Ontario Liberals haven't yet passed the real Drummond test

The Globe and Mail

Ontario Premier Dalton McGuinty, left, and Finance Minister Dwight Duncan share a smile after delivering the province's budget at Queen's Park on Tuesday. (Peter Power/The Globe and Mail)

Even before Dwight Duncan had delivered his fiscal plan on Tuesday, he and his critics were firing volleys back and forth about just how many of Don Drummond’s recommendations it includes.

To listen to the Finance Minister, the fact that he’s adopted more than half the economist’s 362 cost-cutting suggestions and ruled out just nine shows his seriousness about eliminating Ontario’s $15.3-billion deficit. To listen to the opposition Progressive Conservatives, the fact that the governing Liberals kiboshed some of Mr. Drummond’s most controversial proposals – such as scrapping full-day kindergarten and increasing class sizes – shows the contrary.

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Of all the debates around Ontario’s budget, it’s one that spectacularly misses the point.

While Mr. Drummond’s report was a useful catalogue of cost-cutting options, the real value wasn’t in the individual recommendations, most of which were already familiar to people in and around government, and many of which overlapped.

The key take-away was in Mr. Drummond’s compelling assessment that the province couldn’t rely on temporary measures alone to reduce expenses, as in previous fiscal crunches, because there’s little reason to believe revenues will surge upward in the foreseeable future. With low economic growth the new normal, the government would have to undertake structural reform that would stand the test of time.

With the odd quibble, the Liberals accepted this premise. So the really interesting Drummond-related debate is how much they’ve acted on it.

Mr. Duncan’s response, in an interview on Wednesday, was very much indeed. He noted among other things the consolidation of business-support and employment programs, and coming “value-for-money” audits of “every program and service.”

Later the same day, a provincial official suggested most people haven’t grasped the meaningfulness of the budget’s pronouncement that public-sector pensions facing deficits can no longer count on government help. Although the Liberals wouldn’t put it in so many words, the province seems headed toward defined contributions rather than defined benefits – which, as private-sector experiences show, is no small battle.

The Liberals can also point to their increasingly business-minded approach to managing the province’s assets, including an overhaul of the Ontario Lottery and Gaming Corporation, and the offloading of money-losing enterprises such as the Ontario Northland Transportation Commission.

But there are also big warning signs in this budget that the Liberals can’t quite resist short-term fixes, and that they haven’t fully wrapped their heads around the biggest and most contentious long-term ones.

While the Liberals are apparently willing to take on their heretofore allies in organized labour, there’s little indication coming negotiations will focus on restructuring the public-sector work force in ways that would bring long-term improvements to efficiency.

Instead, a willingness to legislate a temporary wage freeze – a measure Mr. Drummond opposed because short-term savings tend to be subsequently wiped out by increases – turned out to be a centrepiece of Mr. Duncan’s plan.

But the biggest cause for concern comes in an area where structural reform isn’t so much an option as a necessity.

With health-care spending making up nearly half of program expenditures, getting it under control is make-or-break. And in the next year or two, if it gets major concessions in contract negotiations with doctors, and savings out of its freeze on hospitals’ global budgets, the government might achieve its extremely ambitious goal of capping growth at 2.1 per cent annually.

What remains a mystery is how it will maintain that restraint. In arguably its biggest disappointment, the budget did nothing to elaborate on the agenda previously laid out by Health Minister Deb Matthews – the pillars of which are shifting toward “evidence-based” medicine, and improving “integration” among health institutions to reduce overlap and find efficiencies.

These are worthy goals, but they’re maddeningly vague, and a budget pivoting toward structural reform could usefully have brought some definition. If there are too many hospital administrations, it could have set a hard target for the number to be merged. If there are procedures that government thinks it shouldn’t be financing, based on the available evidence, this would have been a good time to name them.

Perhaps those are all to come. In the interview, Mr. Duncan insisted that this budget is only the start, that more structural changes “down the road” will show the Liberals are adhering to “the spirit of Drummond.”

No doubt, critics will be standing by with checklists, waiting to see what other recommendations are ticked off. But the real test will be whether the government commits to the central goal of which, for now, it’s only skimmed the surface.

Follow on Twitter: @aradwanski

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