Ontario government debt

Fiscal Year Total Debt
(CDN$ billions)
2016-2017 308.3
2015-2016 296.1
2013-2014 288.1
2012-2013 252.1
2011-2012 235.6
2010-2011 214.5
2009-2010 193.6
2008-2009 169.6
2007-2008 156.6
2006-2007 153.7
2005-2006 152.7
2004-2005 140.9
2003-2004 138.8
2002-2003 132.6
2001-2002 132.1
2000-2001 132.5
1999-2000 134.4
1998-1999 114.7
1997-1998 112.7
1996-1997 108.8
1995-1996 101.9
1994-1995 90.7
1993-1994 80.6
1992-1993 61.8
1991-1992 49.4
1990-1991 38.4
1989-1990 35.4
1988-1989 35.5
1987-1988 34.0
1986-1987 31.5
Source:

Ontario Financing Authority (2004-2014) [1]
Viable Opposition (1985-2004)
- referencing a TD Bank report [2]

The Ontario government debt is the amount of money the Government of Ontario borrowed from the general public, institutional investors and from public-sector bodies. As of September 30, 2013 the Ontario government's total debt stood at CDN$288.10 billion.[3] The interest on the debt was CDN$10.3 billion for the 2012-2013 Ontario budget at an effective interest rate of 4%.[4] It represented 8.4% of the total budgetary expenses and is the fastest-rising cost for the Ontario government.[5] The Debt-to-GDP ratio in 2013 was 37.4%, the highest in Ontario's history.[6]

Debt breakdown

The Ontario debt consists of domestic bonds, international bonds, treasury bills & U.S. commercial paper and non-public debt. As of September 30, 2013 the breakdown is as below:[7]

Majority of the debt (72.%) was issued in Canadian currency.

History

The government of Ontario's debt has risen under all governments in the past 25 years.

During the 1990s recession, the Ontario New Democratic Party (NDP) government of Premier Bob Rae increased the total debt from $35.4 billion in 1989-1990 to $90.7 billion in 1994-1995.

The Progressive Conservative government of Premier Mike Harris increased the debt from $90.7 billion in 1994-1995 to $132.6 billion in 2002-2003, even while drastically cutting services and downloading formerly provincially run services onto the municipalities.[8] In the 1999-2000 budget, the Mike Harris government paid $3.1 billion towards the total debt by selling the rights to the government-owned Highway 407/ETR in the form of 99-year lease to a private consortium for approximately $3.1 billion.

The Liberal government of Premier Dalton McGuinty, in part due to the Great Recession, increased spending on social and energy programs, and uploading services from the municipalities that had been downloaded onto them by the previous government, the total debt has more than doubled from $132.6 billion in 2002-2003 to over $288.1 billion in 2013-2014.[9]

Causes of debt

The Great Recession from 2007 onwards has impacted Ontario very hard, especially the manufacturing sector. Ontario's budget surplus in 2007-2008 changed into a $19 billion budget deficit by 2009-2010.[10]

Government spending and some waste have contributed to the growth of Ontario's debt. The so-called "eHealth scandal", the power plant cancellation scandal, and the so-called "Ornge scandal" are often cited as examples of wasteful or ineffective government spending causing the growth in debt, though they have only increased debt by a small percentage.[11]

Ontario government's direct subsidies to corporations average $2.7 billion per year over the five years to 2011.[12] It has been argued that business subsidies such as to the Ontario's automotive sector does not help create widespread economic growth or new jobs, rather it only contributes to increased spending and debt.[13]

Tax cuts and incentives to high income earners during the 1990s reduced government revenues, thus increasing debt.[14]

Risks and consequences

Ontario's credit rating has been downgraded due to its debt, thus increasing the borrowing costs even further. In 2012, Moody's Investors Service downgraded Ontario from AA1 to AA2. It specifically stated the "growing debt burden" as a major concern.[15]

If interest rate increases or economic conditions worsens the province risks defaulting on the debt. According to the 2012 Provincial Solvency and Federal Obligations study Ontario is "the most vulnerable in the 10-20-year window" for defaulting on its debt obligations.[16]

Debt reduction

In 2012, the governing Liberal Party commissioned the Drummond Report, which outlined various measures to reduce the province's debt level.

Debt reduction has been proposed by the Ontario Liberal Party, the Ontario New Democratic Party, and the Ontario Progressive Conservative Party in their 2014 election platforms.

Debt reduction was proposed in the Progressive Conservative Party's 2014 election platform. They proposed to eliminate the deficit and reduce debt through eliminating 100,000 public sector jobs, a public sector wage freeze and benefit reduction, and service cuts to all programs except health.[17]

In its 2014 election platform, the NDP proposed to balance the budget by eliminating corporate tax "giveaways" and through the Fairness Tax on Ontario's highest income earners.[18]

Non-governmental organizations such as the Fraser Institute and the Canadian Taxpayers Federation have advocated for aggressive debt reduction through spending cuts. Organizations such as the Canadian Centre for Policy Alternatives have advocated for strong stimulus programs such as infrastructure spending to aid economic recovery and growth during the Great Recession. They also advocate eliminating corporate subsidies, tax loopholes and cuts.

See also

References

  1. ↑ "Borrowing & Debt History". www.ofina.on.ca. Ontario Financing Authority. 4 November 2013. Retrieved 4 January 2014.
  2. ↑ "Ontario's Fiscal History - It Is NOT A Pretty Picture". www.viableopposition.blogspot.ca. Viable Opposition. 27 March 2012. Retrieved 11 January 2014.
  3. ↑ "Ontario 2013–14 Fall Economic Statement" (PDF). www.ofina.on.ca. Ontario Financing Authority. 4 November 2013. Retrieved 4 January 2014. line feed character in |publisher= at position 8 (help)
  4. ↑ "Ministry of Finance Public Accounts of Ontario 2012-2013". www.fin.gov.on.ca. Ontario Ministry of Finance. 14 August 2013. Retrieved 8 January 2014.
  5. ↑ "Ontario’s debt burden just keeps on growing". www.theglobeandmail.com. The Globe and Mail. 2 May 2013. Retrieved 4 January 2014.
  6. ↑ "Borrowing & Debt History". www.ofina.on.ca. Ontario Financing Authority. 4 November 2013. Retrieved 4 January 2014.
  7. ↑ "Ontario 2013–14 Fall Economic Statement" (PDF). www.ofina.on.ca. Ontario Financing Authority. 4 November 2013. Retrieved 4 January 2014.
  8. ↑ "What the tax cut means for Ontario’s debt and deficit" (PDF). www.ofl.ca. Ontario Alternative Budget Working Group. 1998. Retrieved 11 January 2014.
  9. ↑ "Public Debt A Debt Burdened Ontario: Risks and Solutions". www.researchforum.ca. Canadian Forum for Policy Research. 2013. Retrieved 4 January 2014.
  10. ↑ "A Balanced Approach to Balancing Books Ontario’s Challenges: A consultation on debt and deficit" (PDF). www.ontariondp.com. Ontario NDP. 2012. Retrieved 4 January 2014.
  11. ↑ "Public Debt A Debt Burdened Ontario: Risks and Solutions". www.researchforum.ca. Canadian Forum for Policy Research. 2013. Retrieved 4 January 2014.
  12. ↑ "Avoiding a Crisis: Fixing Ontario’s De�cit" (PDF). www.fraserinstitute.org. Fraser Institute. 2012. Retrieved 11 January 2014. replacement character in |title= at position 39 (help)
  13. ↑ "Avoiding a Crisis: Fixing Ontario’s De�cit" (PDF). www.fraserinstitute.org. Fraser Institute. 2012. Retrieved 11 January 2014. replacement character in |title= at position 39 (help)
  14. ↑ "What the tax cut means for Ontario’s debt and deficit" (PDF). www.ofl.ca. Ontario Alternative Budget Working Group. 1998. Retrieved 11 January 2014.
  15. ↑ "Moody’s downgrades Ontario’s credit rating". www.thestar.com. Toronto Star. 26 April 2012. Retrieved 8 January 2014.
  16. ↑ "Provincial Solvency and Federal Obligations" (PDF). www.macdonaldlaurier.ca. A Macdonald-Laurier Institute Publication. October 2012. Retrieved 8 January 2014.
  17. ↑ "Paths to Prosperity - An Agenda for Growth". www.ontariopc.uberflip.com. Ontario PC. 2013. Retrieved 4 January 2014.
  18. ↑ "A Balanced Approach to Balancing Books Ontario’s Challenges: A consultation on debt and deficit" (PDF). www.ontariondp.com. Ontario NDP. 2012. Retrieved 4 January 2014.

External links

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