DECEMBER 11, 1975
The Coming Year: 1976
AN ADDRESS BY The Honourable William G. Davis, Q.C., LL.D.,
PREMIER OF ONTARIO
CHAIRMAN The President
H. Allan Leal, Q.C.
Mr. Premier, Honourable Ministers, ladies and gentlemen: We extend a warm welcome to this meeting of The Empire Club of Canada.
Mr. Premier: I note that on this occasion you have brought your lawyers with you. Perhaps I should have informed you that this was a friendly meeting. Although I am not the best judge of these matters, I am informed by my friends who are, even the non-partisan ones, that you have put together a very strong team, though perhaps somewhat lacking in numbers in the back-up roles. I am also informed that they are all thoroughly conversant with the fact that the game is to be played in accordance with the Marquis of McMurtry rules. With respect, I may say that I agree with the Attorney General in his desire to clean up the game.
I played much of my hockey in the old Trent Valley League and at times the decorum left something to be desired. I hasten to add, however, that there was nothing wrong with the play on the ice, but we did live in mortal fear of the old ladies with the handbags and umbrellas along the boards, particularly in Madoc, who were disposed and able to pummel the visiting players to death. It is too easily assumed, I think, that the shatter-proof glass barriers were later installed for the protection of the spectators. In the Trent Valley, anyway, that is simply not true; they were for the protection of the players.
I would have thought that it was a work of supererogation to introduce our distinguished visitor and speaker to an Ontario audience. But in view of events last October, there is a substantial body of Ontarians who don't know him, or don't know him well enough. In any event, we are here to praise and not to bury Bill Davis.
He is, of course, a native son of this province, having been born in the Flower City of Brampton--and because of that fact it has been, in the words of the poet, "roses, roses all the way!" Educated in his home town, at the University of Toronto, and in law in the grand manner and in the great tradition at Osgoode Hall Law School, he was called to the Ontario Bar in 1955, a worthy legal son of an illustrious father who as Crown attorney for Peel County and as a Bencher of the Law Society was much admired and affectionately regarded for his competence, humanity and acute sensitivity to justice and fair play in the administration of the criminal law process.
Bill Davis succeeded the Honourable Thomas Kennedy, sometime Premier of Ontario, as the member for Peel riding in June 1959, thus being launched on an outstanding political career. His first cabinet post came in 1962 at the age of 33, when he was appointed Minister of Education, the youngest in the province's history. Those of us who were close to the planning and administrative difficulties in education in the sticky '60s have good reason to know how much we owe to his leadership in maintaining an educational system in this province second to none in the world, even in the post secondary field where as Minister of Colleges and Universities he guided the development of these institutions of which we may be justly proud.
As some recognition of his signal services, he was elected the first chairman of the Council of Ministers of Education for Canada, and has been honoured with no less than four degrees LL.D. (honoris causa).
He has served as second vice-chairman of Ontario Hydro in 1961/62 and as such has been tutored in the acute energy problems facing us today.
He became leader of this government in 1971. The true dimensions of the problems of the troubled '70s were not then known, nor are we sure that we can know them even today. There are, however, fundamental qualities of heart and mind which we require in our leaders, politicians and statesmen, to pull us through however intractable or even unperceived these problems may be. Our distinguished guest has these qualities in abundant store and it is a privilege for me to invite the Honourable William G. Davis, Q.C., M.P.P., LL.D., Premier of Ontario and member from Brampton (Bramalea), to address us.
THE HONOURABLE WILLIAM DAVIS:
As we approach the beginning of 1976, 1 welcome this opportunity of being able to share with you my views as to what the coming year is going to demand of the government I lead, of every person in this audience and of every resident of this province.
Here, at the very outset, I want you to know that despite some serious difficulties that lie ahead, it is my firm belief that if we face up to the realities that the coming year will bring, all of us in Ontario will be the beneficiaries of our own determined efforts.
It is also my belief that if we don't face up to those realities individually and collectively--then the prosperity that we've come to enjoy and too take for granted could be seriously threatened.
In saying that, obviously I don't intend to sound alarmist. But the challenges of today and tomorrow are staring us in the face even now--and I think it's up to politicians to articulate those challenges and lay the facts on the line for the public to understand.
The role of leadership is always demanding, but there are certain occasions when it's far more demanding than usual. This, in my opinion, is the case at the present time. The ground is shifting under governments all over the world, and many of the tried and true formulae of the past no longer offer the best way out of a difficult situation. Like it or not, responsible governments are going to have to strike out in new and different directions that may be in stark contrast to the routes they've followed in more prosperous times.
This is what the Ontario Government is in the process of doing, and this is what I'd like to tell you about in general terms today. But I want to set this in perspective, and to review briefly for you how far we have come in our present society and what we have managed to accomplish so far.
Over the past twenty-five years, we in Ontario have been carried along on a surging wave of prosperity. Year after year, we have seen our economy expand almost without interruption.
During that golden quarter century of growth, where so much came to be taken for granted by all of us, we evolved into a society that has become the envy of most other jurisdictions, not just in North America, but throughout the world.
We built a toll-free highway system that ranks among the best to be found anywhere. We introduced a hospital insurance plan, and subsequently a medical insurance plan, that remain as comprehensive and as equitable as you'll find anywhere. Faced with the post-war baby boom and unprecedented immigration, we evolved an educational system that met not only the changing needs of an increasingly technological society, but also insured that there would be equality in educational opportunity for every child in this province.
That, through a formula of provincial funding, cost a lot of money. So did the capital expenditure involved in providing the physical plant to accommodate the greatest influx in student population in the history of Ontario indeed, in the history of Canada.
During that same period, we in Ontario had to look to our municipalities, their needs and the services they were required to provide--because our municipalities are the creatures of the province.
Beginning with the formation of the Municipality of Metropolitan Toronto in the '50s, the form of local government has been changed in various parts of Ontario where population pressures and other changing environmental situations were such that a broad and uniform tax base and co-ordinated planning were necessary to provide services and to avoid financial chaos. (I remind you that no such changes have been implemented, for example, in New York State.)
All of this, along with a multitude of other social and community services, including urban transit, has been accomplished at a price the province, and the taxpayers of the province, could afford to pay.
I stress the role of the "taxpayers" because whenever we speak of the province and its spending, we're talking about the amount that you and I and everyone else in Ontario has taken out of their paycheques and put into the provincial treasury to pay for government expenditures.
In other words, whatever we get we pay for . . . either directly or on interest payments the province has to make when it borrows money on our behalf.
Borrowing, of course, is an important part of a government's fiscal policy and the financial institutions from which we borrow, considering that the amounts involved are often considerable, are extremely hardnosed, which they should be. The interest they charge, and the amount they're prepared to lend us and underwrite, depends on our spending habits and on our economic potential. On the highly sophisticated money markets of Bay Street or Wall Street, I'm happy to say that Ontario still has a Triple-A credit rating, which is the highest you can get and which very few North American jurisdictions share with us.
In order to keep our credit healthy, however, the Ontario Government recently made a commitment to limit its increase in spending in the foreseeable future to 10%.
Why is this limit on the increase in government spending so important to those in the business of lending governments money? Because they, far better than most, know that many governments in times of economic uncertainty try the easy road to self-perpetuation in office. Don't think that politicians aren't interested in staying in office.
As investment falls and unemployment rises in the private sector, extra jobs can only be provided outside industry, and only the government can provide jobs or other forms of assistance where there is no prospect of profit.
Hence governments add to their expenses and necessarily have to raise taxes to pay for them or, as an alternative, add to their debt structure. This, in turn, further puts the crimp on employees' living standards and on a company's after-tax profits. This is something that our friends across the House, the Official Opposition now, do not totally understand. Profits do not only mean dividends; profits are the prime ingredient of the capital we need to do the many things that remain to be done in Canada today. Without that supply of capital, living standards will undoubtedly slip.
In any event, the next step is that employee wage and salary demands begin to bring even more pressure on the declining profits of industry, and industry in turn begins to invest even less. More private sector employees become redundant, and the government tries again to assist them which results in even greater public sector spending.
That traditionally, and in very simple terms, is how the inflationary cycle gains momentum. It has continued to gain momentum in Canada, and it is now complicated by the fact that public service employees in recent years have been bringing enormous pressure to bear on their public sector employers for significant wage increases and the public sector debt continues to grow, albeit up until now, to a manageable limit.
But there is a limit--and so long as I'm Premier of this province the Ontario Government is not going to exceed that limit. Some time in the year ahead my government may be faced with an election, and unless the economic climate improves drastically, restraint in government spending will be one issue upon which the people will have to make a choice. I, for one, have every confidence that the people of Ontario will give overwhelming support to the party that stands for responsible government action.
I can assure you, therefore, that my government will not try to spend Ontario's way to some artificial level of prosperity that will haunt future taxpayers--and just so the record is clear, I'll also assure you here and now that no other Ontario Government could do so in good conscience.
The day of promises and easy spending is over. Government, any government, has to hold the line and set an example if confidence is to be restored in the minds of all the elements that make up the economies of western democracies.
In Ontario, we have made some starts. We have put the lid on the growth complement of our public service and frozen the salaries of our top-level civil servants. We are actually in the process of reducing the total numbers even during a period of demand for increased levels of services. And, as I've stated, in .the next fiscal year growth in provincial spending is to be restricted to 10%. This means that our increase in spending is going to be less than our increase in revenue. In effect, we as a government have had to make a choice and take a hard look at our priorities, and I think that it is imperative that we as individual citizens do the same thing.
As a government, we're not taking this step so as to deliberately make things tougher on everyone--no government does that. We're doing it because the times demand it. We're doing it to preserve what we have and what we've got is worth preserving--and to spring ourselves loose as best we can from the suffocating web of inflation that now enmeshes most of the industrialized world.
We want to imbue this mission with a sense of urgency. That is why Ontario supports the principle of the Government of Canada's prices and income program. That is why, two weeks ago, the Provincial Treasurer, after attending a meeting in Ottawa, urged that the program be put into operation as soon as possible.
We have expressed our intention to enter into an agreement with the federal government for the application of the program to the Ontario public sector. I might also mention that we are supporting the national effort to contain inflation by two additional actions. We are introducing a rent control program in the province, and as I have indicated, we are taking a series of stringent measures to control the rate of government spending in Ontario. When I refer to the rent program I want to make one thing abundantly clear. We do not see it as the long-term solution. We are looking at a program limited to two years. We do not see, as others do, total control of this sector of our economy on a permanent basis.
In many respects, the anti-inflation measures which governments at both the federal and provincial level are taking involve a dramatic departure from the principles of conventional economic policy and the free market society. We have three compelling reasons for doing this.
First, inflation here is worse than it is in the United States and if the pattern of wage and salary settlements and price increases up to October 14 had continued, the gap would have been even wider. The United States is our most important trading partner and customer. If we allow our prices to rise significantly faster than theirs, the eventual result would simply be economic disaster for Canada.
Second, the psychological impact of the inflationary spiral must also be broken. If prices continue to rise at a high rate, everyone, as I mentioned earlier, jumps on the bandwagon--bidding up their wages, fees or pries, and thus accelerating the spiral. We could certainly see evidence of that before October 14 and we can still see it. Perhaps such action is understandable from an individual point of view, but society as a whole cannot tolerate it for long if we are to have any kind of economic stability in this country.
Finally the third point, and this is the one that particularly concerns me as Premier of Canada's largest province--the impact of inflation on government budgets in recent years has been severe and has led to fast rising costs and, as a result, deficits. The trend must be reversed.
The question still remains as to the relationship between the federal government and the provinces in the anti-inflation program. The provinces can sign one of two types of agreements with the federal government. Under one option the provincial public sector--that is our own civil service, schools, municipalities and so on--would come under the direct authority of the Anti-Inflation Board. Under the second option, provinces can establish their own board to administer the federal guidelines. I might note that under either option it is the federal guidelines which would apply.
Although we have not yet concluded an agreement with the federal government, it is our stated intention to bring our institutions under the authority of the federal Anti-Inflation Board. For this, we have been criticized in the Legislature and elsewhere. It has been argued that we have special relationships with certain groups in this province and therefore they should be reviewed by a provincial board.
We simply cannot accept this argument. If every province were to set up its own board, the result would be an administrative nightmare and the anti-inflation program would be in serious jeopardy. Of course we have special relationships with many groups in this province. In fact, this applies to virtually every profession, trade and business as well as to public employees at the provincial and local level.
But special relationship is not the central issue. The issue and the challenge is attacking inflation. This must be done in the most effective and direct manner possible and that is at the national level.
We know that many of the decisions which the Anti-Inflation Board will have to make will be difficult. It must minimize exceptions to the rule. This means that not only will some groups not get what they have demanded, but also, that wage offers by employers in some situations may have to be rolled back.
I am sure the Board has had to do some agonizing over this. There must be strong temptation to say, "Let's allow this one and hope we can be tough on the next one." They have, however, realized that while that approach may solve some problems of disruption, it will not cure inflation.
It has been said, and it is true, that it is rough justice. While everyone must play a part in the battle, the burden inevitably will fall first on certain groups. But however regrettable, this cannot and must not be allowed to scuttle the national effort. If that happens we all lose in the end. If we are firm in our resolve, we all stand to benefit in the long run.
Having said that, I know that when the full extent of the Ontario Government's program of restraint becomes apparent, there are going to be complaints. I have heard them already from around the Cabinet table during the review of each Ministry's budget for the coming fiscal year. I have also already heard from some of those present today "We agree with restraint, but we really do need our new hospital." Or, "We have an art gallery problem or a university problem." We have to live with the fact that we are going to be saying "no".
Nonetheless, each Minister has come to understand the importance of what we as a Government, and as representatives of you, the taxpayer, are attempting to do in what is going to be a determined and unremitting battle ... but one that we're in an excellent position to win.
In the next month or two, the Treasurer and some of his colleagues will be touring the province. They will be visiting various regions of the province to explain our program of restraint and hopefully enlist public support and co-operation.
At the local level we will be looking to municipal representatives to join with us in this anti-inflationary crusade--because that's what it's going to be--and to provide leadership by example in their own areas or regions. They, too, can expect complaints; they, too, should be expected to bear the added responsibilities of elective office in times such as these.
At the individual level, all of us will have to become more accustomed to looking after our needs, as opposed to our wants. In times of great productivity and affluence, the distinction between our needs and our wants often becomes blurred--but when we're feeling the pinch, I don't think it's too difficult to separate them.
For example, do we need to go to a doctor with every minor ailment? Of course not, but the escalating cost of health services in this province, now running at three billion dollars a year, suggests that far too many of us do. How long do we need to occupy a hospital bed after a minor operation? This is obviously a medical decision, but there is evidence to suggest that a number of doctors, for whatever reason, allow patients to remain in hospital for longer than is necessary. If you multiply this practice sufficient times you can get a very unrealistic picture of the actual hospital bed situation, and a level of cost for hospital operation that is unnecessarily high.
The Ontario Government believes the seat belt legislation, which comes into effect on January I, will not only save lives, but also money. An estimated $90 million a year is the annual cost in direct OHIP charges alone in providing medical treatment for those injured in auto accidents.
Parallel with the seat belt legislation, there is to be a reduction in the speed limits on provincial freeways and highways. Quite apart from the obvious safety factor, this step should also result in a sizeable saving in our consumption of motor fuels, which in Canada has reached a staggering 3.8 billion annually, and which we can ill afford.
Quite frankly, I don't think Canadians have got the message concerning the importance of energy conservation, to say nothing of economic restraint, as have our neighbours to the south.
From what I read and hear, most Americans have come to realize that "the party's over", at least for the time being, and they're prepared to make sacrifices. Their wage settlements on average are running considerably below the 20 to 80% demands we've become accustomed to hearing in Canada. For the most part they've learned to live with reduced speed limits, because in many states some two years ago the reality of the energy crisis was brought home to them when they were lining up in their cars for hours on end to get a gallon of gas.
On the economic front, we've all become aware of the events in New York City--a sort of Perils of Pauline serial, fiscally speaking, that's being played out in Washington, Albany and Gracie Mansion. The whole world is watching that one because of its enormous implications.
Here we have what used to be one of the world's truly great cities continually teetering on the brink of bankruptcy, with public employees being laid off in the thousands because there's no money to pay them. Many of these employees were in what are vitally essential services to any city: sanitation, fire and police protection. Believe me, what could still happen to New York City will become the prototype for every other jurisdiction, big or small, that's been trying to solve today's problems with tomorrow's taxes.
I can assure you that we are not going down that road in Ontario, at least not under my government--because that way leads to disaster, even though people of another political philosophy will probably try to tell you otherwise.
You have probably gathered from my remarks today that the year ahead is going to provide challenges and demand certain sacrifices throughout every sector of our society. It doesn't loom as being an easy year, but by the same token it doesn't need to be an intolerable year.
The provincial government will be asking of the people of Ontario no more than it will be demanding of itself and in some instances, considerably less. If together over the next twelve months we show the same resolve and cohesion that we and our forebears have shown during other trying times in Canada's history, then the Christmas of 1976 will truly be an occasion for celebration and thanksgiving.
I, for one, am sure that we have the ability and determination to make it so.
Our distinguished visitor and speaker was thanked by Mr. Sydney Hermant, a Past President of The Empire Club of Canada.