Ford’s former finance minister proffers sound advice for his successor
Last week, Premier Doug Ford announced a major cabinet shuffle in Ontario. Among the most important moves was the removal of Vic Fedeli (pictured above) as finance minister, to be replaced by Rod Phillips.
Phillips inherits an unenviable set of fiscal circumstances. Ontario faces a multi-billion-dollar deficit with a net debt forecasted to reach $390 billion within the next five years. So he should look for good advice wherever he can find it—including the “Focus on Finance” book, which Fedeli published every year during his time as Opposition finance critic.
Here’s one quote that encapsulates some of the best advice from Fedeli’s Opposition-era books: “They [the Liberal government] continue to kick the fiscal can down the road, hoping that revenue growth will eventually catch up to their spending. But they can’t help themselves and continue to spend ever-increasing amounts of taxpayers’ money.”
In this short passage, Fedeli correctly identified the causes—and the solution—to Ontario’s fiscal mess. The cause was more than a decade of unsustainable spending growth, which grew substantially faster than the rate of nominal economic growth or the combined cost pressures from inflation and a growing population.
Since spending was the source of Ontario’s fiscal problem, the right answer was (and is) to strike at its root and, as Fedeli said, to stop spending “ever-increasing amounts of taxpayers’ money.”
If Phillips followed this advice and stopped spending “ever-increasing amounts” of money from year to year, the deficit could quickly be slain. Indeed, one pre-budget analysis from the Fraser Institute showed that if revenue forecasts came to pass, a two-year nominal spending freeze would be sufficient to essentially balance the budget by next year.
And holding the line in subsequent years, or taking steps now to actually reform and reduce public spending, would create the room for much-needed tax relief to bring down Ontario’s economically damagingly high tax rates.
Unfortunately, in his first and only budget, Fedeli did not fully take his own advice to stop spending increasing amounts of taxpayer money and instead tabled a budget with modest nominal spending growth in coming years. Of course, this was an improvement over the fiscal approach of the last years of Premier Wynne’s tenure, when spending growth skyrocketed. But it was inadequate in light of Ontario’s fiscal challenges and obviously would fail to achieve balance during the Ford government’s first term.
Indeed, Fedeli deserves some credit for slowing down the rate of spending growth. Now it’s up to his successor to take the necessary next step of pursuing a balanced budget on a much quicker timeline than envisioned in the 2019/20 budget. This, however, can only be achieved if Phillips is willing to heed Fedeli’s wise words from his Opposition years and recognize that the only way out of Ontario’s fiscal mess is to stop kicking “the fiscal can down the road” and to finally stop spending “ever-increasing amounts of taxpayers’ money.”