns on concrete issues like the demand for a $14 an hour minimum wage are an excellent way to keep up the pressure on all the major political parties.