Kelly McParland: As Quebec gets its house in order, Ontario continues bankrupting itself

Article content

Canada’s two most populous provinces will unveil their 2018 budgets this month — Quebec on March 27, Ontario the next day. The result will offer a portrait of two governments going in opposite directions.

Quebec, long derided as Canada’s highest-taxed, deeply indebted, most interventionist regime, is coming off several years of careful budgeting that has produced a strong economy, repeat surpluses, low unemployment and a multi-billion-dollar dividend. Ontario’s government, having increased the debt almost 150 per cent since coming to power in 2003, is hoping against hope that even more borrowing will somehow produce the results previous borrowing hasn’t.

Both face elections this year. The irony is that despite their contrasting fortunes, Quebec Premier Philippe Couillard and Ontario’s Kathleen Wynne — both Liberals heading long-serving administrations — could both find themselves out of jobs by year-end.

In Quebec’s case, loss of power would be a cruel return for a job well done. The province isn’t used to being cited as an example of fiscal rectitude: most of the country still gets more enjoyment from complaining about the $11 billion it rakes in from the equalization program, thanks to its mysterious ability to qualify as a “have-not” province year after year. Yet in finally addressing the province’s chronic underperformance, Finance Minister Carlos Leitão has shown a degree of political nerve absent from previous governments, and the province has benefited from his efforts.

This year’s budget will again enjoy a surplus, the fourth in a row. Previous surpluses have been used to boost spending on health and education, and to fund a $1.2 billion income tax cut announced last fall. The books are in such good shape, Leitão reported, that he plans to plunk down $10 billion on the debt accumulated over previous decades. The money will come from a special investment fund set up to offset the painful cost of so much borrowing, and represents the biggest repayment since the 1950s.

“It’s a historic moment for Quebec, and is a direct result of our good management of public finances and the good performance of our economy,” Leitão boasted in announcing the payment, which will cut future interest costs by about $1 billion over the next five years.

A sound fiscal record hasn’t been enough to halt a slide in popularity, however. Quebec’s Liberals have been in power for all but 19 months of the past 14 years, and face an election in October with a population eager for new faces. The decline of the Parti Québécois has weakened a key source of Liberal support — fear of the separatists — as have memories of the painful early days of the economic turnaround.

Like many Canadians, Quebecers have been trained to view spending restraint as “austerity,” reflecting the curious notion — popular among left-wingers and political opportunists — that careful management of resources is a bad thing and should be avoided at all costs. Better to spend now and worry later. Couillard’s achievement has thus become a liability, with soundings consistently showing the Liberals trailing by a large margin in voter intentions.

A recent Leger Marketing poll showed the Coalition Avenir Quebec with 37 per cent support, against the Liberals’ 26 per cent, and the PQ at 22 per cent. CAQ leader François Legault was preferred as premier over Couillard by a margin of 27 per cent to 15 per cent. The kicker is that Legault’s strength owes much to the fact his party strikes many as broadly similar to the Liberals, enabling voters to switch governments without risking big changes. The CAQ vows it will seek to end Quebec’s reputation for financial sloth, arguing that provincial pride demands an end to its dependency on equalization.

Ontario’s Liberals are also up for re-election, in their case in June. Premier Kathleen Wynne consistently rates as the least popular premier in the country, and even the recent attempt at self-mutilation by the opposition Progressive Conservatives has so far shown no sign of altering voter intentions. With just weeks to go before the formal campaign begins, Wynne and her finance minister Charles Sousa have been searching feverishly for a way to turn the tide.

Unfortunately for them, Sousa is no Leitão, and Wynne has shown nothing like Couillard’s respect for sound finances. Ontario’s treasury is beyond bare, its debt having ballooned to $312 billion, the biggest debt held by a subnational government anywhere in the world. Ontario owes twice as much as California, which has a population bigger than all of Canada. Interest costs soak up enough tax money to build a new hospital every month.

Wynne’s Liberals have done little to remedy that, preferring to shore up support with pledges of ever-greater spending. A year ago, for the first time in a decade, Sousa laid claim to a balanced budget, announcing that “next year, and the year after, we’re projecting it will be balanced too.” The promise was jettisoned a week ago, when — in the face of continuing unpopularity — he revealed he would plunge the province back into deficit this year, to the tune as much as $8 billion.

The money is needed to buy votes in June. Wynne proclaimed herself “steadfast” in her determination to help struggling Ontarians, without addressing why they continue to struggle after 14 years of big-spending Liberal governments. Both Wynne and Sousa argued that “uncertainty” looms — from U.S. tax changes, the threat to NAFTA and the potential of a punishing tariff war — forcing them to once again pile new debt on old. Neither is willing to entertain the notion that uncontrolled borrowing is what’s made the province so vulnerable to a downturn in the first place, by removing the room to manoeuvre in difficult times, reducing Ontario’s attraction to investors and relentlessly pushing up costs for families. In a piquant footnote, Sousa pledged the new budget “will have a clear plan to track back to balance,” the same promise he’s been making every year since becoming finance minister.

The contrast in fortunes means that while both premiers could find themselves out of office soon, Couillard’s successor has much better prospects to work with. Quebec has a balanced budget with healthy surpluses that can be used to lessen the pain of a downturn. Wynne’s Liberals, on the other hand, have borrowed the province into a corner that will be difficult to escape. Neither good times nor bad times was ever the right time to get the books in order.

The new PC leader, Doug Ford, is promising a slimmed-down platform limited to a handful of major goals: lower hospital wait times, lower hydro rates, smaller and less expensive government. Quebec has shown that bad habits can be changed. But first you have to make the effort. Ontario hasn’t seen a lot of that lately.