Making Canada Relevant Again- The Economic Super-Thread

[Fishbone Jones]

Easy guys. Let's not get personal.

Both of you have good discussion points. Work around those.

Milnet.ca Staff

 

[Kat Stevens]

removed, knee jerk reaction, apologies all around.

 

[SeaKingTacco]

Easy guys. Let's not get personal.

Both of you have good discussion points. Work around those.

Milnet.ca Staff

Ack.  At no time was I intending on being disrespectful to Kat.  I apologize if I came off that way.

 

[GAP]

removed, knee jerk reaction, apologies all around.

You have good points, and from a personal perspective your arguments have weight, but from an overarching policy originally intended to get votes, there needs to be a rework......probably not tieing it into EI, but a program of its' own.

 

[Cloud Cover]

Hey man, good on you for collecting EI.  You are only following the rules, as written.

Just don't try and pretend you "earned" it.

Well, by taking employment in the first place guys like Kat certainly earned the right to pay for EI, (along with all the other taxes they have a right to pay!), therefore it is "insurance" that is earned and not simply granted. IMO the problem is public nature to link EI in Canada as a social benefit of the welfare state, consequently there are too many social objectives tied to EI, some of which are quite worthy and noble but are funded from the wrong pool. There is simply too much politics in EI, it could be more even handed and efficient.  The CAW in some auto plants, for example, had a very efficient supplememtary system that kicked in for certain circumstances. Im not sure what the models were, but bottom line is there are alternative systems that may have good practices that may have a fit in this system.

As for the threads regarding Caterpillar EMD, my very good friend and neighbour, 20 years on the job, blue collar, honest god fearing Conservative who paid into EI all his working life now finds that very system has let him down. He was in my house crying yesterday while the real estate agent held an open house because he cant make the next 3 years of his mortgage payments, and keep his kids in university.  I am trying my hardest to keep this 46 year old man positive and frankly, from blowing his brains out or driving off a bridge. So for those of you who think there are easy solutions to the problem of income support,  you need to understand there is a human, community and social well being dimension to being unemployed. There are many things our economic and social systems can and should do to help out as our country de-industrializes from heavy manufacturing so rapidly.  The oil sands and related spin off industry simply does not have the capacity to employ everybody or for that matter to sustain our national economy.   

 

[SeaKingTacco]

whiskey,

I firmly believe there is a place for Employment Insurance.  I just happen to feel that the current system is a mess.

Sorry about your friend and EMD.  Seriously- he should look west.  You would not believe the high paying jobs out this way that are going unfilled for lack of a sentient being with a pulse.

 

[a_majoor]

Diane Francis on how we should be following up the China mission:

http://opinion.financialpost.com/2012/02/10/its-time-for-canada-to-play-trade-hardball/

It’s time for Canada to play trade hardball
Diane Francis  Feb 10, 2012 – 6:30 PM ET | Last Updated: Feb 10, 2012 5:51 PM ET

Comments Email Twitter The Prime Minister’s visit to China netted more than a couple of pandas for a decade. It got Washington’s attention.

The optics, notably concerning the oil sands, was the main aim of the high-level visit. And it worked.

The threat that Canada would divert energy to China, instead of to the United States led Mitt Romney to hoist approval of the Keystone XL pipeline to the top of his political agenda.

There is little doubt that a new version of the Keystone, with a different route or by train, will be approved even if President Obama wins a second term. The Keystone project was ill-conceived from beginning. The route was foolish; moreover, oil sands production should be upgraded in Canada or shipped by looping existing pipelines from north to south.

The timing made it impossible for any sitting president to approve, especially when to do so would alienate a large chunk of the base of his support. Any mega project should be broken down into bite-sized pieces, avoid election cycles and operate under all radars.

For instance, the equally gigantic Alberta Clipper pipeline now under construction – was approved in 2009 by President Obama to carry oil sands production through Wisconsin to Chicago refineries without a murmur.

This is the lesson of the oil sands controversies. Canadian corporations and governments must stop being naïve. Politics and geopolitics trumps everything including good will, free trade agreements, contracts, handshakes and trust.
Which brings me to China.

Canada cannot be naïve when it comes to Beijing either.

There is no way that Canada should embark on a special relationship with China and, fortunately, the Canadian delegation did not bite when Beijing indicated that China would welcome a “free trade deal” between the two countries.

A special bilateral arrangement with China would be exponentially more dangerous than relying on the U.S. Congress or U.S. politicians to do what makes economic and energy sense.

China will eat Canada, or any other country, for lunch.

The Prime Minister’s trip to China should be followed up with equally prominent visits to the other major Asia-Pacific nations where Canada is on the short end of lop-sided trade relationships. The most asymmetrical relationships involve Singapore, South Korea, Japan, Taiwan and Thailand as well as China.

Canada has a great deal of work to do in Asia: In the first nine months of 2011 Canadians exported $33.8-billion worth of goods to 16 Asia-Pacific nations and imported $64.8-billion in goods. A reversal of these figures must be a trade priority.

Here’s the playbook for the PM in that region:

• The Prime Minister should undertake similar high-level trade missions even in countries with long-established relationships but that import dramatically less from Canada than they could like Japan or South Korea.

• Canada must seek trade deals and arrangements that will facilitate the purchase of Canadian-made manufactured or value-added products instead of signing deals to buy more commodities that are already available to any buyer globally. This means deals for lumber, paper, furniture or building modules, not logs and pulp; building materials not raw materials and for cars, trucks, planes, trains, financial services and machinery.

• Canada must make it clear to Japan, South Korea, China and the rest that reciprocity is a priority: No investment or market access in their countries and none will be granted in Canada.

• Canada should firmly state that it seeks bilateral relationships that are fair: Those wherever value-added products to Canadians are equally offset by similar exports from Canada. For instance, Japan and South Korea tax and restrict car imports from North America through devious means that are unfair trade and contrary to the World Trade Organization rules. They should be put on notice, in concert with Americans, this must stop.

Finally, just as the China visit got America’s attention, so visits to all the Asia-Pacific countries would get Chinese attention. These countries must be played off against one another just as America must be played off against Asia.

Fortunately, the Prime Minister, who has blasted China for its human rights violations, gets it.

So do others. Canadians must be reminded about the scandal involving China’s Sinopec Shanghai Engineering. The company now wants the Supreme court of Canada to exclude it from appearing in a Canadian court to defend 53 charges of workplace violations against it, outstanding for three years, linked to the death of its own Chinese guests workers at an Alberta oil sands plant.

This illustrates that these countries, and their corporations, can be ruthless when it comes to their own interests. And Canada must be, too. This is about business, not friendship. This country must realize that it can and should leverage its resources to get value-added and manufacturing export business.

Pandas are one thing. Pandering is another.

 

[Edward Campbell]

At last!

A new, Conservative, social policy framework is taking shape, according to this article, reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail:

http://www.theglobeandmail.com/news/politics/harpers-use-of-europes-debt-crisis-as-backdrop-for-speech-no-coincidence/article2318288/

First: it may be a little hypocritical for someone like me, who is well over 65, to be cheering for reduced benefits for e.g. my son, who, not being 40 yet, is likely to be the object of social policy changes; but

Second: we, all of us - no matter what age, must face the demographic and financial facts. Our social spending envelope, the money we ask our children and grandchildren - yet unborn, perhaps - to pay to support us, is too rich. We have, as Prime Minister Harper said, "too much [government] debt, too much general willingness to have standards and benefits beyond our ability or even willingness to pay for them ..." We are reluctant to say "no," but even more reluctant to pay up.

Harper, Flaherty and Menzies, et al are doing for future governments what Mulroney, Wilson and Mazankowski did for Chrétien, Martin and Harper: telling Canadians that we must live within our means. Bravo! 

And more on this, living within our means, in this article which is reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail:

http://www.theglobeandmail.com/news/politics/adam-radwanski/ontario-gears-up-for-a-different-life-post-drummond/article2338738/

Ontario gears up for a different life post-Drummond

ADAM RADWANSKI

From Wednesday's Globe and Mail
Published Tuesday, Feb. 14, 2012

Ontario’s day of reckoning is upon it.

At approximately 2:15 on Wednesday afternoon, what has been bubbling beneath the surface will burst above it. And even in a place known for its apathy toward provincial politics, the debate about what lies ahead will become impossible to ignore.

Contrary to what’s been conveyed by some media reports, economist Don Drummond did not write the next budget. But what he has done is in some ways even more important than that. With the voluminous report finally set for release, he will tell Ontarians what their politicians have been afraid to tell them: that the comfortable status quo to which we’ve grown accustomed is about to become a thing of the past.

There’s a reason, beyond punting deficit-reduction plans past a provincial election, why Dalton McGuinty struck a commission last spring to examine the future of the province’s public services. And there’s a reason why he appointed Mr. Drummond, a former bank economist and federal bureaucrat practised in the art of self-promotion, to head it. The government needed new ideas, and someone to lend legitimacy to controversial ideas it already had, and Mr. Drummond fit the bill.

In retrospect, it was a stunning confession on the part of the Premier. Though it wasn’t obvious during an alternate-reality fall campaign, Mr. McGuinty effectively acknowledged nearly a year ago that his province was broken, and called in reinforcements.

But just how broken has become apparent only in the past few months, and it’s caused Mr. Drummond’s commission to take on a life beyond what Mr. McGuinty envisioned.

A manufacturing-reliant province that’s become an honorary member of the U.S. rust belt, Ontario has seen its economic recovery go off the rails amid global turmoil. It’s been placed on negative watch by one of the world’s leading credit agencies. It’s been told by a census that it’s losing its pull to newcomers. It’s had insult added to injury, with oil-rich Alberta promising a $5.2-billion surplus by 2014-15, a far cry from not being on pace to wipe out a $16-billion deficit before 2021.

If these developments have been too disparate to fully capture Ontarians’ collective attention, Mr. Drummond’s report will comprehensively show what they add up to. It will revolve around the premise that the province can no longer count on anything above 2 per cent economic growth, and must reduce its spending growth to less than 1 per cent annually to get back to balanced budgets and retain markets’ confidence. And through some 360 proposals, including roughly 100 related to health care alone, it will set out what that means.

The shock won’t be in individual recommendations, so much as their totality. Mr. Drummond won’t just recommend an overhaul of the health system. He won’t just call for the Liberals to scrap education policies that helped get them elected, including smaller classes and full-day kindergarten. He won’t just ask them to renege on another campaign commitment to continue easing the financial burden on cash-strapped municipalities (a recommendation learned by The Globe and Mail on Tuesday).

Going down any one of those roads would force Ontarians to significantly change their expectations for what services they can expect. Mr. Drummond will ask the province to go down all of them at once, and other treacherous paths as well.

To review, the Premier of the country’s largest province asked a trusted economist how much he needed to do to get it back onto stable ground. And that economist and his co-panelists returned with a veritable encyclopedia of things that need to be done differently. Not small things; not easy things; not things, in many cases, that are consistent with what Mr. McGuinty and his colleagues and competitors have been saying. Big, scary things that might ultimately make for a better province, but would make for all kinds of upheaval along the way.

Of course, Mr. McGuinty isn’t bound to accept all these ideas. The kindergarten roll-back, for instance, has already been rejected. The government seems to have a few relatively low-pain ideas that Mr. Drummond doesn’t, so the commission’s model for fiscal sustainability isn’t a house of cards that will collapse if one element is removed.

But starting Wednesday, it will also fall to Ontarians to decide what they think is palatable; to consider the balance between sustainability and immediate need that other parts of the Western world are already agonizing over. And it will fall to their government to start implementing difficult changes that, at some level, it’s long known are needed.

Give Mr. McGuinty this: He appointed Mr. Drummond, and let him do what needed to be done and say what needed to be said. Partly by design, partly by accident, the Premier helped bring this mess into the open. Now we all have to figure out what to do about it.

I think Canadians, even smug, complacent, Ontarians are ready for the "news" that Prime Minister Harper and Premier McGuinty are delivering (the latter through Don Drummond): we must recast our plans and programmes because we must learn from Greece et al that we cannot borrow indefinitely.

My guess is that many (not most, but enough, in any event) Ontarians are ready to go down all of those painful roads simultaneously in order to restore fiscal sustainability for future generations. My suspicion is that Mr. Drummond will have crafted his recommendations with great care - no one or even any half dozen will be political "deal breakers," it is only in the totality that we will find a) real pain, and b) real "redemption."

I also suspect that other jurisdictions, including in Canada (Hallo Québec!), the USA and Europe will be watching this exercise with great interest. Ontario is big, it is important, it has an opportunity to work its way back from the brink; it need not follow the McGuinty's current, easy, popular Greek path to fiscal disaster; it can follow a new, harder but bearable plan back to economic and social self sufficiency.

 

[GAP]

I don't think it's in McGuinty's genes. It will have to be done by someone else after Ont. crashes, but I don't see the PC's with their present leader being the ones.....they are so hungry to get in power they are promising the impossible.

 

[Edward Campbell]

Diane Francis on how we should be following up the China mission:

http://opinion.financialpost.com/2012/02/10/its-time-for-canada-to-play-trade-hardball/

How we most likely will be following up the China mission:

Reproduced under the Fair Dealing provisions of the Copyright Act from the Ottawa Citizen
http://www.ottawacitizen.com/opinion/editorial-cartoons/index.html

 

[a_majoor]

Too true, alas...

 

[Edward Campbell]

And more on this, living within our means, in this article which is reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail:

http://www.theglobeandmail.com/news/politics/adam-radwanski/ontario-gears-up-for-a-different-life-post-drummond/article2338738/

I think Canadians, even smug, complacent, Ontarians are ready for the "news" that Prime Minister Harper and Premier McGuinty are delivering (the latter through Don Drummond): we must recast our plans and programmes because we must learn from Greece et al that we cannot borrow indefinitely.

My guess is that many (not most, but enough, in any event) Ontarians are ready to go down all of those painful roads simultaneously in order to restore fiscal sustainability for future generations. My suspicion is that Mr. Drummond will have crafted his recommendations with great care - no one or even any half dozen will be political "deal breakers," it is only in the totality that we will find a) real pain, and b) real "redemption."

I also suspect that other jurisdictions, including in Canada (Hallo Québec!), the USA and Europe will be watching this exercise with great interest. Ontario is big, it is important, it has an opportunity to work its way back from the brink; it need not follow the McGuinty's current, easy, popular Greek path to fiscal disaster; it can follow a new, harder but bearable plan back to economic and social self sufficiency.

And here, in his own words, reproduced under the Fair Dealiong provisions of the Copyright Act from the Globe and Mail, is Don Drummond's overview of his prescription for Ontario:

http://www.theglobeandmail.com/news/opinions/opinion/growth-wont-save-ontario-this-time-only-reform-will/article2339376/

Growth won’t save Ontario this time. Only reform will

DON DRUMMOND

From Thursday's Globe and Mail
Published Wednesday, Feb. 15, 2012

Ontario faces two huge challenges – economic and fiscal.

The province has already slid below the average of the rest of Canada in terms of output and income per capita. Beyond the next few years of recovery, Ontario can look forward to only modest annual growth of around 2 per cent, well below historical norms.

This reality frames the fiscal problem. The province can’t simply adjust its fiscal parameters for a few years to eliminate a deficit caused by the recession and associated stimulus. Even with the restraint measures already taken, the provincial deficit would continue to rise in an environment of modest economic growth. The fiscal response must not only be strong and sustained, it must reform the way the government delivers virtually every service.

Last March’s provincial budget established the Commission on the Reform of Ontario’s Public Services to advise the government on how to return to a balanced budget no later than 2017-18 and how to get more value for taxpayers’ money. Early in its work, the commission concluded that the deficit, $14-billion in 2010-11, was on track to rise to just over $30-billion by then.

Revenue growth at existing tax rates would be insufficient to cover program spending, where existing cost pressures would drive spending much higher. “Existing” is the operative word here; our mandate precluded us from recommending tax increases, so we focused on changing the existing trajectory for spending.

Without vigorous fiscal action, the government’s debt-to-GDP ratio would rise from last year’s 35 per cent to more than 50 per cent. The danger is obvious. High-debt governments are vulnerable to the demands of financial markets, forced eventually to take draconian measures to keep their lenders happy.

Governments got out of similar fiscal holes in the 1990s, notably the federal government and provinces such as Alberta, Saskatchewan and Ontario itself. But they had strong economic growth to lend a helping hand; that, and a period of spending restraint brought them back to balance in relatively short order. Ontario even managed this feat while cutting taxes.

Once budgets were balanced, however, spending took off again, partly because it could (revenue growth remained strong) and partly because governments had missed an opportunity for thorough reform, a chance to really change the way they delivered public services for the better. This was particularly evident in health care, where the brakes were slammed on previous rapid spending growth, but reforms were partial. After a few years of restraint and growing perceptions that quality of care had slipped, all jurisdictions simply turned on the money taps again.

So we have to keep in mind two things. First, economic growth will not be a huge help this time around, either in the next few years or further down the road. Everything must be done to bolster the economy, but we can’t count on the type of growth to which Ontario has been so accustomed. Second, the government must focus on reforming programs, not on simple (even simple-minded) cost cutting.

Affordability and excellence of public services are not incompatible; they can be reconciled by delivering all programs more efficiently, which serves both the fiscal imperative and Ontarians’ desire for better-run programs. The silos of the health system can be better integrated to save money and ensure people don’t fall between the cracks. Universities and colleges could deliver better value for the money through greater differentiation and reducing their high, internal rates of cost escalation. Impressive results have been achieved in recent years in Ontario’s education system, but non-core costs have risen sharply and must be reined in.

Inefficiencies and client confusion are sown in many service areas by overlapping responsibilities among the three levels of government. In all cases, great efficiency requires clear plans and objectives, continuous analysis of performance and a firm determination to reform or scrap underachievers.

The commission is recommending a degree of spending restraint that is almost certainly unprecedented in Canadian postwar history – annual growth in program spending of only 0.8 per cent over a seven-year period. We would limit health to increases of 2.5 per cent a year, postsecondary education to 1.5 per cent, education to 1 per cent and social services to 0.5 per cent; everything else would contract by 2.4 per cent a year.

There are no easy escape routes from this course of action. A one-year delay in the target date for budget balance would permit spending growth of 1 per cent annually. We already incorporate higher annual revenues from tax compliance and other measures not requiring tax rate hikes. Even higher taxes would offer little relief. Debate over eliminating the last scheduled corporate income tax cut largely misses the point; such a step would reduce the $30-billion deficit in 2017-18 by only $800-million. To allow 2-per-cent annual spending growth, for example, would require a three-percentage point increase in the HST to 16 per cent.

Almost all of the commission’s nearly 400 recommendations could and should be implemented regardless of the fiscal situation, simply because they offer Ontarians better value for the taxes paid to provide public services. Our report is replete with examples of potential efficiency gains in everything the government does.

Few, if any, governments have succeeded at this in the past; few, if any, have even tried. But throwing money at problems is no longer an option. Things must be done differently.

We think the Ontario government can deliver the best public services in the world at a cost Ontario taxpayers can afford. It will not be easy, but we think this is feasible. And we ask: Why not?

Don Drummond, former chief economist at TD Bank, is chair of the Commission on the Reform of Ontario’s Public Services.

It is reported that, taken together, these recommendations amount to finding ways to spend 16% less (after a few years) on individual Ontarians. It seems like a lot but Drummond suggests that we can spend a lot less without inflicting  real hardship. One hopes McGuinty will stare down government unions, special interests, political professionals and a media that will make hay manufacture dissent and controversy out of every cut, and do what's right. One hopes ... but perhaps it just demonstrates the triumph of hope over experience.

 

[Edward Campbell]

The Drummond Commission (it was a team effort) report is online here.

 

[mariomike]

The Drummond Commission (it was a team effort) report is online here.

Recommendation 5-100: "Adopt the Nova Scotia model in which emergency medical technicians provide home care when not on emergency calls; this requires integrating municipal and provincial funding structures."

We never had time for that stuff:
“They’re not seeing any downtime on their shifts, they’re going from one call to the next, they’re being forced to work overtime at the end of their shifts, and in many cases they’re not getting their lunches.”
Toronto EMS Chief Bruce Farr
Jan 24 2011

 

[larry Strong]

....One hopes McGuinty will stare down government unions, special interests, political professionals and a media that will make hay manufacture dissent and controversy out of every cut, and do what's right. One hopes ... but perhaps it just demonstrates the triumph of hope over experience.

I seriously doubt that Dalton McGuinty has the spine to follow through with the cuts needed.

 

[Edward Campbell]

A fair comment, reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail:

http://www.theglobeandmail.com/news/opinions/cartoon/editorial-cartoons-february-2012/article2321277/

 

[GAP]

Feds mull 10 per cent cut to Parliament's $585M budget
Article Link

CTVNews.ca Staff

Date: Wed. Feb. 15 2012 10:00 PM ET

Prime Minister Stephen Harper wants to trim operating costs in Ottawa, and Conservative MPs held a secret meeting on Wednesday to look at how they can curb spending -- including parliamentary perks that some want to protect.

While MPs at the meeting weren't keen to reveal what was discussed, it appears the government could cut up to 10 per cent of the parliamentary budget, CTV's Ottawa Bureau Chief Robert Fife reported.

The annual budget for the Parliament of Canada in this fiscal year is $586,331,000. That includes operating costs for the Senate, the House of Commons, the Library of Parliament.

A 10-per-cent cut could mean about $58.6 million in savings for taxpayers.

While it's expected that MP salaries of $157,731 will be frozen this year, some other key cuts could include:

    A scaling back of MP office budgets
    A drop on round-trip flights for MPs from 64 to 52
    Eliminating all business-class travel on flights

Tony Clement, president of the Treasury Board, has publicly mused that any cuts should be balanced.

"You have to be fair to the employee, which in this case is the MPs, and you have to be fair to the taxpayers," he said.

But Parliament is the only federal department that doesn't publicly post its expenditures. Other departments are required to make their costs public. And the meeting called by Prime Minister Stephen Harper took place behind closed doors.

Insiders say that Labour Minister Lisa Raitt teared up at last week's caucus meetings because she is concerned that fewer free flights would mean less time with her family and her young children.

And for once, it appears that MPs from all sides of the political spectrum are united against serious cuts.
Little More on link

 

[a_majoor]

Many Canadians seem to be onside with spending cuts; perhaps we will see more than the timid $4 billion being looked for so far:

http://www.torontosun.com/2012/02/15/canadians-support-cuts-to-federal-workforce-poll

Canadians support cuts to federal workforce: Poll

By Mark Dunn ,Senior National Reporter

First posted: Wednesday, February 15, 2012 03:01 AM EST | Updated: Wednesday, February 15, 2012 07:48

OTTAWA - Finance Minister Jim Flaherty has the backing of Canadians to slash federal jobs, according to a new poll that suggests reducing the deficit should be the cornerstone of the government's upcoming budget.

Flaherty is expected to announce tough measures to find annual savings of at least $4 billion a year — a move public sector unions fear will lead to stacks of pink slips after years of bloat under Prime Minister Stephen Harper.

An Abacus Data poll suggests 61% of 1,209 online respondents support job cuts to balance the books and erase the $32-billion deficit.

The poll found 65% believe balancing the budget and reducing the federal deficit should be a very high or high priority. Eighteen percent said they oppose taking an axe to federal workers, while 21% neither support nor oppose job cuts.

Conservatives (73%) are most in favour of chopping while Liberals are least supportive at 53% followed by New Democrats at 55%.

"The unions representing federal public servants have a tough sell arguing against job cuts since many Canadians perceive public servants to be overpaid and less productive than workers in the private sector," Abacus CEO David Coletto said.

Many Canadians (41%) expressed concern about the impact of job cuts on government services while 30% pointed to their potential impact on the economy. Twenty-two percent said they aren't at all concerned about the impact of cuts and 5% indicated concern for bureaucrats losing their jobs.

The Canadian government employs about 450,000 people, including military and RCMP staff.

The survey also asked how the government should go about clearing its red ink — whether through higher taxes while maintaining spending or cutting spending and leaving taxes alone. Most said they prefer spending cuts over tax hikes.

The margin of error for a random survey of this size is 2.9 percentage points, 19 times out of 20. The poll was conducted between Jan. 31 and Feb. 2.

Mark.Dunn@sunmedia.ca

 

[Edward Campbell]

This report, reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail, indicates (to me, anyway) that Drummond is on the right track:

http://www.theglobeandmail.com/report-on-business/economy/drummond-report-gets-cool-reception-from-ontario-businesses/article2341350/

Drummond report gets cool reception from Ontario businesses

RICHARD BLACKWELL

From Friday's Globe and Mail
Published Thursday, Feb. 16, 2012

Don Drummond’s call for Ontario to kill off its hodgepodge of business support programs and design a new system from scratch is triggering a backlash from industries likely to lose out, and setting the stage for a battle over government handouts.

While much of Mr. Drummond’s report focused on big-ticket areas of spending such as education and health care, he also made strong recommendations for wholesale changes to the province’s business programs, saying they are fragmented and lack clear and coherent objectives.

The best way to deal with them is to start over, he said, ending all existing direct subsidies by the end of next March and phasing out all refundable tax credits at the same time. These should be replaced with a new, co-ordinated approach that focuses on innovation, productivity and training. All supports should end after four years, then be renewed only if they are working, the report recommended.

Last year, the provincial government spent about $1.3-billion in direct help to business through 44 programs, the report said. Another $2.3-billion went to companies indirectly, mainly through the tax system. Most of these tax programs were launched before overall corporate tax rates were cut significantly.

The prospect of a swift end to government supports has galvanized some industries.

In the mining sector, tax credits were designed to encourage investment when corporate tax rates were high, but that is no longer the case, Mr. Drummond’s report said, so the resource tax credit should be eliminated. But Greg Rieveley, chief financial officer of exploration firm Noront Resources Ltd., said tax credits are key to keeping the industry healthy and getting new investments. “As a commodity-driven economy, [Ontario is] always competing with other countries for exploration dollars,” he said.

Another of the direct supports singled out in the Drummond report is the Risk Management Program, which is essentially a shared-cost insurance system for farmers, to ensure they have stable incomes. The program, which cost about $145-million in 2010-11, provides farmers with “no incentive to increase efficiency or expand markets,” the report says.

Ontario Federation of Agriculture president Mark Wales, however, says Mr. Drummond clearly doesn’t understand the program because it “does work and does help drive innovation.” If farmers have stable prices, they have the confidence to plan ahead, make investments and become more innovative, he said.

And the suggestion that Ontario cut its tax support for horse racing and eliminate the sharing of slot machine revenue drew howls of outrage from the racing industry.

The Ontario Harness Horse Association said tens of thousands of jobs could be at risk, and the Ontario Horse Racing Industry Association urged participants to lobby the government to keep the status quo.

Some of the supports Mr. Drummond included in his hit list clearly have a political component that the government itself would be loath to drop. The largest direct support is the $300-million business portion of the “clean-energy benefit” that goes to consumers and companies to offset higher power costs caused by investments in renewable electricity. It is designed to ensure the province retains support for its overall green energy policy.

Still, some executives in knowledge-based industries agree with Mr. Drummond’s view that a wholesale revamp of business programs is needed. David MacDonald, CEO of technology services firm Softchoice Corp., said there has been a bias in past government support programs toward traditional manufacturing, and said that needs to end. “We’ve got to get more productive and innovative, and that is not going to come from the old industries,” he said, endorsing the Drummond approach.

Ian Howcroft, Ontario vice-president of Canadian Manufacturers & Exporters, said the overall themes in Mr. Drummond’s report make sense, even if the idea of starting from scratch may be a bit too extreme.

“We have probably not got full value from many of the subsidies that we had,” he said. “I wouldn’t say that we should get rid of all of them [but] we should do an analysis and see where we can get more value. Where we are not getting value, we should do things differently.”

Mr. Howcroft said he also agrees with Mr. Drummond that the province should look at its supports “through a lens of productivity.” Rather than designing a program to create jobs, he said, “you should make it to enhance and build productivity, and the result of that can be to create jobs.”

First: There is a veritable hodge-podge of "business supoort" programmes at the national, regional, provincial and local levels - many overlap, many are outdated, many are counterproductive or conflict with others.

Second: I will be happy when everyone, from the boardrooms on Bay Street to the homeless "advocates," including McGuinty's own cabinet, has problems with Drummond's plan - that will mean his proposed cuts are going to work.

 

[GAP]

First: There is a veritable hodge-podge of "business supoort" programmes at the national, regional, provincial and local levels - many overlap, many are outdated, many are counterproductive or conflict with others.

Second: I will be happy when everyone, from the boardrooms on Bay Street to the homeless "advocates," including McGuinty's own cabinet, has problems with Drummond's plan - that will mean his proposed cuts are going to work.

Now is an excellent time to massively reduce all "business suport " programs. At all levels. You are never going to find a better atomosphere of acceptance and justification to back out of a lot of these programs who have outlived their initial usefulness, if they ever had one.

Then start working on the social programs. Yesterday there was an announcement by another of the "Kum by ah" group that minimum wage needs to be upped until people are earning $50,000/yr....this would give them food, shelter and the internet......ah......ok....... :