TORONTO — Ontario’s Liberal government is crediting revenue from the initial public offering of Hydro One, in part, for a lower deficit projection of $7.5 billion, despite insisting all of the money raised from the sale is going to infrastructure.
In its fall economic update released Thursday, the government projects the 2015-16 deficit will be $1 billion lower than the $8.5 billion it forecast in the spring budget. The 2014-15 deficit is $10.3 billion.
An approximately $1.1-billion increase in net revenue “largely reflects” the success of the Hydro One IPO, the document says.
But that doesn’t mean the government is using that money to balance the books, said Finance Minister Charles Sousa.
“All of it is going into the Trillium Trust (infrastructure fund),” he said. But it must be on the books as a non-tax revenue item, he said.
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Progressive Conservative critic Vic Fedeli suggested that once the Hydro One revenue is moved into the Trillium Trust the deficit rises again. But he said he has all along doubted the Liberal promise that all of the proceeds from asset sales will go toward infrastructure.
“The only explanation is the fact that it’s artificially there,” he said.
“You can’t spend it twice. You’re either going to put it against the deficit, as they did here, or you’re going to put it in the other column. They’re attempting to spend the same dollars two times.”
The IPO raised $1.83 billion, but a deferred tax asset benefit, special dividend and payment-in-lieu of taxes brought the total from the sale of 15 per cent of the utility to $5 billion.
That was $3 billion more than Ontario had projected, Sousa said.
The NDP is concerned that a mention in the economic update that the government “will need to consider other tools” to get to balance by its self-imposed target of 2017-18 if revenue growth falls short as a signal it is planning on selling off more assets.
Sousa would not rule out new or higher taxes as those “other tools.”
The fall economic statement also reveals the Liberals expect to see $300 million in cap-and-trade proceeds — which Premier Kathleen Wynne has said will go to reinvesting in green technology and helping people mitigate increased costs — rising to $1.3 billion in 2017-18. Sousa said revenue from the cap-and-trade system would be accounted for in the same way as the Hydro One revenue.
The rosy picture the government attempted to paint of a quicker path to balance also came with a lower growth forecast. In the spring budget the government projected the province’s real GDP would increase by 2.7 per cent in 2015 and 2.4 per cent in 2016.
Now, the government says real GDP growth is forecast to be 1.9 per cent in 2015 and 2.2 per cent in 2016.
The province’s net debt is still projected to nearly hit $300 billion by March 31, 2016, though the current projection is now slightly lower than the estimate in the budget.
Interest on debt is also now forecast to be $140 million below the estimate in the budget because of low interest rates.
Sousa also said the government will establish a committee to look at improving the representation of women on boards and in senior executive positions, as well as a committee on the sharing economy, encompassing ride-hailing services such as Uber.