Will Ontario rethink its budget?

Ontario’s recent upset election results, which gave the incumbent Liberals a majority, should only strengthen that government’s resolve when it comes to financial services sector policy. For example, the government has recently been contemplating some new regulations for financial planners. While a private member’s bill on that topic appears destined to fail, the election results will give the government a free hand to deliver some increased oversight to the field.

What’s less certain is the future for the budget that triggered the election in the first place. That budget promised some key measures – including a healthy increase in public spending, heavier taxes on high-income earners and a new provincial pension plan – designed to win support from the New Democratic Party, which used to hold the balance of power. This all made political sense at the time. But given the cold, hard reality of weak provincial finances, the question is whether the government will seize the opportunity to put sound policy ahead of politics.

While voters clearly rejected the Tories’ plan to cut their way out of fiscal trouble, the new majority Liberal government now may be able to move off its path of profligacy in order to get its finances under better control.

However, the Ontario Liberals’ proposal to create a stand-alone provincial pension plan is not ideal. Such an approach fragments the public pension system, creates added bureaucracy and will impose administrative costs. Expanding the Canada Pension Plan certainly would be a more efficient, cost-effective way to address the concern of inadequate retirement savings in many Canadian households.

In the wake of the Ontario Liberals’ decisive election victory, perhaps the feds also will be prepared to take a step back and reconsider their ideological devotion to voluntary, private methods of increasing retirement savings. Indeed, now that the Ontario election campaign is over and political uncertainty reduced, both the feds and Ontario should be in a position to put policy ahead of politics and ideology.

Whether they do so will dictate the impact of this election on the economy, the financial services sector and Canadian households overall.