March 24, 2021, Finance Minister Peter Bethlenfalvy tabled the 2021 Budget, Ontario’s Action Plan: Protecting People’s Health and Our Economy, in the Legislature. This Budget builds on previous phases of Ontario’s Action Plan to respond to COVID-19, outlined in the March 2020 economic and fiscal update and the November 2020 Budget.
The primary focus of the 2021 Budget is supporting Ontarians through the final stretch of the COVID-19 pandemic, with a particular emphasis on protecting the health of Ontarians, as well as promoting economic recovery and a return to normalcy.
The Budget contains $51 billion in total supports over a four-year period, an additional $6.1 billion above and beyond the previous budget. Budget 2021 also offers an updated economic and fiscal outlook based on various potential economic scenarios. A similar approach to fiscal planning was applied in Budget 2020, to provide transparency on the Ford government’s planning and to withstand economic turbulence associated with the pandemic.
Ontario’s 2021 Budget arrives at a critical time for Premier Doug Ford and his government. There is currently a race between vaccines and the variants, an economy that also needs a proverbial shot in the arm and a re-election campaign looming on the horizon. The commitments made here will serve as the PC government’s opening salvo as we enter the pre-election phase. We will see high profile commitments from government and more stakes in the ground by the opposition as they begin to develop their respective frames for voters to consider. Premier Ford’s biggest challenge will be to satisfy the question of “what’s next?”
The Premier must address the immediate challenge of getting Ontarians vaccinated and re-opening the economy as quickly as possible, while also painting a picture of what post-pandemic Ontario will look like. This budget sets the stage for Doug Ford’s audition to keep his title as Premier of Ontario for another mandate.
Ontario’s Action Plan: Protecting People’s Health and Our Economy
Ontario’s Action Plan: Protecting People’s Health and Our Economy includes $6.1 billion in new spending, building on the government’s previous spending in response to the COVID-19 pandemic. In total, the 2021 Budget contains $51 billion in supports over a four-year period.
The 2021 Budget is composed of two pillars: Protecting People’s Health and Protecting Our Economy. Both pillars are outlined in detail below.
Protecting People’s Health
There aren’t significant surprises in the government’s health commitments, many of which have been announced or telegraphed already – and in many cases are renewing or extending current commitments. The “Protecting People’s Health” pillar contains a total of $16.3 billion in supports over four years. Measures that fall under this pillar focus on defeating COVID-19, fixing the province’s long-term care system, and caring for Ontarians, through investments in hospitals, mental health, and victim supports.
Spending under this pillar falls under three priority areas:
- Ontario’s vaccine rollout will receive an investment of more than $1 billion for administration and distribution. Of this amount, $50 million will support vaccinations in First Nations and urban Indigenous communities.
- Investments in testing, contact tracing, and personal protective equipment (PPE) to control and prevent the spread of COVID-19. An additional $2.3 billion will be dedicated to testing and contact tracing in 2021-22, while the Ontario Together Fund will receive a $50 million top up to further increase domestic PPE production.
- Increasing hospital capacity to provide care for COVID-19 patients and address procedural backlogs created by the pandemic. An additional $1.8 billion will be invested in the hospital sector in 2021-22.
- Protecting communities that have been disproportionately affectedby COVID-19 through a $50 million investment, plus an additional $4 million directed towards First Nations, Métis, and Inuit populations.
Fixing the Long-Term Care System:
- Further investments for long-term care residents and facilities, including $650 million to protect residents through the duration of the pandemic. Over the next four years, up to $246 million will be used to prioritize facility upgrades such as air conditioning, and $933 million will be dedicated to building more long-term care beds, in line with a long-standing promise.
- Improved staffing in long-term care through ongoing efforts to train, recruit, and retain more personal support workers (PSWs) and nurses.
Caring for Ontarians:
- Expanding hospital infrastructure to accommodate demand for modern facilities in growing communities, with an additional $3 billion since the 2020 Budget; communities include political priority areas like Peel Region, Ottawa and southwest Ontario.
- Addressing mental health and addictions needs, with $175 million in additional support in 2021-22, as part of the government’s existing commitment of $3.8 billion over ten years, and the creation of mobile mental health clinics for rural and underserved communities.
- Supporting vulnerable people and building safer communities, through housing support for victims of domestic violence and survivors of human trafficking, as well as $2.1 million to support victims of crime.
Within this pillar, the Ford government also reiterates its call on Prime Minister Justin Trudeau to increase the Canada Health Transfer (CHT) to at least 35% of provincial-territorial health spending. An increase to the CHT would mean more than $10 billion in additional federal health funding for Ontario in 2021-22, which could be used to support critical health needs and address procedural backlogs that have accumulated because of the pandemic.
Protecting Our Economy
The “Protecting Our Economy” pillar outlines the government’s plan to support Ontario’s families, workers and employers. Through $23.3 billion in spending, these measures are meant to support those Ontarians who have made crucial sacrifices during the COVID-19 pandemic. The plan also sets the stage for long-term economic growth which the province will rely on to eventually bring the budget back to balance.
Spending under this pillar falls under three key priorities:
Supporting Workers and Families:
- Ontario Jobs and Training Tax Credit: New for 2021, this credit will provide up to $2000 to help people with the cost of training.
- A third round of payments to support parents through Ontario’s COVID-19 Child Benefit. This time the payment has been doubled to $400 per child and $500 per child with special needs.
- Increasing the CARE tax credit by 20% from $1,250 to $1,500. This will provide approximately $75 million in additional support for the childcare expenses of over 300,000 families.
- The Seniors Home Safety Tax Credit will provide an estimated $30 million in support for about 27,000 seniors and people who live with senior relatives.
- A second round of Ontario Small Business Support Grant payments which will provide an additional $1.7 billion in relief, bringing the total support to $3.4 billion. Approximately 120,000 small businesses will benefit in the form of grants of a minimum of $10,000 and up to $20,000.
- An additional $400 million over three years in new initiatives to support the tourism, hospitality and culture industries which have been particularly hard hit by the COVID-19 pandemic.
- An enhanced Regional Opportunities Investment Tax Credit to encourage businesses to invest in certain regions of the province that have lagged in employment growth.
- An additional $2.8 billion investment in broadband infrastructure to ensure that every region in the province has access to reliable broadband services by 2025.
- $400 million over four years to create the Invest Ontario Fund, which will support Invest Ontario and encourage investments in the key sectors of advanced manufacturing, technology and life sciences.
- $50 million available for grants to faith-based and cultural organizations.
- Financial relief for municipalities totalling $1 billion to help preserve public services and support economic recovery.
Updated Ontario Economic Outlook
COVID-19 has created an economic contraction in Ontario, resulting in a 5.7% decrease in Ontario’s real GDP during 2020. Ontario’s Ministry of Finance expects that the real GDP will grow by 4.0% in 2021, 4.3% in 2022, 2.5% in 2023, and 2.0% in 2024.
Despite there being a rebound in employment, it has been unevenly distributed across sectors. From May 2020 to February 2021, Ontario’s employment has risen by 829,400 net jobs. However, it remained 305,300 net jobs (−4.1%) below pre-pandemic rates. There continues to be a decline in employment for part-time, youth and female workers, which are below pre-pandemic levels.
In terms of managing Ontario’s finances responsibly, the government has outlined three key priorities:
- Continuing to build the foundation for economic growth.
- Providing two alternative economic and fiscal scenarios for transparency measures.
- The Faster Growth Economic scenario projects that Ontario’s real GDP will grow 5.9% in 2021, 4.7% in 2022, 2.7% in 2023 and 2.2% in 2024.
- The Slower Growth Economic scenario projects that Ontario’s real GDP will grow 3.1% in 2021, 3.4% in 2022, 2.3% in 2023 and 1.8% in 2024.
- Developing a path to sustainable public finances.
This plan was created following the Fiscal Sustainability, Transparency and Accountability Act, 2019, which requires the government to define “extraordinary circumstances” to run a deficit. The government has cited the global pandemic and necessary economic recovery planning as justification for running a deficit this year.
The Government of Ontario plans to create growth through Ontario’s Capital Plan, which includes strategic investments in infrastructure such as: transit, highways, schools, hospitals and broadband. The Government plans to invest $16.9 billion in 2021‑22, with planned investments over the next decade totalling $145.4 billion.
The pace at which this government has grown over the past year is exponential, both in terms of investments and political maturity. It is worth noting the relatively high popularity of the Ford government during this pandemic did not start from a neutral position. While nobody is perfect, the Premier’s personal strengths as a politician shone through and re-established him as someone many Ontarians can trust at this moment to help the province get through this crisis.
Budget 2021 reflects a government that has learned some lessons from past missteps and acknowledges that people expect continued investment in health care, supports for families, small business, and municipalities, as well as broad support to expedite real economic recovery. The Budget’s spokesperson (the third in three years), Minister Peter Bethlenfalvy, also represents a fresh face for Ontario’s recovery plan.
Government officials hope this budget is seen as something that represents breaking the political status quo. There are no deep program cuts (which has been an accusation against this government in the past) or major tax increases. They say it represents a ‘third way’ where the province will invest in economic growth (with a projected deficit of $33.1 billion in 2021-22) with an eventual path to balance. They have made it a point to differentiate temporary spending and wind it down as Ontario moves away from the COVID-19 crisis – which will inevitably lead to criticism in coming years. Officials have admitted that the pathway to fiscal sustainability will take many years.
Health investments clearly respond to areas of political risk for this government. Its re-election hopes – so far buoyed by the ongoing pandemic – will be impacted in no small way by the success or failure of the COVID-19 vaccine rollout. Long-term care was already a challenge for this government (and previous ones); the pandemic has laid bare the results of long-term neglect. And hospital expansion remains an area of opportunity for government – though when it comes to both hospitals and long-term care, this government has clearly learned the lesson that simply building new beds without significant investments in staffing and other patient supports will not be a success.
The approach is balanced, but also carries risk because it depends on variables that are out of the control of the Ontario government such as contributions by the federal government, new COVID-19 virus developments, international vaccine politics and unexpected turbulence in the global economy. It is worth noting that Ontario has modelled different scenarios accounting for this. There are also other storm clouds on the horizon with the Long-Term Care Commission report and the pressure for continued ramp-up of COVID-19 vaccine distribution.
Another wildcard is a potential federal election this spring or fall. With the Greater Toronto Area (GTA) being a deeply contested battleground, expect pre-election investments from the Trudeau Liberal government.
We can look around the world to other leaders who have led their people through huge crises with great popularity but have lost in their re-election because the people decided they are no longer the right person for the times. This Budget and recovery plan is Premier Ford’s first overture to the people of Ontario as they start considering their options. Expect many more to come depending on how these variables play out.
Expect all members of Cabinet and the PC caucus to be ‘selling’ the budget in their communities in the days, weeks and months ahead. There is also an expectation that Premier Ford will shuffle his Cabinet to deliver on this plan and prepare for the upcoming election.
- Andrea Horwath, Leader of Ontario’s New Democratic Party commented: “The pandemic’s not over. The pain continues for people and families. This budget was an opportunity to give people the help they need to get to the other side, and to give folks a future with hope. This budget doesn’t do that.”
- Steven Del Duca, Leader of Ontario’s Liberal Party stated: “While in the best of times – this budget would have been considered mediocre, this was not a budget for the single biggest economic crisis in a generation.”