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The Drummond Report and Ontario’s Future

Published February 19, 2012

by iris_author

This blog was originally published in Professor Mark Winfield’s blog.

Ontario Premier Dalton McGuinty’s government is widely seen to have survived the province’s October 2011 election less as a result of its own appeal to the electorate and more as a result of errors and misfortunes on the part of PC Leader Tim Hudak. The government was seen to be tired, and out of ideas about how to move forward on the economic, social and environmental challenges facing Ontario. The first few months of the government’s new minority mandate have been notable only for the lack of new initiatives and the ORNG air ambulance debacle.

The Report of the Commission on the Reform of Ontario’s Public Services (a.k.a. the Drummond Report) has, to some degree, now provided a government that was in search of an agenda with one.  Whether it is an agenda that will serve Ontario’s interests well in the long term is another question altogether. The Commission’s report is extremely broad in its scope, and its most interesting, imaginative and detailed aspects deal with health care.

The report’s other elements vary greatly in their depth and originality. Its sections dealing with electricity, the environment, natural resources management and land-use, for example, are generally thin on new analysis and largely endorse the government’s existing policy directions. There are remarkably few new ideas and quite a few old ones of very doubtful value. Further “streamlining” an environmental assessment process that has already been ‘reformed’ to a point of virtual meaninglessness and increasing the reliance on not-for-profit corporations controlled by the industries they are supposed to regulate hardly look like progress  from the perspective of advancing sustainability or protecting public safety, health and the environment.

More generally the report, with its focus on “efficiencies,” lacks any overall positive vision for where the province should be going.  It does ask the government to articulate an “economic vision” for Ontario – highlighting by implication the government’s failure to effectively provide such a vision so far. The lack of any underlying sense of the way forward makes it difficult to evaluate the wisdom of the bulk of Drummond’s proposals. This is particularly true with respect to education, an area with major implications in terms of longer-term economic and environmental strategy.

Moreover, the report is almost entirely focussed on the expenditure side of the equation. In fairness to Mr.Drummond that limitation was imposed by the government. There are strong suggestions that the province review the usefulness of its existing $1.3 billion per year in direct business support and $2.3 billion per year in corporate tax expenditures. However, there are few specific recommendations or any sense of the potential to generate additional revenue by closing loopholes that have long outlived their purposes or which may have been of questionable value in the first place. Some modest opportunities to generate new revenues through user fees (e.g. charging for parking at GO terminals and full cost pricing of sewer and water services) and terminating the pre-election gimmicks of the undergraduate university tuition fee rebate and the Clean Energy Benefit on electricity bills are identified, and there is some discussion of the possibility of road tolls as a transit funding mechanism, but there is no discussion of more substantial options on the revenue side.

The cancellation of the final stage of the government’s corporate tax cuts seems likely at this stage. Given the burdens in terms of lost services and increased user fees that ordinary Ontarians are being asked to accept, some contribution from a business community that has benefitted from a succession of tax cuts will be politically essential.  That step would save about $800 million per year in revenues.

More serious revenue options like occupying some of the tax room vacated by the federal government when it cut the GST  by increasing the provincial portion of the HST, – or better still more ambitious strategies like the introduction of a carbon tax (something Mr.Drummond himself proposed in 2008) have not been put on the table. Given the scale of the impact of Mr.Drummond’s proposals, those options need to become part of the conversation.

Even Toronto Mayor Rob Ford (with considerable prompting from city council) when faced with similar challenges, recognized the need to move on the revenue side to moderate the need for damaging expenditure reductions. The risks of the province mortgaging its future by focussing exclusively on expenditures are far too large for it to ignore the same alternative.

A declining US market for exports, the difficulties for export-oriented value-added economic activities posed by a rising Canadian dollar driven by resource exports from western Canada, the regional impacts of climate change, the rural-urban split evident in the outcome of the 2011 election, and a federal government oriented towards the interests of the Alberta, have all contributed to the challenges facing the province. But more imagination and vision that what Mr.Drummond has offered will be needed to put the province back onto a path towards sustainability and prosperity.

Mark Winfield’s new book Blue-Green Province – The Environment and the Political Economy of Ontario has just been published by UBC Press.

Posted in: Blogs | Sustainable Energy