Duncan rules out tax hikes, across-the-board cuts in Ontario

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Modest growth will be the new normal in Ontario for the foreseeable future, Finance Minister Dwight Duncan says.

"These are uncertain times," he said Wednesday in the Legislature, where he unveiled his economic outlook and fiscal review. "And people are anxious. And that is understandable."

The government is ruling out tax increases and across-the-board spending cuts to put Ontario's finances on a long-term, sustainable path. It is also rejecting privatizing public health care, which consumes the lion's share of program spending.

Past experience has shown that deep, arbitrary, across-the-board cuts do not work, the economic outlook says in a pointed reference to the previous Harris government, which slashed spending on hospitals and schools in the 1990s as part of the Common Sense Revolution.

Instead, the government plans to reduce program spending by reforming the way it delivers services.

"A far more demanding – and far more rewarding – approach is to examine everything the government does, piece by piece, to find creative, efficient and effective ways to deliver public services," the economic statement says.

There is no detail on the "creative" approach spelled in the economic outlook. Instead, the government is relying on former Toronto-Dominion Bank economist Don Drummond to provide a roadmap for reforms.

Mr. Drummond is conducting a wide-ranging review of all program spending. He says the province must cap annual growth in total program spending at 1 per cent a year for the next six years, to meet its target of erasing the deficit by fiscal 2017-18.

The economic outlook reveals how the weakening global economy has taken a toll on Ontario since last March, when the government released its budget.

Total revenue for fiscal 2011-12 is forecast to be $778-million less than the $108.7-billion figure in the budget, largely because of lower personal income tax revenues.

At the same time, program spending is forecast to reach $114-billion, up from $111.2-billion in fiscal 2010-11. The government is projecting a deficit of $16-billion for this year.

Despite the recent slowing growth, Ontario's economy has largely recovered from the global recession of 2008, the outlook says. The unemployment rate now stands at 8.1 per cent, down from 9.4 per cent during the recession.