The two or three people out there who didn’t think Doug Ford’s Ontario would be markedly different than that of Kathleen Wynne certainly had their eyes opened during last week’s brief Throne Speech.
Lower electricity bills. Lower personal and business taxes. Lower gas prices. Investments in healthcare. Transparent and accountable bookkeeping at Queen’s Park. Axing the carbon cap-and-trade program which contributed to provincial revenues. Pulling the plug on often-controversial and divisive wind farm projects.
The old adage in Canadian politics is that “Tory times are tough times.” Liberals would definitely like us to think so.
But it’s fair to say any change in government, especially after the displaced incumbent has been in power for so long, does mean a period of uncertainty. If the new government is intent on cost reduction and quick to act on campaign promises which reduce its revenues, in the short-term at least, this period of uncertainty may be longer, deeper and more disruptive to the economy.
And that’s before we add in any macro-economic factors which might give reason for restraint.
In other words, it’s a bad time to really rock the boat for a province which has already endured a decade of tough times for its export-driven manufacturing sector, especially in the face of a trade war with its largest trading partner.
Should we be worried? There is a long history of Tories cutting when perhaps they should be spending.
The “inward-looking” Tory
In his A History of the English-Speaking Peoples, Winston Churchill has a whole section devoted to the Tories of two centuries ago, describing them as “inward-looking.” These are the folks who want to reduce public spending, avoid getting tangled up in foreign affairs which might cost the country money and who favour small government.
It can be a thin line from “inward-looking” to “backward”.
Ford’s cuts to the infrastructure budget for our elementary and high schools is a perfect example.
We already have in this province (and across Canada) a huge infrastructure deficit. It is thanks to past governments, of all leanings, failing to properly budget against the inevitable costs of repair and maintenance, while at the same time appearing to ignore that our small number of large cities have become very large, with internal road networks originally designed in the 19th century needing to accommodate a very mobile 21st century.
I spoke recently with a superintendent of schools about how much wear and tear high schools in particular in his district suffer each year from those rowdy teenagers. Repair and maintenance is a constant need. Fall behind for even a little while and it will become that much more costly to catch up down the road.
Then there is the constant need for reinvestment as community demographics change – old schools become redundant and new schools must be built elsewhere.
The shakeup from Industry 4.0
We also stand on the edge, or might already be in the thick of, the Fourth Industrial Revolution. Many argue we’ve already taken the plunge. Data, not oil, is now the world’s most valuable resource.
Industry 4.0 is reshaping entire industries and their supply chains as smart sensors, AI and analytics redefine how we do business, manage business, deliver services and build engagement between brand and consumer.
Governments must be responsive to this, and these are fast-approaching realities.
History is full of trades, industries and technologies that became obsolete. People with skills which no longer mattered had to retrain and adapt to new labour force needs. Industry 4.0 is accelerating this natural evolution. If the futurists are even half-right, the changes we can expect by 2025 across our economy and our society will have significant impacts on employment.
Government has to be on the ball and responsive to this, with the right investments in education, retraining and social assistance for those in career transition.
No time for laissez-faire policies
I recently attended an event which featured former Quebec Liberal Premier Jean Charest as speaker. He expressed his belief that his government did the right thing when it rolled out low-cost daycare, subsidized by the taxpayer, in Quebec. He estimates that providing affordable daycare allowed some 300,000 women to join the labour force. This addition to the workforce will be paying lots of taxes to offset the cost of daycare.
Contrast that with the typical Tory view, that the average family should be able to deal with the challenge of balancing childcare and income without such government intervention. This is hardly realistic in an economy in which home ownership (at least in our large cities) demands a dual income, sometimes more.
I am also reminded of the Great Depression years, when Tory R.B. Bennett served as Canada’s 11th prime minister. He too advocated spending cuts, with laissez-faire policies that proved largely ineffective – what Canada really needed was increased spending and increased liquidity to grease the economy’s wheels. When Bennett finally came around and decided to follow the lead of U.S. President Franklin D. Roosevelt and his New Deal, it proved too little, too late for his re-election ambitions.
But this isn’t the 1930s. It isn’t even the 1990s when the Mike Harris PCs held Ontario. We stand at a crossroads of economic and social change driven by rapid advances in digital technology, and the very unpredictable gusts of wind from the south.
Ford Nation’s bite might not be that bad
So how does all this affect commercial real estate?
Like always, I want to remind people that real estate is a derivative industry, generating revenue from how it gets used. From cradle to grave, we all occupy real estate for everything we do, so the greater the demand the more valuable property becomes – and vice versa.
Do we need to worry about this Doug Ford government?
Despite the short-term shakeups, I suspect the bark will prove worse than the bite. Ford may appear to have a disposition similar to that fellow down south, but he is far less bellicose. He understands that our economic growth and well-being depends on trade.
If we fear too much cost-cutting too fast at such a sensitive time, we can perhaps find reason for optimism in last week’s Throne Speech. While the Ford PCs are committed to reining in the deficit, they have the sense to be cautious about giving a concrete time frame in which to balance it.
What is important is not cutting taxes, but having taxes wisely spent, and to stop spending in areas where it is no longer needed. Perhaps an idea is to have a provincial department whose only responsibility is looking for things we can stop doing.
I wish the new government well as we face a decade of rapid change. Hopefully, its approach to public sector planning will be open to future needs and provide the necessary grease for Ontario’s economy.
To discuss this or any valuation topic in the context of your property, please contact me at [email protected]. I am also interested in your feedback and suggestions for future articles.