Politics

Ontario Finance Minister Peter Bethlenvalvy promises he hasn’t forgotten to be fiscally conservative

When Michael Wilson became Canada’s Finance minister, he inherited a string of government deficits he called the “silent menace.”

Wilson was appointed to the job in 1984, after years of record spending by the Pierre Trudeau government.

Before he was reassigned six-and-a-half years later — the longest a Progressive Conservative has held the cabinet post — Wilson managed to set a new course for federal spending.

After representing the Toronto-area riding of Etobicoke Centre for 14 years, he decided not to run for re-election in 1993, returning instead to his career on Bay Street. He died in 2019 at the age of 81.

After his parents moved to Etobicoke, Ontario’s current Finance minister, Peter Bethlenfalvy, met Wilson when the latter was still in Parliament. After Bethlenfalvy started volunteering for him, he began to imagine a similar career path for himself.

“He’s my role model: to be in the private sector, but also to give back,” Bethlenfalvy told iPolitics in November.

Before entering politics, Bethlenfalvy developed his business acumen on both Bay and Wall streets, where he held senior executive positions with such global heavyweights as Manulife Financial, DBRS Ltd., and TD Securities.

The 2018 provincial election was Bethlenfalvy’s first go at public office. In running for Doug Ford’s Progressive Conservatives (PCs), he said his intention wasn’t to become Finance minister. Nevertheless, it took the rookie MPP less than three years to ascend to what’s considered the second-most important job in cabinet, behind only the premier.

Like Wilson, Bethlenfalvy found himself steering the government’s finances at an unenviable moment, even though they were appointed at different points in their respective governments’ life cycles: Wilson was then-rookie prime minister Brian Mulroney’s first appointee, while Bethlenfalvy was Ford’s third in as many years.

Neither of Bethlenfalvy’s two immediate predecessors — Vic Fedeli and Rod Phillips — lasted long enough to table a second budget. Fedeli was the fall guy for unpopular and veiled spending cuts, while Phillips’s mid-pandemic trip to the Caribbean island of St. Barts cost him his post.

Bethlenfalvy is coming up on one year on the job, having taken over from Phillips on New Year’s Eve last year. Just two months before, Phillips had tabled that year’s budget after it was delayed in the spring, which is when the government usually produces its spending forecast.

The 2020 budget projected a deficit that fiscal year of $38.5 billion. It ended up being less than half — $16.4 billion — thanks to tax revenues that were unusually high during a crisis, as well as $8.5 billion in pandemic aid from Ottawa and lower-than-expected government expenditures. Critics weren’t happy with the latter two.

Nevertheless, Bethlenfalvy would have been uncomfortable inheriting that bottom line. Much like Ford, who reminded everyone this November he believes “the worst place you can hand your money over is to the government,” Bethlenfalvy considers fiscal prudence part of his political DNA.

“It would be very easy to kick the ball down the (road) and make future generations pay for all of this,” he said. “So we have to be responsible financially.”

Before being appointed Finance minister, Bethlenfalvy oversaw the province’s bureaucracy. As president of Ontario’s Treasury Board from June 2018 to June 2021, he was responsible for trimming excess public-service spending. (He was head of Finance and the Treasury Board for six months, before the latter was assigned to MPP Prabmeet Sarkaria.)

While at the Treasury Board, Bethlenfalvy: passed Bill 124, the controversial legislation to limit wage increases for public-sector workers; initiated the move to a centralized procurement agency, Supply Ontario, to save on procurement costs; spearheaded a “line-by-line” independent audit of the government’s finances; and kickstarted an effort by the government to digitize its services to make them cheaper.

Because they both had business careers before going into politics, Bethlenfalvy says he and Ford “agree on most things.” They’re also “very much on the same wavelength” when it comes to the importance of innovation and keeping promises.

But what he “brought to the table” as Finance minister was a focus on modernizing and digitizing government operations and services, as he’d done at the Treasury Board, he said.

It’s not surprising that Bethlenfalvy’s first budget, tabled on March 24 of this year, dealt mainly with pandemic costs. But there was a short section dedicated to digitizing government, including $500 million for the Ontario Onwards Acceleration Fund, which is meant to make Ontario “the most digitally advanced jurisdiction in the world.” The fund has already been used to: create an online system to manage court cases; make it easier for doctors to make online health-expense claims; and accelerate the transition to digitized government licences and certifications. 

The government is counting on the pandemic being largely over by the time Bethlenfalvy prepares his next budget this spring, which should give him more flexibility. But because he’ll likely be releasing it shortly before his party comes up for re-election, he’ll still have to make the political calculations required of any pre-election budget.

This fall’s economic outlook and fiscal review — also known as the fall economic statement or mini-budget — shows the government might be spared a record deficit, again thanks to higher tax revenues. The $21.5-billion deficit it projects would still be the province’s worst-ever unadjusted shortfall, but it’s $11.6 billion less than what Bethlenfalvy’s spring budget projected.

Like the 2019 fall economic statement (the last to be released on schedule, before pandemic disruptions), this year’s mini-budget was reasonably cautious. The biggest chunks of new cash are for provincial infrastructure like highways and bridges — including the controversial Highway 413 and Bradford Bypass projects around Toronto. According to the fall economic statement, the province is counting on these multi-year, billion-dollar projects to drive its economic recovery. Funding for health care, including the province’s troubled system of long-term care, was the mini-budget’s final pillar.

When asked what kind of spending future budgets will prioritize, Bethlenfalvy avoided specifics, saying only that “being fiscally responsible is definitely (still) one of my priorities, and one of our government’s priorities.” 

In the best-case scenario, Ontario returns to black in 2026-27, according to his last budget. But in a more recent analysis, the province’s independent Financial Accountability Office said the books won’t balance until 2029-30 at the earliest.

“Right now, we have an incredible amount of uncertainty,” Bethlenfalvy said of those projections. “No one really knows what’s around the corner.”

What should be expected is a continued push to innovate government operations and to make government services more efficient, Bethlenfalvy said.

The PCs have resisted raising taxes to pay for the debt incurred during the pandemic, and for more than 10 years of deficits that preceded it. But they’ve also failed to keep two promises: to cut the provincial gas tax by 10 cents a litre, and to lower income taxes for middle-income earners by 20 per cent.

Ford said this fall that a 5.7 cent/litre gas tax cut would come before next spring’s budget, but Bethlenfalvy wouldn’t say if the income-tax cut was still on the table.

“I know you won’t like this, but stay tuned,” he said when pushed for an answer.

As Canada’s Finance minister, Bethlenfalvy’s role model, Michael Wilson, never balanced the federal books.

But he came close by restoring Ottawa to an operating surplus: Had he not inherited more than $200 billion in high-interest debt, his government would have eventually gone into black. He got there partly by cutting loose budget-sucking Crown agencies and making targeted tax reforms.

Before going on to negotiate NAFTA as minister of International Trade, Wilson’s main legacy as Finance minister was introducing the federal goods and services tax (GST). While controversial at the time of its creation, the GST became a critical revenue generator for the surpluses of the Chrétien and Martin governments to come.

Wilson, of course, faced the “silent menace” of deficits — but never the “invisible enemy” of a pandemic.


This article was first published in the iPolitics Holiday Magazine that was printed in early December. Some information may be outdated at the time of its publication online in late December.

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