On Thursday November 18, the Ontario Minister of
Finance, Hon. Dwight Duncan, released the much anticipated Fall
Economic Statement and Fiscal Update (the Update) as required by
statute. The Update is positioned in the context of providing
immediate tax reductions and energy rate reductions for Ontario
families. The Update describes a series of initiatives to be taken
immediately as well as the current economic and fiscal conditions
of the province and its outlook for the next year. The plan also
discusses Ontario's borrowing and debt management strategies,
its tax and pension modernization reform and the key elements for
public consultation on the 2011 provincial budget.
The following bulletin provides a brief summary of new
initiatives outlined in the Update that will be interest to
The Update provides detailed background on the electricity
policies that have been implemented over the course of the past
several years. In the move toward more renewable electricity
generation, upgrades to existing generation and increased
investment in distribution and transmission infrastructure, the
government is forecasting price increases of roughly 3.5% each year
for the next 20 years. However over the course of the next five
years prices are forecast to increase by 7.9% annually.
In order to offset the new costs associated with the
government's plans, it is proposing direct energy rate
reductions through a new Ontario Clean Energy Benefit (OCEB)
program. The OCEB would provide eligible consumers with a benefit
equal to 10% of the total cost of electricity on their bills,
including tax, effective January 1, 2011. The benefit would apply
to roughly 4 million residential consumers, and more than 400,000
small businesses, farms and other consumers.
The following is an example of the impact the proposed OCEB
would have on monthly electricity bills:
Due to the length of time required to implement this change, the
proposed OCEB price adjustments would appear on electricity bills
no later than May 2011, and would be retroactive to January 1,
In 2010-11, the estimated cost of the proposed OCEB is $300
million, with an estimated full-year cost of $1.1 billion in the
next fiscal year.
The Update introduces new measures that would protect consumers
and investors, and modernize financial regulation in Ontario.
Specifically, the government is proposing amendments to the
Ontario Securities Act to allow the Ontario Securities
Commission to develop and implement a regulatory framework for
over-the-counter (OTC) derivatives. These amendments would allow
for new rules specifically designed for OTC derivatives and would
also include derivatives within the scope of existing
insider-trading offences. The OSC will undertake consultations in
developing the rules that support these proposals.
Additional proposed amendments to the Ontario Securities
Act would provide for regulatory oversight of credit rating
agencies, and strengthen the oversight of alternative trading
systems, which are securities marketplaces that perform some of the
functions of an exchange.
These reforms are designed to assist Canada in achieving its
international financial reform commitments and assist in the
transition to the new Canadian Securities Regulator.
Economic and Fiscal Outlook
The key economic indicators have show some improvement since the
2008 recession. At the present time, the Ministry of Finance is
projecting real GDP growth of 3.2% in 2010, 2.2% in 2011, 2.5% in
2012 and 2.7% in 2013. Another indicator shows employment
increasing since May 2009 by 2.9% or 186,100 new jobs, with about
75% of jobs lost during the recession having been recovered.
Ontario's budget deficit for 2009 was $19.3 billion but now the
government is forecasting a deficit of $18.8 billion for
Total revenue has increased by 0.7% while total expenditure has
decreased by 0.2% in 2009-2010. The Update indicates that the
government is on track to meet its medium term fiscal targets
outlined in the 2010 provincial Budget. The revenue picture is
brighter for 2010-11 at $107.7 billion, about $0.8 billion higher
than forecast in Budget. In summary, the Update suggests that
sustained moderate economic growth is expected due to growth in
export markets and increased demand for consumer goods over
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