Auditor general asks the Liberals to stop lying in their books. The Liberals decline

OPINION: The government is giving Ontarians a break on their hydro bills in a way that’s designed to obscure costs. The AG isn’t having it
By John Michael McGrath - Published on October 18, 2017
Auditor General Bonnie Lysyk took the Liberals to task for the Fair Hydro Plan. (Christopher Katsarov/CP)

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The Liberal government really, really wants you to dismiss its latest dispute with Auditor General Bonnie Lysyk as an “accounting disagreement.” But you shouldn’t, because it actually raises fundamental questions about how a ruling party should govern, and what limits should be placed on a political party desperately trying to ensure its own re-election.

It’s the one thing in this entire dispute that isn’t particularly opaque: Lysyk told reporters on Tuesday that if the government’s plan to discount some customers’ hydro bills with tens of billions of dollars in debt is allowed to go forward, the basics of how the government counts its bills will be essentially meaningless.

“If you’re going to follow normal public accounting standards, you don’t need to structure your debt like this,” Lysyk says. “They’re going to take you through the technical, nitty-gritty level. I would say, at the higher level, does this make sense?”

“It’s a slippery slope … You might as well not have Canadian accounting standards, because governments will be able to choose the bottom line they want.”

And if the Liberals can simply choose whatever bottom line they want, they can run for re-election touting a “balanced budget” that really isn’t, or claim they’ve kept debt levels manageable, when, perhaps, they haven’t. Which is probably the point.

To review: in the spring, the government announced the “Fair Hydro Plan,” which lowered residential electricity bills by 17 per cent by loading Ontario Power Generation (the company that owns half the province’s power plants) with tens of billions of dollars in debt. That debt will be used to pay part of people’s hydro bills in order to give customers a discount while ensuring power companies are made whole.

What has Lysyk so irritated is that the government isn’t racking up that debt on its own accounts. Rather, the entire policy edifice is being constructed around ensuring that neither the debt nor the ensuing interest payments show up on the government’s balance sheet. That means it doesn’t show up as a “deficit” for public accounting purposes, and next year, the Liberals will be able to claim they balanced the province’s books while reducing hydro rates. Like similar promises — tastes great, half the fat! — it’s deeply misleading.

The Liberals maintained on Tuesday that they structured the Fair Hydro Plan the way they did because of important public policy principles: namely, that social policy programs should be paid for by taxpayers, but energy finances should be paid for by hydro customers. This claim is dubious for a few reasons, not least of which is that the Liberals were the ones who put all those social programs on people’s hydro bills in the first place.

On top of that, OPG isn’t being loaded up with debt so that the province can build a new nuclear plant or hydro dam — something that would actually light a home, power an air conditioner, or charge a car battery over its life. OPG is artificially lowering people’s hydro bills because the government belatedly discovered that onerous electricity costs are both economically draining and politically dangerous. That sounds… suspiciously like social policy. Yet it’s being paid for by hydro ratepayers, not taxpayers (who are, of course, physically the same humans, but that’s another issue entirely). The government’s attempt to distinguish between these two policy categories is nonsense from top to bottom.

While the government’s claims are byzantine and opaque, the auditor general’s point is a simple one: the Fair Hydro Plan is a political decision made by the province’s elected leaders, and the debt and interest that are an integral part of that plan should properly reside on the government’s balance sheets. This isn’t an “accounting disagreement”: it’s not even particularly advanced civics. Leaders should be held to account for the decisions they make, and governments should make it easy for voters to do so by ensuring their decisions are clear and understandable.

The fact that the Liberals disagree on this point says a lot about where the party that ran on basic, no-nonsense good government reforms in 2003 has ended up 14 years later.

Speaking of the 2003 election: every time political power has changed hands at Queen’s Park in this reporter’s lifetime, the new government has been able to claim, with varying degrees of sincerity, that it was shocked to discover that its predecessor had left Ontario’s budget in an even worse state than anyone had imagined. That deficit then becomes the excuse for the leaders to make major changes in the status quo: they can swing an axe like Mike Harris did after his 1995 win, or raise taxes like Dalton McGuinty did in 2003.

Between the Fair Hydro Plan and other recent disputes with the Auditor General, the Liberals have laid the groundwork for an opposition party to take the reins of power in 2018 and announce that it’s shocked to discover the parlous state of the province’s finances. Literally all a theoretical Premier Patrick Brown or Andrea Horwath has to do to “discover” a billion-dollar “hidden” deficit at this point is to accept the accounting advice of the auditor general, an independent officer of the legislature.

Armed with a fresh mandate from the voters and a deficit that can convincingly be blamed on the other guys, an antagonistic party would have a lot of leeway to undo some major Liberal policies — the Tories could cut programs; the New Democrats could introduce corporate tax hikes.

No governing party gets to choose what happens after it’s defeated, but the Liberals might ponder in their quiet moments how their own actions and choices are going to help take a torch to their legacy if they are, in fact, defeated next year.  

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