Is today’s budget a plan for “unprecedented” times, or for just a moment in time?
It’s an important distinction for budget planners. In times of economic uncertainty, budgets generally include more immediate, targeted support for people and businesses in the line of fire.
In Budget 2025, we see that most vividly in the creation of the Protecting Ontario Account, a fund that will target sectors of the Ontario economy most vulnerable to tariff-related business disruptions by providing liquidity relief as a sort-of bank of last resort, for businesses “that have exhausted available funding.” This is similar in approach to how central banks managed previous monetary system shocks — by providing a funding window when other banks could not.
To me, the Protecting Ontario Account demonstrates a commitment on behalf of the government to businesses affected by risks that they likely couldn’t have anticipated, and to a degree that they likely would not be able to mitigate. I like it because it embodies the concept of managing risk and assigning different types of risks to those entities best able to manage them.
Let me better explain. Businesses operating in the auto sector regularly deal with changes in demand, driven largely by changes in the economy and small changes in trading relationships. These are risks that are familiar and, to some degree, predictable.
Right now, over 12,000 Ontario auto workers have been laid off, not because of recession-induced reduction in demand for cars, but because of tariffs introduced by our southern neighbour and erstwhile ally, who believes that Canadian-made automobiles pose a national security threat to their country. Yes, the country that spends more on defence than the next nine countries combined is afraid of our cars (and our steel, and our aluminum).
This is known as a “tail risk”— a risk that is highly improbable or impossible to accurately forecast, but whose impact can be ferocious. Think of a global pandemic, or a devastating fire that wipes out entire cities. There are limits to how much of this risk any company can manage, and it is logical that government step in as a backstop.
The Ontario Made Manufacturing Investment Tax Credit is another example of the government stepping in to manage a tail risk, by providing additional incentives for manufacturing companies, those who are being hit hardest by the tariffs, to maintain or enhance their presence in Ontario. Other short-term mitigation measures include enhanced rebates on Workplace Safety and Insurance Board (WSIB) premiums and deferring certain business taxes.
But this is a short-term solution to what could become a long-term problem. In the past, governments have focused on skills training, a shift from auto to working on solar panels or wind turbines. But should we be building subway trains instead of automobiles for the next three years? Or pipelines? Or nuclear reactors?
The budget includes a section called “Unleashing Ontario’s Economy.” This is a collection of funds that, again, use the government’s cheque-writing advantage to mitigate some financial risk in re-orienting the economy, finding ways to leverage existing economic activity and nudge it in a direction that would over time help the province to prepare itself for a future trading relationship with the United States that is significantly different than the past one.
And maybe I’m asking too much of a budget. To really “unleash” an economy, there are many other risks that the government could be mitigating, and they aren’t strictly financial. The budget is full of words like “building,” but building things is heavily dependent on a variety of government jurisdictions working together to manage conflicting regulatory and legislative imperatives.
Our inability to build sufficient homes is a testament to that. Municipalities argue they don’t have sufficient funding to build and maintain existing infrastructure, builders argue that there are too many government impediments like regulation and taxes, the federal government, for a time, argued that it wasn’t even in the housing business, and provincial governments ultimately have the ability and accountability over land-use planning but are reluctant to ride roughshod over existing neighborhoods with new rules.
We already know that there is a significant and growing labour shortage in areas like skilled trades. Training is squarely in the purview of the provincial government, but the federal government controls immigration.
If we are to build things, whether it be housing, infrastructure, nuclear reactors or subway trains, we need to understand the key risks to each and hold governments accountable for managing the risks that they are best able to manage. And this “unprecedented” time requires us to think differently and focus on working together.
If we’re going to be creating new industries, let’s get it right from the start. And that needs to include many parties, levels of government and the community working together. While impending change is coming, it is also an opportunity to do things dramatically differently, by better understanding and mitigating the risks inherent in reorienting the province’s economy.
What could that look like? Here’s an example. The City of Toronto is procuring 55 new subway trains for the Bloor line. We’ve already seen the government consider alternatives, perhaps shifting production to Canada where possible. For example, a few weeks ago, the minister of Transportation sent an email to the City of Toronto asking if it would consider a sole-procurement deal of the TTC’s new subway trains to support local workers by building made-in-province trains. We already know that the city and province have put forward $1.52 billion to fund 55 new trains, with the federal government committing $758 million.
A risk analysis around this transaction would first include an analysis of the cost of the project in a normal environment. What would have been the price of the winning bid? Would there have been a premium to sole-source the project compared to the market price?
Now, in our abnormal environment, we’d need to layer on the incremental costs of new tariffs on steel and aluminum, any other incremental costs in terms of creating a new supply chain, materials and labour, that might not have been needed in normal times.
How would these changes impact the timeline for delivery? Would the existing trains need to run for longer, and how much would that cost, both in additional upkeep and potential congestion? Would the economic benefits outweigh the cost? Does the Thunder Bay plant have the capacity to undertake this project, or is incremental investment needed? And how much of this incremental cost/investment can be borne by the market, and how much needs to be backstopped by the government?
Government can be a force for good, especially when some risks are too great for others to bear. But governments, like other large organizations, are bound by processes and policies from the “normal” times. There are risks in doing things differently. There are now a lot more data and analytical techniques to identify and manage that risk than there used to be.
I’d like to see a budget that “Unleashes Government” — one that invests in managing the risks of doing things differently to fully meet the moment.
Peter Weltman is a former Financial Accountability Officer of Ontario.
