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Ontario opens to the door to private partnerships

Don Drummond


Ontario businesses got no new tax or spending goodies in the provincial budget tabled Tuesday, but the government opened the door to possible privatization opportunities that companies could take advantage of in the coming years.

In a budget that promises to further reduce the size of the province's public service through thousands of job cuts, Ontario floated the idea that many of its services could be delivered by private entities.

"Just because a government department is delivering a program or service today does not mean it should deliver that program or service in the future," the budget says. "Existing assumptions and traditional models must be revisited…"

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The provision of public services needs to be open to "new forms of competition," the budget said, and that may mean making use of private companies, not-for-profit entities or other levels of government.

To figure out exactly how to rejig the public service so it is more efficient, the McGuinty government has hired Don Drummond, the highly respected and government-savvy former chief economist at Toronto-Dominion Bank. His broad mandate, as chairman of the Commission on the Reform of Ontario's Public Services, will be to make recommendations for fundamental changes that will help eliminate the province's deficit.

The privatization of health care or education is explicitly off the table in Mr. Drummond's mandate, but anything else is fair game - as long as it doesn't result in a tax increase, the government said. The commission should even look at "exporting and monetizing" some of the expertise in the public sector - by considering selling government-owned intellectual property overseas, for example - budget documents suggest.

Ontario Finance Minister Dwight Duncan told reporters Tuesday that Mr. Drummond has in the past rejected a "slash and burn approach" to trimming government deficits, and he will bring that approach to his new assignment.

NDP leader Andrea Horwath expressed misgivings about a shift of government functions to the private sector, saying the budget "opens the door to American-style privatized public service delivery."Ontario Conservative leader Tim Hudak dismissed Mr. Drummond's panel as "a bureaucratic commission [that will]hire more consultants."

Finding new ways to save money is critical for the Ontario government, which has been loath to boost taxes or cut services sharply. Its belt-tightening - along with a modest economic recovery after the recession -- has trimmed the projected deficit this year from $19.7-billion to $16.7-billion. However, Ontario's books are not expected to be balanced until 2017-18. That's much later than the federal government or most of the other provinces.

Businesses looking for accelerated infrastructure spending from Ontario will likely be disappointed by this budget, although money for highways, transit, hospitals and school buildings will continue to flow at roughly the same rate as in past years. About $12.8-billion will be spent in 2011-12 and a total of $35-billion over the next three years. That's about the same amount per year as in the past two years.

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The government said it will announce, over the next few weeks, a slew of new private sector projects that it will help finance, mainly in the information technology and green-tech areas. These investments will total $1.3-billion, although the government contribution will amount to just $175-million, mostly from existing programs.

There are no corporate tax rate changes in the budget, although the reductions announced in the 2009 provincial budget will continue to be phased in over the next few years. The general corporate income tax rate, which dropped to 12 per cent from 14 per cent on July 1, 2010, will fall to 11.5 per cent this July. By the middle of 2013 it will reach 10 per cent.

The budget included a number of small items aimed at specific sectors of the business community, including the extension of a crop insurance program for grain and oilseed farmers, and new insurance programs for cattle, hog, sheep and veal farmers, and vegetable and fruit producers.

The province also said it will set up a task force to look at the problem of auto insurance fraud, and establish a claims database which will make it easier to detect fraud.

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About the Author
Reporter, Report on Business

Richard Blackwell has reported on Canadian business for more than three decades. At the Financial Post and the Globe and Mail he has covered technology, transportation, investing, banking, securities and media, among many other subjects. Currently, his focus is on green technology and the economy. More

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