What we learned from the Liberals’ fall economic update

ANALYSIS: In his latest big speech, Finance Minister Charles Sousa threw some bones to small businesses and hinted at developments on the horizon
By John Michael McGrath - Published on November 15, 2017
Ontario Finance Minister Charles Sousa at Queen's Park
Finance Minister Charles Sousa presented the government’s fall economic statement in the legislature on Tuesday. (John Michael McGrath)

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​Charles Sousa rose in the legislature on Tuesday to give what may be one of his last major speeches as finance minister. He’ll deliver one more budget before the next election — which could spell the end of Liberal government in Ontario — but even if the Liberals return to power, he may not return to the post of provincial treasurer, which he’s held since Kathleen Wynne became premier in 2013.

The fall economic statement is a regular part of the legislative calendar, but it’s not consistently notable. Last year, the FES made news with the launch of the Liberal policy geared toward cooling the Greater Toronto Area’s housing market. This year’s budget update contains fewer developments that will hit voters in the pocketbook: much of the word count is devoted to reminding the reader about pleasant things the government has already done (youth pharmacare, cheaper tuition), even if they’re only tangentially related to the economy or provincial finances (justice reform, abortion access).

The government, though, is taking steps to soften the blow of the higher minimum wage — which will rise to $14 on January 1 — and hinting that more changes will be coming soon. Here are the highlights.

Government to small business: Please, please, please don’t hate us

The headline announcement from the government this week is that it’s reducing the small business corporate income tax rate from 4.5 to 3.5 per cent on the first $500,000 of profit. This is explicitly being sold by the government as a way of taking some of the sting out of its decision to raise the minimum wage to $14 in 2018, and to $15 in 2019. The government also announced a handful of new measures to encourage small businesses to hire young people and apprentices in the trades.

Small businesses that hire a person under 30 will receive a $1,000 incentive from the government, and another $1,000 for keeping them on for six months. Meanwhile, the government is converting existing tax credits for apprentice hires into more straightforward grants.

The Canadian Federation of Independent Business wasn’t overly impressed with the government’s concession. “Thousands of business owners across the province will be assessing today’s measures against a very tough backdrop,” said CFIB’s Ontario vice-president, Plamen Pletkov. “As important as the initiatives announced today are, they won’t offset the real impact of this legislation on Ontario’s jobs and the economy.”

Tories find a policy position: Pumping the brakes on the minimum wage

For months, Patrick Brown and the Progressive Conservatives have been saying that they’re worried about how the minimum wage increase will affect Ontario’s business sector. Finance critic Vic Fedeli restated the position on Tuesday, saying that the jump from $11.60 to $14 will cost jobs. The assistance announced this week won’t offset the increased costs, Fedeli said.

“At the end of the day, they’re talking about $500 million when the total increase in cost from the minimum wage is $12 billion. So it’s going to go from $12 billion to $11.5 billion— that’s still punishing for small businesses who will continue to lay off employees,” he said. “All they’re debating now is how many tens of thousands of people in Ontario will lose their jobs on January 1.”

In response, the PCs have laid out an alternative: while they won’t roll back the jump to $14, the Tories say they’ll spread out the increase from $14 to $15 over the likely four-year lifetime of a majority government — which would mean a 25-cent increase each year from 2019 to 2022. That would leave more than two-thirds of the Liberal minimum wage increase in place.


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Mission accomplished on housing?

Anyone who wants to own a home in Toronto but can’t — or is currently paying too much in rent — could be forgiven for being frustrated by the tone of the fall economic statement. The Liberals didn’t hold a victory speech on the deck of an aircraft carrier or anything, but there’s the unmistakable sense that the government is declaring mission accomplished when it comes to its Fair Housing Plan: home prices in the GTA are down slightly, and Sousa patted himself on the back for having engineered a “soft landing.”

“It’s worked,” Sousa said emphatically. “It’s tempered the market and provided for greater supply, and it’s enabled more families not to be crowded out by speculators.” Except it hasn’t provided or enabled more supply: the government’s own numbers show new province-wide home construction slowing from 77,000 new homes this year to 71,000 in 2018 and 2019.

The decline was predictable: the government said in the spring that its housing policy was intended simply to take some of the froth from 2016-17 out of the market. But if you couldn’t afford a home even before the recent run-up in GTA home prices, the government’s policy means that you won’t be able to next year, either.

Coming soon: Another stretch goal?

The Liberals earned some mockery last year when it turned out that their commitment to reduce auto insurance rates by 15 per cent — hammered out in a deal with the NDP to keep Wynne in power after she took office in 2013’s minority government — ended up being a “stretch goal” the government didn’t even come close to meeting.

Well, the fall economic statement hints that changes will once again be coming to the province’s auto insurance system. It references the report by David Marshall, released by the government earlier this year, which showed that Ontario motorists pay more for their car insurance than drivers in other provinces — despite being safer drivers — and recommended major new reforms. The FES says that the government will be introducing new measures “in coming weeks” — a statement that got a laugh out of NDP Leader Andrea Horwath.

“I don’t even have to tell people not to believe a word of it,” she said. “I think people are going to receive that with a huge grain of salt, and I don’t blame them one bit for that.”

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