The Ford government announced billions to support business investment in Ontario and little direct support for consumers in its fall mini-budget, an approach the finance minister said is driven by global economic uncertainty.
The major attraction in the fall economic statement (FES) is new plans to create an Ontario Infrastructure Bank with $3 billion in seed funding aimed at attracting funds from pension plans and other institutional investors to build long-term care homes, energy infrastructure, affordable housing and “municipal and community infrastructure and transportation.”
The government also announced an additional $100 million for Invest Ontario, an agency tasked with attracting business investment in the province.
There’s also $12 million per year for the mining industry from plans to expand the eligibility of the Ontario Focused Flow-Through Share Tax Credit to the critical mineral exploration sector this year.
The government also uses its 158-page economic statement to celebrate its incentives to attract an electric-vehicle supply chain in Ontario, touting $26 billion worth of investment from major automakers that have landed in the province over the last three years. It also recapped the Ontario Made Manufacturing Investment Tax Credit it announced in the last budget, worth an estimated $780 million over three years.
For consumers, the government announced the continuation of the gas and fuel tax breaks to June 30, 2024, saving consumers an average of $260 since summer 2022.
Finance Minister Peter Bethlenfalvy’s message was about “heightened economic and geopolitical uncertainties."
“The impacts of high inflation and the Bank of Canada’s rapid interest rate increases are weighing on Ontario’s economic outlook for the remainder of this year, and into the next,” he wrote in his fiscal update.
Ontario is still facing some supply chain disruptions and the wars in Ukraine and the Middle East contribute to the economic risks and financial pressures that Ontarians feel at home, the finance minister added.
The FES projects a deficit of $5.6 billion this year, up from the $1.3 billion it projected in the spring budget, due to lower taxation revenues and a $2.5-billion top-up of the province’s contingency fund.
The province expects slower growth next year due to rising interest rates, with real GDP projected to grow by 1.1 per cent in 2023 — beating the 0.2 per cent projection in the spring budget. However, the government now projects next year will be worse, with only 0.5 per cent growth in 2024, 2.0 per cent in 2025 and 2.8 per cent in 2026.
The Ontario Infrastructure Bank
The marquee Ontario Infrastructure Bank is being launched on the same day as the fall economic statement, and an announcement on the inaugural board members and chair that will run the arm's-length agency is expected soon.
The economic statement itself contained few details about the plans. However, it did come with an assertion that “Ontario taxpayers cannot build the infrastructure that the province needs alone.”
Civil servants who briefed the media said the bank’s goal will be to “de-risk” investments in infrastructure with a public benefit to entice pension plans and institutional funds toward the targeted infrastructure projects. All of those projects — long-term care homes, energy and transportation — will have existing revenue streams, as the government isn’t planning to add new user fees, the civil servants said.
Brian Lewis, a Munk School senior fellow and former chief economist for the Government of Ontario, said he’s concerned that deals reached through the new infrastructure bank may cost more than conventional financing.
“I think that's the question that needs to be answered is: who's ultimately going to pay for the return on these deals?” he said.
“Somebody is having to pay for it somewhere along the way because I don't think that they don't think the private sector is going to willingly accept low rates of return or big risks for the sake of getting infrastructure built that's in the public interest,” he said.
When it comes to building long-term care homes, for instance, private investors can and do invest in them, he noted.
“We can't dismiss the idea out of hand, but the fact that there's so many questions that need to be answered means it’s hard not to be skeptical,” he said.
Opposition parties were in unison in their concern about the Ford government’s plans to establish an Infrastructure Bank.
NDP, Liberal and Green MPPs who spoke to reporters after the fall economic statement’s release each said they’re skeptical of the idea because of what recent scandals have revealed about how individuals with ties to members of the Progressive Conservative government have benefited from its decisions.
“When this government shows you who they are, we should believe them,” New Democrat MPP Catherine Fife, the Opposition finance critic, said. “There is a long track record now of partisan appointments, insiders getting into positions of power — this government is not particularly good at establishing these third-party agencies.”
Liberal interim leader John Fraser said, “That’s a given,” when asked if a close watch should be kept on who Ford’s government appoints to Ontario Infrastructure Bank’s board.
“I’m worried that it’s going to be a $3-billion boondoggle,” Green Leader Mike Schreiner said. “Partly because I don’t think any of us can trust this government when it comes to patronage appointments.”
An Invest Ontario boost
The government also announced a $100 million boost to the Invest Ontario Fund, which it said would help Invest Ontario, the provincial agency tasked with bringing in investment, “attract more leading companies to the province, further support business already here” and create jobs.
The 2021 budget saw the government commit to $400 million over four years to create the fund, saying it would invest $100 million each year from 2021–22 to 2023–24. It aims to attract investments in advanced manufacturing, technology and life sciences. The additional $100 million brings the total of announced funding for the fund to $500 million.
Thursday’s economic statement referred to a $3.1 million grant through the fund this year for Mitsui High-tec (Canada) Inc., which produces motor core components for electric vehicles. The company announced in June it would invest $102.3 million in a manufacturing facility in Brantford.
A government official said Invest Ontario has ongoing negotiations with companies and that the additional funding would enable it to pursue more potential investments.
The PC government created the Invest Ontario agency in July 2020, noting in its 2023 budget that such an organization was needed due to the “increasingly fierce competition between jurisdictions in attracting business investments.”
In March 2021, the government announced the agency’s inaugural board of directors — a list including former premier Ernie Eves, former Ontario cabinet minister Janet Ecker, Joseph S. Mancinelli, international vice-president and central and eastern Canada regional manager of the Labourers' International Union of North America (LiUNA) and developer Carmine Nigro, who was also already chair of the Liquor Control Board of Ontario.
Ecker, who was reportedly fired from the Metrolinx board after writing a column that was critical of the premier, is no longer part of Invest Ontario.
Housing, housing, housing
The FES included $200 million over three years for municipalities to expand or repair water, wastewater, or stormwater infrastructure to help municipalities service more homes.
It also included some less-than-stellar news on the province’s housing woes.
The government is projecting improved housing starts compared to the 2023 budget, but the numbers are still way off from what’s needed to achieve the 1.5 million new homes by 2031 target.
Last year saw 96,100 starts, which is good relative to Ontario’s historical numbers but still well short of the 150,000-plus per year pace needed.
With the 2023 FES projecting housing starts below 90,000 until 2026 — and then just over 94,000 — Ontario needs to more than double its historical clip to have any chance of meeting the target.
“We’re going to keep trying because we have to get the job done,” Bethlenfalvy said about the challenge that lies ahead to meet the government’s housing target. “So I’m encouraged that the housing starts … have gone up since the budget.”
There have been some significant developments on the housing front since the budget — including the government’s stunning Greenbelt reversal and the estimated 50,000 homes that would’ve gone along with it.
In July, the province assigned housing start targets to 21 smaller municipalities — building on the targets it imposed on 29 large municipalities in 2022. With the targets came strong mayor powers, which the province hopes can help municipal executives overcome hyperlocal concerns around development.
Cities with housing targets account for around 1.3 million of Ontario’s 1.5 million goal.
Just nine municipalities are currently on track to exceed those targets. Three are within 80 per cent of the goal, while 38 aren’t close.
Exceeding or being close to the targets is a precondition for accessing the province’s $1.2 billion Building Better Fund, which gives cities money for housing-related infrastructure.
In other news
There were some other announcements in the FES.
The province is joining hands with the federal government to try to reduce vaping, especially among youth. The federal government’s tax on vaping products would double, as per agreement from Ontario, with the province getting half the tax revenue.
The province announced earlier this week it is lowering the age for publicly funded mammograms to 40, a decade earlier than the current age of 50, starting next fall. No funding has been attached to the announcement so far.
In reaction to the government’s fall economic statement, opposition MPPs also zeroed in on what they felt is lacklustre action by the government to address affordability challenges, including specifically those faced by renters and others who don’t own their own home.
“The fall economic statement fails to deliver on that,” said Schreiner, referencing Ontario’s housing affordability crisis.
“This government missed the moment to address the housing affordability crisis,” Fife said.
Liberal MPP Stephanie Bowman, her party’s critic on the finance file, said the fall economic statement contained “basically zero measures to help people with affordability — which would be things like rent control, adding money to the Ontario Child Benefit, giving relief to families who want their kids to be doing well and healthy and who have them in extracurricular activities and are struggling to pay for those things while at the same time putting food on the table.”
