VZCZCXRO6564
RR RUEHGA RUEHHA RUEHQU RUEHVC
DE RUEHON #0088/01 0871821
ZNR UUUUU ZZH
R 271821Z MAR 08
FM AMCONSUL TORONTO
TO RUEHC/SECSTATE WASHDC 2412
INFO RUCNCAN/ALCAN COLLECTIVE

UNCLAS SECTION 01 OF 02 TORONTO 000088 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PGOV ETRD ELAB CA
SUBJECT: Ontario Budget Focuses on Economic Stabilization 
 
 
Sensitive But Unclassified - Please Protect Accordingly. 
 
¶1. (SBU) SUMMARY:  Ontario's 2008 budget, unveiled on March 25, 
represents a concerted attempt by Premier Dalton McGuinty to take an 
active role in stabilizing and growing the Ontario economy.  Against 
the wishes of the federal government, which has waged an on and off 
war of words with Ontario provincial officials over taxation 
policies, the budget contains only modest tax relief for Ontario 
businesses.  McGuinty has proposed a wide range of spending measures 
in line with his election promises to "modernize" Ontario's 
workforce and aid ailing industries.  Conservative leader John Tory 
criticized the budget for its "last-minute" spending spree on 
infrastructure that will "be here today and gone tomorrow" and the 
absence of corporate tax cuts to attract manufacturers to the 
province.  END SUMMARY. 
 
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Ontario Government Focuses on Employment 
---------------------------------------- 
 
¶2. (U) A C$1.5 billion "Skills to Jobs Action Plan" is the 
centerpiece of Ontario's 2008 budget.  Combined with other 
investment proposals, the government plans to invest nearly C$2 
billion in workforce training measures.  The plan complements 
earlier initiatives such as the Next Generation Job Fund, the 
Ontario Automotive Investment Strategy (OAIS), and the Advanced 
Manufacturing Investment Strategy (AMIS).  Ontario estimates that 
the initiatives will assist up to 20,000 unemployed workers who 
commit to a long-term training plan for a second career. 
 
--------------------------------- 
Investment and Business Promotion 
--------------------------------- 
 
¶3. (U) The budget proposes C$750 million in tax cuts over four 
years.  This is in addition to the C$1.1 billion of corporate tax 
relief from FY2008 to FY2010 announced in Ontario's mid-year budget 
update in December 2007.  Together, the mid-year 2007 budget update 
and this budget offer business tax relief of almost C$600 million in 
FY08 and a further C$500 million in FY09.  Most prominent among tax 
relief measures is the elimination of the business capital tax 
retroactive to January 1, 2007, for businesses primarily engaged in 
manufacturing and resource activities.  The government intends to 
eliminate the capital tax on all businesses by July 2010. 
 
¶4. (U) The budget also proposes tax incentives for start-ups and 
"innovative firms."  A 10-year Ontario income tax exemption is 
included for new corporations that commercialize intellectual 
property developed by Canadian universities, colleges or research 
institutes.  The budget includes C$300 million for new investments 
by the Ministry of Research and Innovation and tax credits to small 
companies conducting scientific research and development in Ontario. 
  Provincial Finance Minister Dwight Duncan also announced a C$4 
million plan to collaborate with Ontario universities over the next 
three years to develop the financial services workforce.  Toronto is 
the third largest financial center in North America after New York 
and Chicago, and the 15th biggest in the world.  . 
 
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Infrastructure 
-------------- 
 
¶5. (U) The budget includes a one-time C$1 billion expenditure for 
infrastructure improvement, to be paid for out of the C$5 billion 
FY2007 surplus.  In FY2008, which begins on April 1, the province 
intends to spend C$7.5 billion on transportation infrastructure 
including rail, road, and transit projects throughout the province 
with sizable amounts dedicated to supporting projects outside the 
Greater Toronto Area.  The budget fully funds the province's half of 
the cost of the new Windsor access road that will link the end of 
highway 401 with the new Detroit River International Crossing (DRIC) 
bridge linking Windsor and Detroit.  Access road construction is 
scheduled to begin in 2009. 
 
-------------------------- 
Energy and the Environment 
-------------------------- 
 
¶6. (U) The budget includes funds for the implementation of the 
Liberals' election promise to reduce electricity demand by 6,300 
megawatts (MW), phase out the use of coal-fired electricity plants 
by 2014, and double the use of renewable energy.  The replacement of 
coal-fired plants could mean a reduction of up to 30 megatons of 
greenhouse gas (GHG) emissions, the single-largest emissions 
reduction in Canada.  The government also committed to consult with 
municipalities and the energy generation sector to structure 
property tax treatment of renewable energy facilities to promote the 
development of green energy.  Ontario's nuclear industry will also 
benefit from increased funding for apprenticeship programs to 
develop skilled workers. 
 
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TORONTO 00000088  002 OF 002 
 
 
Budget Deficit Eliminated 
------------------------- 
 
¶7. (U) The McGuinty government has eliminated the C$5.5 billion 
deficit it inherited from its Progressive Conservative predecessors 
and is on track to achieve its third consecutive budget surplus.  A 
C$600 million surplus is forecast for 2007-2008.  The province's 
accumulated debt-to-GDP ratio should improve from 25.2% in 2003-2004 
to 16.2% by 2010-2011. 
 
--------------------------------- 
Opposition:  Too Little, Too Late 
--------------------------------- 
 
¶8. (U) Conservative opposition leader John Tory, who currently does 
not hold a seat in the Ontario legislature, condemned the McGuinty 
budget as excessively interventionist and insufficient to stimulate 
economic growth in Ontario.  He noted that Ontario was moving 
perilously close to becoming a "have-not" province under Canada's 
scheme of equalization payments among the provinces. 
 
¶9. (U) Tory described the budget as "Dalton and Dwight's Deeper 
Downturn."  Ontario, Tory asserted, is insufficiently prepared to 
deal with a prolonged downturn in either the Canadian or U.S. 
economy.  Instead of industry-specific spending programs scattered 
across the province, Tory suggested that the Ontario government (and 
any Tory-led government) would focus on reducing the taxation and 
regulation burden on all residents.  Only a thorough paring-back of 
government activity in Ontario would allow the province to improve 
its last-place rankings in economic growth, according to the PC 
leader. 
 
¶10. (SBU) COMMENT:  The general contours of McGuinty's budget bear 
no surprises and largely align with his activist governing 
philosophy and expansive campaign promises.  Ontario's 
export-dependent economy continues to evolve, due in no small part, 
to the strong Canadian dollar, slowing U.S. economy, and higher oil 
prices.  The budget is a reflection of his efforts to minimize pain 
resulting from the ongoing restructuring of the Ontario economy. 
END COMMENT. 
 
NAY