Business, booze and red ink: What Doug Ford’s first budget means to Ontarians

Financial Post reporter Geoff Zochodne talks to Larysa Harapyn about the initiatives in the Progressive Conservative’s Ontario budget. Promises made, promises kept?

‘Our engine is sputtering’: Ontario PCs bank on business investment incentive to spur slowing economy

The first budget from Ontario Premier Doug Ford and his “Open For Business” government predicts that the province, like the rest of Canada, is headed for an economic slowdown.

After ending the 15-year reign of the Ontario Liberals last June, the new Progressive Conservative government tabled a fiscal plan Thursday at Queen’s Park that shows the province’s economy will expand by 1.4 per cent in 2019, 1.6 per cent in 2020 and 1.5 per cent in 2021.

According to the plan, the relatively moderate output in Ontario’s future will follow economic growth last year of 2.2 per cent.

“There was a time when Ontario was the engine of Confederation,” said Ontario Finance Minister Vic Fedeli, according to a copy of a budget speech he was set to give Thursday afternoon. “After a decade and a half of economic mismanagement by the previous government, our engine is sputtering.”

In attempting to kick-start the province’s motor, the Ontario Tories are following the lead of the federal Liberal government.

The budget says the provincial government will provide $3.8-billion in tax savings over six years via the “Ontario Job Creation Investment Incentive,” which the budget says “parallels” the boost to capital cost allowances the federal government outlined in its fall update.

Ontario is obligated to mirror Ottawa on the move under a tax-collection agreement, but the province had pushed for it prior to the federal government’s official announcement.

The measures allow for immediate expensing of manufacturing and processing machinery and equipment, among other things, and will cost the province $615 million for 2018-19 and around $1.1 billion for 2019-20.

“By providing faster writeoffs of capital investments, this incentive will encourage businesses to invest in Ontario now and create jobs for the people of Ontario,” the budget says.

A copy of Ontario Budget 2019 seem on Thursday April 11, 2019.

Only assets bought after Nov. 20, 2018, will qualify, with the measure to be phased out from 2024 to 2027. According to the province, the incentive will create an estimated 50,000 to 93,000 net new jobs and add between $7 billion and $10 billion in net new business investment.

The pick-me-up comes amid concerns about Canadian competitiveness following tax reform in the United States. Those reforms in the United States not only included accelerated depreciation, but a sweeping tax cut as well.

The Ontario Tories had promised a cut to the corporate tax rate in their campaign platform, but the government says their incentive will have the desired effect of lowering Ontario’s average marginal effective tax rate for corporations.

That rate, the budget says, will fall to 12.6 per cent in 2019 from 16 per cent last year, below the 18.7 per cent average in the U.S. this year following tax reform.

“We’ve done something … in our opinion and in the opinion of others, (that) is a lot better,” Fedeli told reporters when asked about the missing corporate-tax cut.

The finance minister added that when the government consulted with businesses, the expensing incentive was what they had wanted.

“It brings relief immediately,” Fedeli said. “And it drops us down farther than the states now, and so we protected the businesses by doing that.”

The Ford government’s latest forecast shows a deficit of $11.7 billion for the 2018-19 fiscal year, to be followed by a string of shrinking shortfalls that will end with a surplus in 2023–24.

However, with the tax help, the province is not predicting it will crack the 2-per-cent mark for annual economic growth in any year between now and 2024.

While a more sluggish economy was not unexpected, the provincial government has revised the outlook from a fall update, which came before December’s serious slide in the stock markets and which had projected 1.8-per-cent growth this year and 1.7 per cent in 2020. The same update had predicted 2-per-cent growth for Ontario in 2018, an expectation that was actually surpassed.

Ontario’s forecast also challenges any expectation of a recession brought on by the imposition of the federal government’s carbon tax (in Ontario at least). That possibility was raised by Premier Ford, who has regularly railed against the climate measure.

“Ontario’s economy is expected to grow at a steady pace over the 2019 to 2024 period, moderating from recent years mainly due to a less supportive external environment,” the budget says.

Ontario’s latest budget was delivered as the possibility of a Canadian recession is still seen as relatively low.

On Wednesday, Bank of Nova Scotia released an economics report that said the likelihood of a recession in Canada in 2019-20 was “small but rising.”

“While a recession is not very likely in the next few quarters, this probability is gradually rising: the model-implied probability of a recession in Canada increases to 11 per cent in 2020,” the report said. “If Canadian consumer confidence starts to deteriorate in the coming months, the probability of a recession will rise further.”

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Two new commissioners with Progressive Conservative ties appointed to Ontario’s market watchdog

A pair of new commissioners with connections to Premier Doug Ford’s Progressive Conservative Party have been appointed to Ontario’s top securities watchdog, a move that may raise eyebrows after a public disagreement last fall hinted at strained relations between the regulator and the province.

Mary Anne De Monte-Whelan and Heather Zordel, both highly-qualified corporate finance professionals, were added to the roster of the Ontario Securities Commission on Wednesday, following a four-month period which saw eight commissioners depart after their appointments were not renewed.

De Monte-Whelan is a former investment banker who was also an adjunct lecturer at the University of Toronto’s Rotman School of Management, and is now president of The Delan Group, a consulting firm.

Zordel is a partner in the securities group at mid-sized law firm Gardiner Roberts LLP. She also sits on the board of Toronto Hydro and is serving a three-year term as a part-time member of the Condominium Authority of Ontario, which operates under the province’s Ministry of Government and Consumer Services.

Both also have ties to the Progressive Conservative Party.

De Monte-Whelan ran as a Conservative candidate in 2011, losing the race in the Etobicoke-Centre riding.

A 2011 campaign-period financial statement for “Mary Anne Demonte-Whelan,” which the Post received from Elections Ontario on Wednesday, showed a $1,217.15 contribution from Deco Adhesives Products (1985) Ltd., the Ford family business.

Zordel, meanwhile, has since 2014 contributed to the provincial Conservative party and several of its members, including Doug Ford’s run for the leadership of the party in 2018, according to the Elections Ontario website.

Ford was elected Premier of Ontario last June and, within months, there were signs the OSC and the new government were not entirely aligned on policy.

In September, Finance Minister Vic Fedeli issued a terse statement saying the Ford government disagreed with a freshly issued OSC proposal to scrap some commissions tied to mutual fund sales.

The finance minister has the final say on rules proposed by Canada’s largest capital markets watchdog, and industry watchers said the surprising public rebuke was likely to put a chill on the regulatory process.

The OSC fee proposal, which came from a process initiated by the former Liberal government in Ontario, was backed by 12 other provincial and territorial securities regulators under the umbrella of the Canadian Securities Administrators.

In a statement Wednesday, OSC chair Maureen Jensen praised the “tremendous breadth of financial experience and strong industry perspectives” the new appointees would bring to the commission.

“I am delighted with the appointments of Mary Anne and Heather,” she said. “I look forward to working closely with them to deliver regulation that drives opportunities for Ontario businesses and investors.”

OSC commissioners are appointed for fixed terms by Ontario’s Lieutenant Governor in Council.

A spokesperson for Ontario’s finance ministry said Zordel and De Monte-Whelan were appointed for the “extensive expertise” they will bring to the commission.

“Both appointees applied and were reviewed by the Ontario Securities Commission’s Governance and Nominating Committee,” the spokesperson said in an emailed statement. “Further, both Ms. De Monte-Whelan and Ms. Zordel were approved through the all-party Standing Committee on Government Agencies.”

The OSC had just seven commissioners before Wednesday’s appointments, dropping from 15 last fall as the terms of eight commissions expired without renewal or replacements.

The regulator, which enforces securities laws and also sets policy for the province’s capital markets, cannot run with fewer than nine commissioners for longer than 90 days. The terms of two current commissioners are set to expire this summer.

Ford has faced questions over recent appointments of family friends and close associates linked the PC party.

The appointment of Ron Taverner as chief of the Ontario Provincial Police has prompted a review by the province’s Integrity Commissioner after a report Taverner didn’t meet the initial posted job requirements for rank, but was hired after the requirements were changed.

The premier has also been criticized by Liberal and NDP opponents for the appointment of Cameron Montgomery, a defeated Progressive Conservative candidate last June, to a $140,000 a year job as chair of an agency that administers standardized provincial testing for students.

Ford and his government have not been shy about shaking things up since they were elected to power. In a surprise move, they slashed the size of Toronto city council, and Ford made good on an election pledge to end the tenure of the chief executive of Hydro One, whose compensation prompted Ford to publicly refer to him as the Six Million Dollar Man.

 

Ottawa says Ford government’s call to drop retaliatory tariffs against U.S. would equal ‘unilateral surrender’

TORONTO — Ottawa is dismissing a call from Ontario’s economic development minister to drop retaliatory tariffs against the United States, saying doing so would mean “unilateral surrender” to the Americans.

The federal government applied tariffs on $16.6-billion worth of American imports of steel, aluminum and other products after the U.S. imposed steel and aluminum levies last year.

Ontario’s economic development minister had said the tariffs are hurting industries and workers in both Canada and the U.S., and said Ottawa dropping its countermeasure tariffs could lead the U.S. to drop theirs.

Federal Economic Development Minister Navdeep Bains rejected the suggestion Monday, saying in a statement that his government has been hard at work pressuring the Americans to end the trade dispute.

“The Ford Government’s call for Canada to unilaterally and unconditionally remove its counter-tariffs would equal unilateral surrender to the Americans,” Bains wrote. “The reciprocal tariffs are critical to pressuring the Americans to end this dispute once and for all.”

Prime Minister Justin Trudeau has discussed the tariffs over the phone with U.S. President Donald Trump and Finance Minister Bill Morneau has met with U.S. Treasury Secretary Steven Mnuchin.

Bains said the last time any Ontario official visited Washington was five months ago.

Steel at a Hamilton, Ont., mill.

“While we’re standing up against illegal U.S. tariffs and supporting steel and aluminum workers in Ontario, Doug Ford’s government is nowhere to be seen,” Bains wrote. “We’re not aware of any efforts by the Ontario government to persuade any American leaders to drop the tariffs — no meetings, no phone calls.”

Ontario Economic Development Minister Todd Smith noted that Premier Doug Ford met at the auto show in Detroit with car makers, who are concerned about the tariffs.

“We continue to burn up the phone lines in the U.S. to remind them that these tariffs are hurting them just as much as they’re hurting us,” he said. “Ontario is doing its part, now its time for the federal government to do theirs.”

Ford has suggested to the federal government that Canada’s tariffs should be dropped first, Smith said, though he admitted there is no indication doing so would lead the U.S. to in turn remove its tariffs.

“But clearly something has to be done,” Smith said. “These tariffs have been in place since June of last year and there’s been no movement on this.”

Smith and Quebec Economy and Innovation Minister Pierre Fitzgibbon sent a letter Monday to Morneau, calling on Ottawa to secure the permanent removal of all tariffs on Canadian steel and aluminum.

The tariffs were imposed last year by the U.S., and the American commerce secretary has said they were designed to address the world’s overproduction and overcapacity of steel. The federal Liberals were criticized last fall for signing a new North American trade pact, which includes the U.S., without securing any guarantees from Washington that it would lift the levies.

Ottawa has announced a financial aid package for industries caught in the crossfire, including up to $2 billion in new funding and support for workers in steel, aluminum and manufacturing sectors.

Canada has rejected the premise of the American duties — that its metals exports pose a national-security threat to the U.S. — and has been fighting for the removal of the tariffs.

There’s now only one buck-a-beer option left in Ontario

TORONTO — Four months after Doug Ford delivered on his campaign promise to bring back “buck a beer,” the only brewery still offering the option appears to be one in the Ontario premier’s west Toronto neighbourhood.

When Ford announced incentives for companies selling beer at $1 for a bottle or can last August, two breweries took him up on the offer — Cool Brewery in Toronto and Barley Days Brewery in Picton, Ont.

Loblaws also offered its President’s Choice beer for a dollar a bottle for a limited time.

But now the Liquor Control Board of Ontario says the Barley Days Brewery beer that had been available for a dollar — plus the 10 cent deposit — has raised its price to $1.65.

The Crown corporation in charge of alcohol sales in the province says that as of Monday, Cool Lager was the only “buck a beer” still available on its website.

The government offered businesses that agreed to sell “buck a beer” for a dollar prime spots in LCBO stores and advertising in the store magazine’s inserts.

Ford government’s first fiscal update sees Ontario changing business tax policies

The Ontario government proposed on Thursday to take steps to try to shore up the province’s competitiveness for business investment.

A fiscal and economic update tabled Thursday at the Ontario legislature says the province would mirror the federal government if Ottawa opts to offer companies accelerated expensing of depreciable assets, which is a policy that corporate Canada has been requesting.

“This would support jobs and growth opportunities in Ontario and strengthen Ontario’s competitiveness in the global economy,” noted the province’s 2018 economic outlook and fiscal review, a sort-of mini-budget tabled Thursday at Queen’s Park.

The province’s finance and economic development ministers had already written to the federal government calling for the accelerated depreciation. There have also been rumblings that Ottawa is preparing some measures aimed at Canada’s competitiveness in its own upcoming fall update.

Ontario’s update said Thursday that reform in the U.S. have wiped out the province’s “tax advantage” and made the province less attractive for business investment.

Yet in keeping with the work of new Premier Doug Ford, the Ontario update also proposes to try to undo some of the work of the province’s previous Liberal government.

For example, today’s Progressive Conservative government at Queen’s Park says it is proposing to break ranks with Ottawa on another measure: phasing out access to the federal small business tax rate based on how much passive investment income is earned by a corporation.

Ontario had proposed to match this measure for the province’s own small business deduction, which the government estimated would have hiked taxes on those smaller firms by about $160 million a year by 2020-21. Now, the Tories say they plan on ditching this move, and not paralleling Ottawa’s decision.

The new government also says it will be reviewing its research and development-related tax support and will not implement the previous regime’s plan to link the rates of an R&D and innovation tax credit to a company’s level of investment.

This is all in addition to the savings that the new regime says they are providing to businesses by cancelling the province’s cap-and-trade carbon-pricing system, as well as by freezing Ontario’s minimum wage at $14 per hour. Businesses are also set to pay less in the way of Workplace Safety and Insurance Board premiums.

Under the watch of Premier Ford, Ontario would also no longer “stand in the way” of pipelines transporting oil to or through the province from Western Canada, the update says.

Fedeli’s remarks to the legislature said that Ontario would “unilaterally relinquish our veto over new pipeline construction within our borders.”

“Pipelines create good jobs, both in Ontario and across the country,” added the update. “In every way possible, Ontario will support its partners looking to expand oil distribution, and at the same time, protect their competitiveness from the federal carbon tax.”

Ontario’s former Liberal government had projected a $6.7-billion deficit for 2018-19 in its spring budget, with no plan to balance the books until 2024-25. The Liberals had also forecast a $600-million surplus for 2017-18.

But Ford’s government had ordered up an independent inquiry into the province’s finances after winning a majority in June’s election. The commission of inquiry revised the province’s financial figures, pegging the projected deficit for 2018-19 at $15 billion, and the Tories declared that Ontario actually ran a $3.7-billion deficit for 2017-18.

The fall update now says that the province is projecting a $14.5-billion deficit for 2018-19, down $500 million from what the inquiry laid out. When the province would return to a balanced budget under Ford, or if it would this term, remains to be seen.

Also in the province’s fall update was a new tax measure for lower-income Ontarians, the Low-income Individuals and Families Credit, or LIFT credit, which the government said would result in a single, full-time worker making minimum wage would pay no provincial personal income tax in Ontario.

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If Doug Ford honours his campaign promises, Ontario’s deficit monster will grow to $18.7 billion next year

Finances in Ontario, already one of world’s most indebted regions, will get a whole lot worse if the government follows through on its campaign pledges.

The budget deficit in Canada’s most populous province is poised to jump almost 50 per cent to $18.7 billion (US$14.3 billion) in 2019-20 from this fiscal year under plans by new Premier Doug Ford, according to a report from Toronto-Dominion Bank. By 2022-23, the province’s net debt would rise to $483 billion, or to about 48 per cent of its annual output.

Finance Minister Victor Fedeli is scheduled to release an economic update on Nov. 15. It comes in the wake of an independent inquiry that estimated in September the deficit for the fiscal year ending March 31 2018-19 could be as high as $15 billion, more than double the previous government’s forecast, due largely to accounting changes. TD is estimating a budget deficit of $12.5 billion for this year including a $1 billion reserve.

“The upcoming fiscal update will provide a huge opportunity for the government to signal how it plans to slay the deficit monster,” TD’s economists Derek Burleton and Rishi Sondi wrote in the note released Wednesday. “From a credibility perspective, the sooner the government gets its fiscal house in order, the better.”

Ford, who took office late June, pledged to cut corporate and personal income taxes, which could cost $3.6 billion per year by year three of its mandate, according to TD. A promise to reduce the gas tax would would cost another $1.2 billion per year.

To be sure, Ford has committed to balancing the books over time, and could introduce cuts or other spending restraints. The government has already halted expansions at some universities, scrapped a pilot basic income program, and plans to cap social assistance which together with other measures could shave off $2 billion from spending this year, according to the report. Allowing other programs to lapse could save another $1 billion while freezing a minimum wage hike may support employment and boost revenues.

“If the government plans to honour its campaign promises, program spending will have to be pared significantly,” the economists said. “Should the economy take a turn for the worse, the government’s job becomes exponentially harder. All told, the path to balance will be fraught with hard decisions.”

Bloomberg.com

Ontario, Saskatchewan premiers vow to reduce provincial trade barriers

TORONTO — The premiers of Ontario and Saskatchewan said Monday they are working together to reduce trade barriers between their provinces.

Speaking at a joint news conference in Toronto, Ontario Premier Doug Ford and his Saskatchewan counterpart Scott Moe said they have signed a memorandum of understanding on the issue.

Ford said Canada has focused on free trade with the United States at the expense of internal trade, and must reduce interprovincial hurdles to stay economically competitive.

“I hear from business leaders that this is one of the primary obstacles to attracting new investment and jobs to our country. We can’t afford not to act,” Ford said.

“Most of barriers when it comes to free trade between provinces is regulations. We’re going to put a list together, both myself and Premier Moe, of different sectors — let’s use transportation for example — where we can start knocking down some regulations,” he said.

Though they gave few concrete details of their plan, Moe promised swift action. “I think you can look for us to move very quickly on initiatives,” he said.

The pair would not, however, say why they did not send representatives to a meeting on internal trade last week.

“We’re just signing an MOU and we’ll move forward on that MOU,” Ford said.

Ontario’s New Democrats said the two premiers’ absence from the meeting suggests they aren’t interested in working with the rest of Canada on this issue.

“If you’re going to have interprovincial trade agreements they should be negotiated on a pan-Canadian basis,” NDP legislator Peter Tabuns said. “A patchwork is not a good thing for us, it’s not a good thing for the rest of the country.”

Ford and Moe are already joined in the opposition to Ottawa’s carbon pricing plan for provinces that don’t have their own system in place by next year.

Both provinces have launched legal challenges to the federal plan and are intervening in each other’s cases.