Quebec continues to outperform Ontario on government debt

The health of the economy is making headlines every day, but Canadians should not overlook the state of government finances. Quebec has often had the weakest government finances in Canada. At the dawn of the 2008/09 recession, for example, Quebec had the largest debt burden of any province relative to the size of its economy. By contrast, at least until the early 1990s, provincial governments in Ontario have generally kept their books in comparatively good shape.

In recent years, however, the fiscal positions of the two provinces have flipped and now Ontarians are in the unusual position of envying the state of Quebec’s books.

To understand the scale of the reversal, let’s first consider net government debt (all debt minus financial assets) per person. In 2008/09, Ontario’s per-person net debt was $13,164 compared to $17,295 in Quebec. This year, Ontario’s per person debt load has climbed to $28,333 compared to $23,865 in Quebec.

In other words, 15 years ago Quebec’s per-person debt was 31 per cent larger than Ontario’s. Today, Ontario’s debt is 19 per cent larger than Quebec’s.

The relative change in fiscal strength is even more dramatic if we consider debt relative to the size of the provincial economy. On the eve of the 2008/09 recession, Ontario’s net debt was 27.8 per cent as large as its economy compared to 42.6 per cent for Quebec.

Since then, Ontario’s debt has climbed to 41.4 per cent while Quebec’s has fallen slightly to 38.5 per cent (and this decline has been particularly rapid since 2012/13 when it peaked at 53 per cent). By contrast, after climbing quickly in the years following the 2008/09 recession, Ontario has made no similar progress in reducing its debt burden, which hovers near its all-time high.

And it’s not just compared to Quebec—Ontario’s relative fiscal position within Canada has also deteriorated. Several other provinces, which have historically struggled to successfully manage their finances, are now far less indebted than Ontario.

Prince Edward Island, New Brunswick and Nova Scotia have net debt loads approximately 60 per cent as large as Ontario’s. While the Maritime provinces face fiscal challenges of their own, it’s a meaningfully reversal that Ontario now carries much more debt than these historically highly-indebted jurisdictions.

Finally, while it’s widely known that Ontario carries a large government debt burden, a recent report from the Financial Accountability Office of Ontario (a publicly funded arms-length agency that monitors Ontario’s finances) highlights how Ontario is now highly indebted by Canadian standards after adjusting for the size of provincial populations or economies. For example, Ontario’s per-person government debt is 66.6 per cent higher than the weighted average of all other provinces.

If the Ford government wants to reverse Ontario’s slide and improve the province’s fiscal health relative to other provinces, it must get serious about keeping the promises to balance the books and put Ontario on a path to fiscal sustainability.