Post-Budget Address

Head Table Guests

Bill Laidlaw, CEO, St. John Council for Ontario and President, The Empire Club of Canada; Gord Homer, Deputy Chairman, Scotia Capital Inc.; Ernie Eves, QC, Vice-Chairman and Senior Advisor, Credit Suisse First Boston Securities Canada Inc.; Sonja Chong, Partner, Taxation, Braithwaite Innes Harris & Chong LLP and President, Hong Kong-Canada Business Association (Toronto); Libby Burnham, QC, Past President, The Canadian Club of Toronto; Robert W. Chisholm, Vice-Chairman, Domestic Banking, Scotiabank; Agnes Di Leonardi, Vice-President, Legal and Corporate Secretary, Ford Credit Canada Limited; Dr. Bob Christie, Deputy Minister of Finance; Lynda H. Bowles, Partner, Deloitte & Touche LLP; Ann Curran, Director, Corporate Development International and Ist VicePresident, The Empire Club of Canada; The Reverend Dr. John Niles, Victoria Park United Church; and David J. McFadden, QC, Partner, Smith Lyons and Director, The Empire Club of Canada.

Introduction by Marilyn Linton

Jim Flaherty

Good afternoon and thank you, Marilyn Linton, for your kind introduction.

Yesterday, I delivered my first budget as the Minister of Finance for the province of Ontario. When I set out to prepare this budget, I wanted to tell a story. A story that would outline a vision for the future. A story I'd be proud to tell my children. A story that they'd remember when they're grown. That when they look around Ontario as young adults someday, they'd see the benefits of the responsible choices our government is making today.

Responsible choices such as paying down the debt. Yesterday we made a record debt payment--$3 billion. I think of paying down debt as a future tax cut for our children. Our debt payment means we are paying over $90 million less in interest this year. That's $90 million less for our children to worry about in the future.

Tackling our debt is very important to me. It reminds me of why I got into politics in the first place. And why I consider myself a conservative today.

It wasn't always so. As a teenager, back in the 60s I actually knocked on doors for the Trudeau Liberals. A few years later, I realised Trudeau couldn't count. Racking up a massive debt is irresponsible. That's why I'm no longer a Liberal.

There's another aspect to the story of this budget that is very important to me. That's providing first and foremost for the most vulnerable people in our society. I strongly believe that's our duty as legislators. And our duty as conservatives.

For me that's where the story of this budget begins. I like to think a sense of compassion informs all the decisions I make as husband, a father and a Minister of the Crown. I say this mindful of the legacy of my predecessor, Ernie Eves. I think Ernie would agree that being a conservative is about providing first for the most vulnerable people in our society. I know this was as important to him as it is to me.

Quite simply responsibility doesn't have to come at the cost of compassion. In fact, it's by acting responsibly that we are able to afford to take care of the people who need us the most. I'm referring to people who are not able to share in our prosperity because of chronic illness, disease or disability. People who are unable to work through no fault of their own.

Let me give you a few examples of what we're doing for our most vulnerable people in Ontario with this budget.

I want to talk a bit about some of the things the media didn't report in detail. We're investing in new places to live for adults with developmental disabilities. We're investing in Child Treatment Centres, where children with autism, spina bifida, cerebral palsy and developmental learning disabilities can get the services and care they need. We're investing in shelters for abused women. Providing for the most vulnerable people in our lives was a vital consideration in my budget plan.

I want to talk to you today about that plan and some of those decisions that went into making it.

Growth

We've shown time and again that tax cuts provide an important stimulus to our economy.

Tax cuts return money to the people who earn it. And in turn those people put that money right back into the economy by purchasing goods and services and by investing. Since 1995, our economy has grown by almost 25 per cent.

In order to build on Ontario's prosperity, yesterday I announced that we intend to legislate the remainder of the 20-per-cent income tax cut promised in 1999. In real terms this would mean a family of four--two working parents and two children--with an income of $60,000 would now pay about $2,300 less in taxes. $2,300 is groceries for four months, a year's tuition at a community college or the cost of a new computer.

I also announced that we would take the first steps to eliminating the personal income surtax--a tax that hits Ontario taxpayers with incomes that start at $54,000. People at that level are by no means rich. Our government believes that middle-income earners deserve to keep more of their hard-earned money. As a result of this initial move we're proposing 340,000 people will no longer have to pay the surtax. And I emphasise that this is just the first step. We know that there is more to do. And we know that cutting taxes is the right thing to do. It's the responsible thing to do. Since we started cutting taxes, our businesses have created more than 822,000 jobs. Since we started cutting taxes, business investment in this province has increased by 66 per cent.

Our new package of initiatives to promote business activity in this province--Ontario's Edge--builds on that success. Ernie Eves announced significant corporate income tax cuts in his final budget as Minister of Finance. An important part of Ontario's Edge is to pass into law the full schedule of our corporate income tax cuts each year between now and 2005. We are providing businesses in Ontario with certainty. We know from experience that they will respond positively.

By 2005, if our legislation passes, Ontario will have a lower combined general corporate income tax rate than any of the 50 U.S. states. No Canadian province will have a lower rate. We said in the budget yesterday that we plan to make Ontario the home of the best performing economy in North America with the highest quality of life. Our goal is to make that happen over the next decade.

That's what Ontario's Edge is all about. Eliminating the job-killing capital tax is another part of Ontario's Edge. As you know, thousands of businesses across Ontario, in every sector, must pay capital tax whether they are making money or not. That means capital tax claws back money that should be used to keep employees on the payroll instead of going into government coffers. I'd like to thank our Business Tax Review Panel for recommending this particular initiative. They told us that capital tax is a cost of doing business in Ontario that almost no other country imposes.

Businesses' first priority should be paying wages to their workers--not paying taxes. That's why, in this budget, we are proposing the first steps toward eliminating this tax. Our plan would make the first $5 million tax free. This move alone would eliminate capital tax for more than 11,000 small- and medium-size businesses in Ontario and directly support the creation of new jobs.

Accountability

Common sense tells us that a vibrant economy is essential to support the things that matter most to the people of Ontario.

Since we started cutting taxes, government revenues have increased by $15 billion. This additional revenue is allowing us the kind of health-care system that provides certainty. And the kind of education system that produces a skilled work force. But while our revenues are increasing, so are our spending pressures.

I want to speak for a moment about health care. We know the people of Ontario care passionately about their health-care system. They've told us that health care is their number-one priority and we have responded. We've invested more money in Ontario's health-care system than any government before us. We've increased our investment in health care by $6 billion since we came to office. We're spending a staggering $23.5 billion this year on health care.

The numbers are now so large they barely make any sense for ordinary people. That translates into a shocking $745 per second spent on health care in the province of Ontario. Take a moment and look at your wrist watches. Follow the sweep of the second hand and think about $745 a second. Today, 45 cents of every dollar that we spend on programmes goes to health care. When we look ahead about five short years, we can see health care eating up about 60 per cent of every dollar that we spend on programmes. This rate of increase simply isn't sustainable. Ontario isn't alone in this predicament.

There's not a single province in our country that's not grappling with the demands a growing and aging population is placing on our health-care system. Even the federal government has acknowledged the health-care challenges facing the provinces. Roy Romanow has been asked to chair a task force to investigate ways to protect our system of universal medicare. But unfortunately, the federal government has failed to recognise the urgency.

Maybe it's easier to procrastinate when you are paying less than 14 cents on the provincial health dollar.

Mr. Romanow's report will come too late for Ontario. We can't wait 18 months. We need reform now. We have to manage health care more effectively. All of the health-care system needs more effective and efficient management. Our public-sector partners--like our hospitals and community-care access centres--need to be more accountable and they will be. My budget outlines the first steps.

Our proposed new Public Sector Accountability Act will require all major organisations that receive taxpayer dollars from our government to balance their budgets each year. I'm talking about hospitals, school boards, municipalities, colleges and universities. Public-sector organisations will have to issue business plans to show what their objectives are and track their progress in meeting those objectives. I want to make a model of businesses like yours and how you meet the bottom line. I want to apply the same principles to public-sector institutions. We will call on experts in the private sector to join a new Value for Money Review Panel that will examine what role government should play in the 21st century.

The panel will have the mandate to assess any government service and ask some common sense questions. Is this service meeting its original objectives? How important is this service? Who should deliver this service?

This review will direct us to wasteful services that should be eliminated. It'll advise us on ways to focus our energies on services that are most valuable to the people of Ontario. We must be able to account for taxpayers' money. Just as you do in your business. Just as Ontario families do in their homes. What business would tolerate employees who can't account for how they spend the company's money? Government shouldn't be any different. The shareholder we answer to at the end of the day is the taxpayer.

That's the standard I set for myself as the Minister of Finance and it's a standard I intend to live up to.

On accountability, our government has set the bar very high. We made it against the law in Ontario for a government to run a deficit. There are penalties for any government that does. Cabinet ministers get a pay cut of 25 per cent for the first deficit and an additional 50 per cent cut for each deficit after that.

It's a version of the private-sector performance bonus. Acting responsibly as a Finance Minister is not just about making smart decisions at budget time. Our economy is constantly changing and we have to keep ahead of those changes with a tax system that is flexible and responsive to business.

Just because we delivered the budget yesterday doesn't mean the books are closed for another year when it comes to reviewing our system of tax administration. As Finance Minister, my door is always open to new ideas. I'm here today to listen as much as to speak. I want and value the input of the Ontario business community. I believe we build our economy through consultation and consensus. A healthy economy and a thriving business community are crucial to our collective prosperity.

Many of you have children. Their education is very important to you. Our investment in education exceeds the growth of enrolment. Our publicly funded education system is our top priority. We feel it is time to answer the call of many parents in the province who pay for their children's education.

They pay for their children's education for a good reason. They want their children educated in their own religion, according to their own customs. That's something we can't offer in the public-school system. These parents often struggle to pay for a religious or cultural education. That's why we're phasing in a limited tax credit over the next five years.

With this measure, we are joining other provinces in supporting educational choice. There's been a lot of talk in the media about dealing with the anticipated "double cohort" of students in 2003. This is the year all grade 12 and OAC students will graduate together. The baby-boom echo and the fact that more students are pursuing higher education will add to the number of students going to college or university in 2003.

There will be a place for every student in grades 10 and 11 today who wants to go to college or university.

We're committed to spending $293 million to ensure there are places in the classrooms of our colleges and universities for any students who want to advance their education in the coming years.

A lot of young people visit my office. I tell them that the best investment they can make is in their own education. I insist that my government also invest in the education of its young people. We did that again yesterday and we will continue to make education a priority of our government.

There are clearly some challenges ahead of us. I'm confident we can meet them. We've come a long way in the province of Ontario. We've moved decisively to build a solid plan for the future. Our government is bringing accountability and responsibility to Ontario. We have fundamentally changed the political culture in Ontario for the better. We are cutting taxes to leave more of your money in your hands. We don't think government knows better than you do where to spend your money.

The people of this province now rightly expect more from their government. They want accountability. They demand that their tax dollars be spent wisely, efficiently and responsibly.

We did that yesterday. We demonstrated once again that we have a plan for the future. We're prepared to make the province of Ontario the home of the best performing economy in North America with a quality of life that will be the envy of the world.

Our plan is simple... it's called common sense. Thank you.

The appreciation of the meeting was expressed by Bill Laidlaw, CEO, St. John Council for Ontario and President, The Empire Club of Canada.