Drummond Report – The Key Principles

This is the first in what will be a series looking at the recommendations and the implications of the Drummond Report, looking at Ontario’s public services.  So, my apologies to out-of-province or out-of-country readers, but it’s going to be Ontario for the next number of posts.

As you are all aware, the Drummond Report is really about fiscal responsibility, and eliminating the provincial deficit.  So, the first key point is that we’re talking deficit, not debt, the goal is simply to get to the point of spending no more than we earn each year, so that debt will hold steady rather than grow.  This is an important endeavour, one that those of any political stripe can get behind, because the more money that we spend servicing debt each year, the less we can spend on other programs.

The second key point is that the Drummond Report focuses mostly on expenditure reduction versus revenue generation.  While a number of recommendations are made related to the taxation system, the focus is not on analysing the optimum corporate or income tax rates.  This is important, because if new revenue is not forthcoming, then we must cut in order to balance the books.  We can argue another day about revenues and taxation.

Much of the Report focuses on increased efficiency, such as consolidating back office services.  This makes plenty of sense, but the third key point is that much of this will cost us jobs.  Approximately 50% of spending is labour costs, so decreasing spending will relate to decreased jobs.  For example, if we consolidate all purchasing departments, that means someone who works in purchasing somewhere will be laid off.  The same, of course, with detention centres.  So this will hurt, but not as much as continuing to have to cut programs to service debt.

A fourth key point highlighted in the Report is that the government should not play Santa Claus.  That is, there should be nothing in the system by which the government subsidizes costs for everyone ,such as water, or gives away money to everyone such as the Ontario Clean Energy Benefit.  This is regressive, and means that our tax dollars are going to the rich as much as the poor.  Eliminating these give-aways and creating real world costing means that the cost of living will go up, necessitating an increase in social assistance as recommended in the report.  This is the most important point, because we can use these recommendations to actually decrease income inequality, rather than increasing poverty.

And, as opposed to government give-aways, on the flip side the Report makes a fifth key point that we should hang onto revenue generating assets.  Whether the government should be in casinos, or alcohol, or driver licensing, lets hang onto these items and keep taxes down if they are generating revenues.  This is a message that municipal governments need to hear as well, because Drummond makes it clear that selling revenue-generators to meet short-term fiscal goals (such as development or just balancing the books) is poor long-term fiscal planning.

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  1. Pingback: A Better Budget: Primer | Abe Oudshoorn's Blog

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