Doug Ford officially became the premier of Ontario Friday.
The Progressive Conservative leader, who won a majority government after 15 years of Liberal rule in the country’s largest province, came under constant scrutiny on the campaign trail for not providing a costed platform. There are still few details on how he plans to tackle issues like debt, housing affordability, taxes, and competitiveness.
“The platform famously did not include a bottom-line projection,” Robert Kavcic, senior economist at BMO Capital Markets, wrote in a note to clients earlier this month. “But, tallying up the costed items and building off a base 2018 budget (i.e., before new measures—the same approach used in the fully-projected NDP platform) very roughly suggest that the budget deficit could track in the $5 billion-to-$6 billion range by [fiscal year] 20-21.”
“Suffice it to say that, from a credit perspective, none of the election platforms were giving investors the warm fuzzies, and a shift back into deficit at this later stage of the cycle opens the door to bigger challenges down the road,” he added.
Ford said he would run a deficit during his first year in office and pledged to cut the corporate tax rate to 10.5 per cent – which would make it the lowest of any province or territory. He also pledged to reduce the small business tax rate by 8.7 per cent.
“Ford's tax cuts will leave more money in the pockets of businesses and some taxpayers, though Ford will need to find a way to finance them and it is not clear how he will go about doing this,” said Mike Moffatt, an economist and professor at Western University’s Ivey School of Business in an email to BNN Bloomberg.
Moffatt added Ford is likely to have a negative net impact on Ontario's competitiveness.
“While the corporate tax cuts will certainly help, the province has no credible fiscal plan, which will harm our reputation with rating agencies.”
One Bay Street money manager says he hopes to see some initiatives with regards to small businesses and employment come to fruition.
“A buck a beer isn’t going to cut it,” Barry Schwartz, chief investment officer, Baskin Wealth Management told BNN Bloomberg, referring to one of Ford’s headline-fetching campaign pledges.
“What we would like to see is a plan to reduce the small business tax, incentives to encourage hiring (it would be nice to see some offset to the minimum wage hikes), a plan to tackle future government pension expenses, incentives for startup and venture capital funded businesses, and training and apprenticeship programs to encourage job seekers toward skilled trade jobs.”
Ford pledged to not go forward with the previous government’s plan to increase the minimum wage to $15 per hour and instead leave it at the current $14.
The change in leadership will be “refreshing” for small businesses and make Ontario more competitive, especially with the tax cuts south of the border, said Allan Small, senior advisor at Allan Small Financial Group.
“Doug Ford looks to run the province more like a business,” he told BNN Bloomberg in a telephone interview.
However, Small said he’s “cautiously optimistic” as there are always concerns when there’s promises to cut, because the difference has to be made up somewhere else.
Housing affordability has been another major concern in Ontario, especially in Toronto where the average selling price sat at $805,320 in May. But Ford has made little mention of how he plans to tackle the issue.
“He indicated that he would get rid of the non-resident speculation tax very early in his campaign but I doubt he'll actually do this,” John Pasalis, president of Realosophy Realty, told BNN in an email. “Policy that encourages non-residents to speculate in our housing market – and by extension drive up house prices for young buyers – would probably not be popular with his base.”
“He didn't mention this during his campaign, but I suspect he may consider policies that offer greater incentives for builders to build purpose built rentals,” Pasalis added.
Although many questions remain, BMO’s Kavcic said the change in leadership will mark a “significant turning point for Ontario fiscal policy.”
“While uncertainty about the deficit will persist until a budget is tabled, the mandate sets up a clear tack away from higher taxes and big program spending, to tax relief, leaner government and competitiveness, and could be a first indication that Canadians' appetite for deficit spending has peaked,” Kavcic said.