OTTAWA, Feb. 2, 2012 /CNW/ - Slowing economic growth in the years to
come will prevent Ontario from balancing its provincial budget until
2021-22, based on a Conference Board of Canada analysis. And to achieve
a balanced budget by 2022, the Ontario government needs to hold
increases in health care costs well below the growth rates of the past
The Conference Board estimates that potential real (or sustainable)
economic growth for Ontario is declining to 1.9 per cent annually,
which will translate into lower-than-expected levels of annual
government revenue over the longer term.
"The projected sluggish growth in Ontario's long-term potential output
plays a crucial role in our analysis of the revenues available for
government public services, notably health care," said Glen Hodgson,
Senior Vice-President and Chief Economist.
"If Ontario residents expect their publicly funded health care system to
continue to grow at or near recent levels, they will most likely have
to pay for it through higher taxes. If the public is unwilling to
accept and support higher taxes, other transformative changes will
likely be required to how publicly-funded health care is delivered in
Aging demographics and slower labour force growth will reduce Ontario's
nominal (real economic growth plus inflation) Gross Domestic Product
(GDP) increase to an average of 3.9 per cent over the 2011-2031
forecast period. Ontario is also being affected by the more challenging
economic environment in the United States.
In its 2011 budget, the Ontario government laid out a plan to eliminate
its annual fiscal deficit - projected to come in at $16 billion this
year - in 2017-18. That outlook was based on restricting total program
spending to growth of just 1.7 per cent per year over the next seven
years. The government pledged to curb annual growth in public health
care spending from its seven per cent pace of the past decade to just
three per cent per year beginning in 2012-13. Even if these spending
plans are met, slower projected revenue growth will delay the date of a
This report, Ontario's Economic and Fiscal Prospects: Challenging Times Ahead, (http://www.conferenceboard.ca/e-library/abstract.aspx?did=4662) sheds light on Ontario's fiscal challenges in three ways:
It estimates potential economic growth in Ontario over the longer term.
Potential output is based on three principal factors: the projected
available labour force in Ontario; capital investment; and productivity
It produces a model of health and education spending to account for
demographic changes, trends in technology and access to services, and
trends in cost drivers in these sectors, over a long-term forecast
It projects when the Ontario government is likely to re-balance its
books, based on revised revenue projections - and under different
spending assumptions for health care in particular. Each of three
scenarios uses the same economic outlook, which determines revenue
"In fiscal terms, the scenarios highlight the challenges of controlling
health care spending growth, of transforming the publicly-funded health
care delivery system in Ontario, and/or of increasing available
government revenues," said Hodgson.
Scenario 1: "maintain the spending plan"- For the government to achieve
its target of a balanced budget by 2017-18, it would have to slow
overall program spending to growth of 0.7 per cent annually beginning
Scenario 2: "adjust for aging population" - Health care spending has
increased by an average of nearly seven per cent annually for a decade.
If the government raises health care spending to account for population
growth and inflation, costs are still projected to increase by an
average of 4.7 per cent per year. This figure is well above the Ontario
government's current target, and is beyond the Conference Board's
estimate for sustainable nominal GDP growth. Under these assumptions,
the provincial government would be unable to re-balance its budget
through 2031, which is the time frame of this study.
Scenario 3: "maintain spending growth" - funding for Ontario's health
care system is assumed to continue to grow at a pace that is more
closely aligned with recent history (5.6 per cent annually), with
spending restraint maintained on other provincial programs. To generate
additional revenue under this scenario, the provincial sales tax rate
would have to increase from eight per cent to 15 per cent to allow the
provincial government to balance the budget by 2017-18.
This report was prepared for The Conference Board of Canada's Canadian
Alliance for Sustainable Health Care (CASHC) (http://www.conferenceboard.ca/cashc/default.aspx).
Launched in May 2011, CASHC is intended to provide Canadian business
leaders and policymakers with insightful, forwarding-looking,
quantitative analysis of the sustainability of the Canadian health care
system and all of its facets. CASHC actively engages private and public
sector leaders from the health and health care sectors in developing
its research agenda. More than 30 companies and organizations have
invested in the initiative, providing invaluable financial, leadership,
and expert support.
Link to report: http://www.conferenceboard.ca/e-library/abstract.aspx?did=4662
Link to CASHC: http://www.conferenceboard.ca/cashc/default.aspx
SOURCE CONFERENCE BOARD OF CANADA
For further information:
Brent Dowdall, Media Relations, Tel.: 613- 526-3090 ext. 448