Spending is the Source of Ontario’s Deficit and Debt Problem

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Ontario’s net debt is projected to reach $298 billion in 2015/16, by far the highest level in its history. This amounts to just over $21,600 in provincial government debt per Ontarian. Ontario’s net debt has increased dramatically since 2003/04, with the province running budget deficits in 10 of the past 13 years. These annual deficits have ranged from $1.6 to $19.3 billion, averaging $9.7 billion over the whole period.

The primary reason for Ontario’s persistent deficits is spending growth over the past decade, which has significantly outstripped key economic metrics. Between 2003/04 and 2015/16, provincial program spending increased by 71.6% from $70.4 billion to $120.9 billion. On average, program spending  increased by 4.7% annually during this period, greatly surpassing the average annual rate of inflation plus population growth (2.8%) and of economic growth (3.2%) in the province.

If the government had restrained program spending growth to the rate of nominal GDP growth since 2003/04, the province would be facing a projected $10.7 billion surplus this fiscal year instead of a $7.5 billion deficit. If program spending had been held to the pace of inflation plus population growth over this period, the surplus in 2015/16 would be even larger.

Under both scenarios of restrained spending growth, Ontario would have run just one budget deficit over the past 13 years instead of 10, and the large-scale run-up in provincial net debt since 2003/04 would have been avoided.

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