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Inside the Ontario Austerity budget

Pam Frache

April 1, 2012

The Ontario Liberal government has just tabled Ontario’s first serious austerity budget in the post-crisis era. Canadian Centre for Policy Alternatives economist Hugh Mackenzie noted: Premier Dalton McGuinty’s 9th budget completes the job of cutting government down to size, started by the Mike Harris Conservatives in the 1990s.

While profitable corporations and banks will be able to keep their hands on the $2 billion annual giveaways implemented in the 2009 budget, the McGuinty government has given social assistance recipients an effective cut of three percent – another devastating blow to those who are already subsisting below poverty. Food prices have been rising faster than the rate of inflation so those relying on Ontario Works and Ontario Disability Support programs will be eating even less in the year ahead.

In the meantime, the Ontario liberal government’s 2004 decision to eliminate the corporate capital tax – the tax applied to corporations with a stockpile of capital assets – leaves banks enjoying an additional $830 million annually, on top of their recent windfalls from the reduction of the corporate tax rate from 14% to 11.5%.

Even the Ontario budget documents note that in the future, it will show certain corporate tax measures as an “expense” since: “This change recognizes that these tax expenditures are, in substance, transfers or grants made through the tax system.”

In order to pay for these corporate grants, the McGuinty government has implemented devastating blows to health care and education, turned its back on the child care crisis for parents with children under four years of age, and abandoned even its rhetoric about reducing child poverty by 25% by 2013-14.

Significantly, it has put public sector workers in the crosshairs, attacking their pay, pensions, sick leave, and their right to collective bargaining. Over the next three years, the government proposes to cut $6 billion (Table 1.7) in public sector pay and pensions (“compensation restraint”). The McGuinty government boasts that at 7.4, Ontario now has the lowest number of public sector staff per 1,000 citizens of any province in Canada and is set to reduce this number further through privatization and contracting out.

While not formally tabling wage freeze legislation in the budget, it clearly states the government is prepared to table back-to-work legislation and other administrative measures if public sector unions don’t comply with the terms of the Ontario budget. In other words, you can bargain collectively as long as you roll over. If you resist, we’ll take away your right to strike.

For those public sector workers deemed “essential” and without the legal right to all-out strike, the budget announces a consultation process with employers, ultimately to shift the balance of the supposedly neutral arbitration process toward employers. Federally regulated workers have already experienced the impact of restricting the discretion of arbitrators. Federal Labour Minister Lisa Raitt’s back-to-work legislation to end the CUPW lockout by Canada Post management imposed a unilingual arbitrator on the bi-lingual union, and wage parameters that were worse than those actually tabled by the employer during bargaining. Resistance from CUPW successfully challenged Raitt’s imposition of arbitrator.

But given the fact the Liberal government is a minority in the Legislative Assembly, it seems foolhardy that the government has attacked such a broad swath of the public. With the Conservatives already vowing to oppose the budget, the McGuinty government is betting that labour leaders and the NDP will be more fearful of a provincial election than they are of the impact of austerity on the people of Ontario. Having fought both a federal and provincial election in the last 12 months, and with all political parties facing election deficits, McGuinty is certain that an election is not in play. McGuinty believes the paltry measures of freezing the corporate tax rate at 11.5% (the 2009 Ontario budget promised a further 1.5% cut) and a few other token gestures will be enough to allow the NDP to spin “victory” and support the budget.

But doing so would be a disaster for the NDP. An NDP vote for Ontario’s austerity budget will undermine any future credibility it has to resist austerity, since it will have partnered with the Liberals to bring it in. Instead of “buying time” to build its electoral fortunes, the NDP’s support for the budget will strengthen arguments for austerity, improve the credibility of the Liberals as having “no alternative”, and bolster electoral arguments for strategic voting against the Tories. The impact will also be felt federally where the NDP is campaigning vocally against what the mainstream media have dubbed a “moderate” federal budget. Any support for an austerity budget provincially will undermine NDP rhetoric on a pan-Canadian scale. All these factors will conspire to undermine electoral support for the NDP the next time around.

By contrast, an election fought on a more radical green jobs-for-all strategy paid for by increasing tax on profitable corporations and creating new tax brackets for high-income earners, could galvanize public sentiment and put the business lobby on the back foot. Indeed, even modest steps in tax fairness could generate billions in new revenue to save services and jobs. Public opinion polls have consistently shown wide public support for just such measures, federally and provincially.

But the spectre of the Ontario NDP supporting an austerity budget is just another reminder that real change doesn’t come from parliament. Instead, workers need to exercise the power they have in the workplace, and develop strategies to challenge the bosses’ tools of injunctions and fines in the event of workplace action. These strategic considerations cannot be left just to the labour leadership. Every rank and file worker needs to start discussing resistance strategies now and win their co-workers to the struggle. Public and private sector unions have every interest in fighting together. As CUPE economist Toby Sanger explains in his analysis of the 2012 federal budget that similarly targets public sector wages and benefits:

Higher unemployment, spending cuts and public sector wage constraints have also led to slow growth of wages in the private sector. Wage increases for workers in all regions and sectors of the economy fell behind inflation last year, translating to declines in real wages. But this was all part of the plan, according to Flaherty’s Associate Deputy Minister of Finance, who stated in court in late 2010 that one of the main policy objectives of their expenditure restraint act was to “to reduce undue upward pressure on private sector wages.”

In light of the McGuinty austerity budget, the Ontario Federation of Labour is calling for mass action on April 21 to oppose the Liberals’ austerity budget. The bigger the turnout on this day the greater the confidence of workers, students, seniors and those relying on Ontario’s ever thinning social safety net, to build resistance in every community and workplace in the province. For more information and to endorse visit

Ontario Budget cuts:

Social Assistance:

The Ontario Child Benefit, which was supposed to deliver another $100 for low income Ontarians in 2012, will be postponed for a year, transferring $90 million from low income Ontarians into corporate giveaways.
Social assistance will be frozen. CCPA economist Hugh Mackenzie notes that social assistance recipients will have lost $200 million to inflation over the past two years, and such people will be 5.5% worse off than they were at the end of Mike Harris’s second term. In the meantime, the Ontario budget documents boast that business savings since 2004 have been $8 billion as a result of the McGuinty government’s handouts. (see table 4.2 Total Business Tax Relief by Sector, Annual Savings).
Health Care:

The McGuinty budget cuts spending growth from an average of about 7% to 2.1%. This is less than the Drummond recommendation of holding spending to 2.5%.
Base funding for hospitals will be capped at ZERO from 2012 to 2013. Total hospital operating funding will be held at 2%. Long-term care funding will be held at 2.8%.
According to Natalie Mehra of the Ontario Health Coalition:

This will result in hospital deficits and another round of major hospital cuts across Ontario. Ontario has cut more than 18,500 hospital beds since 1990 and now has the fewest hospital beds per capita of any province in Canada and funds hospitals less than all other provinces but one. … Funding levels announced for hospitals and long-term care are far less than what is needed to maintain existing services, let alone address backlogs. The result will be major cuts to needed care services, longer wait lists for long-term care and unsafe conditions in our hospitals.

Community Care Access Centres will be funded based on the “types and volume of services and treatments they deliver”, at prices that reflect best practices while funding will be directed to “efficient” providers who provide better or more efficient services or treatments
Improving “quality” through “specialization” will result in less accessible access to health care as a result of new geographic barriers for those who live in rural communities.
High-income seniors will pay more of their prescription drug costs and the income threshold has been set at those with over $100,000 in income. But this income threshold has not been indexed, so as the nominal value of incomes rise a greater proportion of seniors will be paying more for their medicine.

The budget contains about $500 million in cuts to education funding over the next three years—rivaling the amount cut by the Mike Harris government in the mid-1990s when they set about to “create a crisis” in education.
School closures and amalgamations of school boards which could see as many as 1 in 6 schools closed, a process that will be accelerated by the elimination of the grants used to keep small schools open.
Cuts to curriculum specialists and cuts to grants that fund arts in schools and community programs like parenting and family literacy centres.
Northern Communities

In addition to the impact of other program spending cuts in health care and education that will undermine access, the Ontario budget cuts the Ontario Northland Transportation Commission – a body that provides transportation services to Northern Ontario. The budget promises to scrap the Northlander passenger rail service altogether, that offers train service between Toronto and Cochrane. In addition, “commercially viable assets such as rail freight, rail refurbishment operations and Ontera telecommunications” will all be privatized.

The money is there

In its pre-budget submission (page 2) the Ontario Federation of Labour shows that implementing even a handful of taxation measures on corporations and wealthy individuals could generate upward of $10 billion annually. This would be more than enough enough to reverse the cuts outlined in the Ontario Budget. The Canadian Centre for Policy Alternatives shows that if Ontario also reversed the tax cuts implemented under Mike Harris, there would be ample revenue to repair the legacy of the Harris cuts and restore the purchasing power social assistance income to current adequate levels.

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