OVERVIEW OF A NEW REPORT FROM THE CENTRE FOR SPATIAL ECONOMICS
Key facts about Ontario’s economy and Budget 2012
April 18, 2012
In February 2012, the Ontario Public Service Employees Union
(OPSEU) commissioned Robin Somerville, Director of the Centre for Spatial
Economics (C4SE), to produce a report on the role of the public sector in
Ontario’s economy and to examine the economic impacts of the 2012 Ontario
Budget. C4SE is a respected mainstream firm that provides economic models,
analysis, and forecasts for eight provincial governments, including the
government of Ontario. Key findings of the C4SE’s report released April 18, 2012
1. The March 27 Ontario Budget
will have a significant impact on the economy.
It will subtract as much as 0.7 per cent in 2014 and 0.6 per
cent in 2015 from real Gross Domestic Product (GDP) growth in Ontario; and
It will begin reducing employment immediately, costing
105,000 jobs in 2015 – 65,000 from the public sector and 40,000 from the
By 2015, the budget will have reduced the size of the
economy by over $20 billion a year, reducing provincial government tax
revenue by between $2 billion and $2.5 billion a year.
2. Cuts in public spending and
tax increases have the same impact on the deficit but cutting public spending
hurts the economy more than increasing taxes by the same amount.
“Cuts in government spending lead to Gross Domestic Product
(GDP) and employment losses that exceed those from higher taxes.”
“If the province needs to have an adult conversation about
spending, then it also needs to have a similar conversation about revenue
and taxation. While the ability to tax is not without limits, raising taxes
rather than cutting spending imposes lower costs on society in terms of
reduced jobs and GDP while achieving the government’s objective of reducing
3. For every dollar Ontario’s
public sector spends, 36 cents goes directly to purchase goods and services from
the private sector.
20 per cent of all jobs in construction are tied to public
Professional, scientific, and technical services;
information and cultural industries; and the arts, entertainment and
recreation are among several sectors that depend on public spending for
between five and 10 per cent of all jobs.
4. “A strong economy includes a
strong public sector.”
“Public spending delivers needed services and, when done
right, is a vital catalyst for current and future economic growth…. The
public sector cannot be viewed in isolation: public sector excellence is
integral to private sector success.”
Comments from the OPSEU perspective:
The current debate around the 2012 Ontario Budget has been too
narrow. The McGuinty government has focused on spending cuts and largely ignored
options for increasing revenue through the tax system. The NDP’s proposals to
change the Budget have added the issue of fairness to the debate, but so far
there has been too little focus on how to minimize the Budget’s negative impacts
on the economy.
By providing hard data from a trusted source, the Centre for
Spatial Economics report gives the parties a new way to judge the relative
merits of different Budget choices.