Is Ontario the new public finance dunce?
Montreal, April 24, 2018 – The bad news just keeps piling up for Ontario, with a provincial election just around the corner. Not only has a key ratings agency just downgraded the province’s financial outlook from “stable” to “negative,” but the Ontario government’s borrowing costs are, for the very first time, higher than those of the Quebec government.
Even if Quebec has long been known for its poor management of public finances, Ontario, because of its deteriorating management, is now competing for the top prize in terms of financial recklessness, shows an MEI publication launched today.
“When you look at debt, spending, and taxes, Ontario looks more and more like Quebec. This is due in part to Quebec’s improved performance recently, but also to the deterioration of Ontario’s public finances over the past decade and a half,” says Jasmin Guénette, Vice President of the MEI and co-author of the publication.
Ontario’s 2018-19 deficit will be $6.7 billion, and the province is not scheduled to return to budgetary balance until 2024-25. Its net debt relative to GDP is set to start rising again after having come down slightly in the past few years.
Quebec, for its part, has balanced its budget every year since 2015-2016, and will pay down $10 billion of its debt over the next five years. The net debt relative to GDP is expected to keep decreasing: Indeed, the two provinces’ net debt-to-GDP ratios have been converging steadily over the past decade.
Ontario has also increased spending by 28%, excluding interest payments on the debt, whereas a comparable measure of spending in Quebec has increased by 19% over the same period. To cover this increased spending, revenues have also gone up in both provinces. “Like Quebec, Ontario now finds itself with a government that spends a lot and is omnipresent in the economy,” adds Mark Milke, independent policy analyst and co-author of the publication.
“Despite Quebec’s recent gains, both provinces are addicted to taxing, spending, and borrowing. The large debts in particular will of course have to be repaid with future taxes, a prospect that ought to alarm anyone concerned about the long-run prosperity and well-being of Quebecers and Ontarians,” concludes Mr. Guénette.
The Viewpoint entitled “Ontario vs. Quebec: Whose Public Finances Are Worse?” was prepared by Mark Milke, independent policy analyst, and Jasmin Guénette, Vice President of the MEI. This publication is available on our website.
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