Drummond Report signals serious wake-up call for province
In the days since Don Drummond released his much anticipated report on how the Ontario government can reduce the massive $14 billion debt, much has been said about the danger of making knee-jerk decisions.
It goes without saying that fiscal policy is an essential and influential policy mechanism that must be used with intent when it comes to improving the economy and that it should be exercised with careful consent.
However, as we now know, the status of the province’s finances and the near term outlook of the province’s economic future is bleak. In fact, it’s so bleak, that we need to make some serious and long-term structural changes to how the government operates and services the public. And fast.
Take the two scenarios outlined in the report; the Status Quo and Preferred Scenarios.
In the first instance, the report imagines the province’s financial situation worsening if no changes were made to policies, programs and practices. It’s a scary picture.
Growth would continue to be driven by inflation, population, aging medical care and school enrolments. On this projection, the deficit would more than double to $30.2 billion by 2017-18 and net public debt would reach $411.4 billion. This would eat up nearly 51 percent of our entire provincial gross domestic product (the entire value of all Ontario goods and services produced in a year).
To avoid this, the report concludes that we adopt the Preferred Scenario budget path to achieve the 2017 balanced budget target. Among many things, the report states that by 2017-18, the government’s spending level should be 17 percent lower than the current trend. To accomplish this, the report concludes that the government, “benchmark its effectiveness and efficiency against the private sector….it must be prepared to shed old priorities and offend their advocates.”
Ultimately, the 2017-18 target to balance the books is at least three years behind any other province. Let’s hope the government has the will to make the tough, but needed, changes that will get the province back on the path to long term prosperity.
Until next time, all the best.