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Minister Peter Bethlenfalvy's Remarks at the Empire Club

Speech

Minister Peter Bethlenfalvy's Remarks at the Empire Club

The Challenge of Our Generation: Building a Modern, Sustainable Ontario Government

Treasury Board Secretariat

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Thank you Kent for the kind introduction, and thank you to the Empire Club for having me. It is wonderful to be here. 

Before I begin, I would like to take a moment to acknowledge some of my colleagues who have joined us today. 

I'd also like to recognize Karen Hughes, who has stepped into the role of Acting Deputy Minister for Treasury Board Secretariat. In the last month, she and her team have done yeoman's work in leading our ministry and indeed the whole of government through the multi-year planning process — a project that will guide the success or failure of our ability to modernize and transform. For those of you who don't know, Karen is actually a former coach of the Canadian Women's Hockey Team that won gold at the Salt Lake City Olympics in 2002. This is the calibre of person we have leading our team at Treasury Board, and we are so fortunate to have her. 

The Empire Club has a history of fostering important discourse in Ontario. Winston Churchill, Ronald Reagan and Margaret Thatcher have all addressed audiences from the Empire Club podium, and you may speculate that if a conservative politician like myself was to begin my speech with a quote, it would be from someone like that. 

But the truth is, as we consider the fiscal situation we were left and the task ahead of us, I take solace in a line from another speaker to the Empire Club, famed actress Audrey Hepburn, who once said "Nothing is impossible, the word itself says 'I'm possible'!" 

This is the confidence that our province must employ as we begin to tackle profound change. 

Since being elected, our Government for the People, led by Premier Doug Ford, has focussed on five clear priorities that sit at the foundation of all our commitments. 

We promised to put more money in people's pockets and have delivered by cancelling the cap-and-trade carbon tax, and lowering gas prices and home-heating bills. Our government has also taken immediate steps to freeze drivers' license fees and cancel Drive Clean. Thanks to the efforts of my friend and colleague Minister Rod Phillips, our government is playing a leadership role on the national stage in the fight against the federal carbon tax. 

Second, we promised we would clean up the Hydro Mess and change the leadership at Hydro One, which I can tell you was a major irritant for my constituents — something that came up time and time again on the doorstep during the election. 

Third, we promised we would create and protect better jobs, and let me tell you we are well underway with our legislation to repeal the job-killing parts of Bill 148, while winding down the Ontario College of Trades. 

Fourth, we promised we would end hallway health care.And on this, I would note that Minister Christine Elliott has already announced that our government is opening up 6,000 new long-term care beds, along with a historic 'surge' funding that will open up an additional 1,000 spaces to help reduce the strain from flu season. 

But the priority that I want to talk about today is Restoring Accountability, Trust and Transparency to government. 

Let's not sugarcoat it: we inherited a mounting fiscal crisis from the previous Liberal Government — one that, left unchecked, imperils the core services of government. 

We are determined to rise to this challenge. Minister Fedeli will share some of the solution next week when he introduces our government's first Fall Economic Statement. 

For my part I want to talk about the steps our government will take to restore trust and accountability, by harnessing the power of transformation and modernization. 

Let's begin by looking at the scale of the financial challenge we inherited from the previous Liberal Government. 

Even getting accurate information about the province's financial position proved to be an immense challenge. As we now know, the Liberals actively understated what was, in fact, a growing structural deficit. 

Whether we are talking about trying to undermine the Auditor General in order to apply jointly sponsored pension assets to the province's revenues, or going to phenomenal lengths to obfuscate Hydro subsidies off-book as part of their Fair Hydro scheme. The previous government left the credibility of the province's financial accountability in tatters. 

And certainly, on these points, we owe a debt of gratitude to the Auditor General — who showed diligence and sophistication in identifying accounting practices that did not meet proper or fiduciary standards. 

One of our first decisions in government was when we announced that we would strike an Independent Financial Commission of Inquiry into the previous government's budget practices, alongside an external line-by-line review of all government spending. 

And the numbers are sobering. The Inquiry revealed that under the previous government, Ontario's debt has reached a staggering $338B, and a $15B deficit for the current year. 

  • In just 15 years, the debt-to-GDP ratio went from 27% to 40.5% in 2018-19 — this is concerning on all accounts, and even crosses a red line identified by my predecessor in this role, Deb Matthews. 
  • Our province is now the most indebted subnational jurisdiction in the world. And rising debt-to-GDP has resulted in multiple rating agencies issuing credit downgrades, which have ultimately driven up our borrowing costs by millions of dollars. 
  • Currently, Ontario spends more on interest payments than it does on the entire Public Service or post-secondary education. 
  • That means we are spending approximately $1.4M on interest every hour. That's $2M on interest alone over the course of this lunch. So please enjoy your lunch if you can hold it down. 
  • We could also see a recession in the next few years that could put further pressure on our debt-to-GDP ratio. 
  • And according to Canada's Parliamentary Budget Officer, Ontario's current fiscal policies are not sustainable over the long term. 

This should be a wake-up call to all Ontarians. 

Prior to entering public life, I spent my career evaluating financial risk. Some ask me if the line items that I see on Ontario's balance sheet keep me up at night. I say no, I sleep like a baby, I wake up every hour and I cry. 

My experience at DBRS, Dominion Bond Rating Service, a credit rating agency, has given me a unique insight into sovereign credit ratings. As Co-President, my team led reviews for sovereigns and sub-nationals around the globe and what I learned is that credit is not infinite. 

We saw several sovereign ratings plummet during the financial crisis and beyond. In fact, my team downgraded the credit rating of this Province in 2009. 

Governments cannot assume that markets have limitless appetite for public debt, as some European countries are now finding out the hard way. 

That's why I call our public finances the challenge of our generation. 

In fact — it is fair to say that bringing the language of business to the business of government is one of the reasons I put my name on the ballot in the first place. And it's why I consider myself particularly fortunate to have been asked by Premier Ford to serve as President of the Treasury Board, where this discipline can be put to good use. 

For example, Treasury Board has driven rigour through the whole operation of government by establishing, for the first time, a Terms of Reference. 

This work is vital because through it, we can hold each ministry to account for their spending and measure performance against dollars spent. We need to change the previous Liberal government ethos of measuring success based on dollars spent, to one of measuring success on results achieved. 

But efficiency is not a goal in and of itself. Efficiency is the means. The goal is structural balance and a more sustainable government. 

That is what we were elected to do. Not just to fulfill a balance sheet commitment, but to ensure that the vital services people across this province rely on meets their needs. 

If we do not take action to reduce the debt and the deficit, our generation, and the next, are at serious risk of jeopardizing core services. 

So the first part of solving a problem is to acknowledge that there is a problem. I am concerned by some public commentary that I've heard that calls into question the veracity of the deficit number provided by the Independent Commission. 

Let me be clear, the Fall Economic Statement will not present any about face from what we have learned from the Commission. A $15B deficit is, in fact, the baseline from which we are operating. 

You need only to consider that by presenting the true $15B deficit, we, for the first time in three years, achieved an unqualified, clean opinion from the Auditor General. 

The threat to our fiscal health as a result of Liberal mismanagement is very real, and very severe. 

We are in the midst of a meaningful expenditure management exercise that will, first and foremost, consider how we can do government differently. 

It is a challenge not borne of ideology. But of simple math. 

If I told you that I was taking out a third mortgage, taking more holidays and spending more money every year than I take in, you might advise me that this will lead to significant financial issues — and you would be right! 

Like families, we cannot indefinitely spend more than we take in. 

We have before us a rare chance to transform public finances and one that we cannot squander. 

This is a "province building" moment. Let me say that again, this is a "province building moment" that if done right, will see a more sustainable Ontario for this year and for future generations 

The line-by-line review led by EY Canada dug into 15 years of financial records. 

What the report found was that had expenditures increased in line with population growth, 2017-18 expenditures would have been $330B lower over 15 years. That's almost the same as our entire provincial debt. 

The review was also accompanied by a consultation with the people called Planning for Prosperity. 

This consultation generated over 26,000 ideas from the People of Ontario who long for government to be easy, accessible, and instant. 

The largest number of ideas submitted were focused on improvements to programs such as ServiceOntario. 

With this information, we now have an opportunity to reshape the customer experience for Ontarians into a modern one. 

When people hear me talk about modernization, they often focus on massive transformation projects, but it is not only about the big things, it is also about the little things, for example: 

  • We cut the phone cords and removed landlines from our offices. In the case of my minister's office alone, saving over $8,000 a year
  • And today, I want to share with you a new step taken by Treasury Board Secretariat — one that I've been thinking about for months, and one which we will seek to proliferate across the whole of government. Since taking office, I have asked officials to take a "paperless approach" to meetings and briefings where possible. The result has been an 86% reduction in binders mailed out for Treasury Board meetings, in addition to other briefings
  • The result? Savings in paper, printing costs, staff costs, and staff working days totaling $26,000 per year. 

This is in addition to 17 trees saved and 54 metric tonnes of GHG savings — all this from one ministry alone. 

The EY report also identified bigger structural challenges that we will begin tackling in the Fall Economic Statement. 

Take old style corporate welfare, which remains a drain on public finances and an unsustainable and inefficient approach to employment. Our government campaigned on ending the Liberal Party's so-called 'Jobs and Prosperity Fund' which was pork barrel politics at its worst. Instead, when we say 'Open for Business' we mean 'Open for everybody'. 

There is a role for government in encouraging job creation — whether it is by using the tax system to incent investment or by cutting red tape and regulatory burden. But the days of governments handing out taxpayer cheques to handpicked companies...with no accountability for job creation or results...those days are over. 

Here is where government and the business community can work more closely together — by tapping the skills and experiences of the brightest to make government more effective. 

That's why today, I am also pleased and really excited to announce that our government will be launching the Planning for Prosperity Advisory Group. This group of independent and respected experts will support the government's transformation agenda by providing their ideas on delivering programs and services in a way that promises the best value for the people of Ontario. 

The non-paid advisors will provide independent advice to government on opportunities for innovation and change to achieve sustainability and budget balance. 

We look forward to hearing their novel, trail-blazing ideas on how to implement changes that will make government work better for Ontarians. 

We need to put structures in place that create a culture of productivity and efficiency. That is why, no matter what difficulty or obstacle, we will transform government into a modern institution that serves the People. 

We all know that diet fads don't work. Similarly, instituting broad program cuts is not the answer. Cuts may achieve a short-term gain, but in the long run, that spending will return. 

Our exercise of expenditure management is about protecting the core services of government. Not doing so hurts our most vulnerable and reduces our ability to invest in what matters. 

We will put the People at the centre of every service, every regulation, every program, every process and every policy. That is our promise to you. 

Together, we will restore trust, accountability and transparency into the province's finances. Transforming the culture of government will allow us to do that. 

After all, the proper management of public finances is not just a fiscal imperative. It is a moral imperative. 

We will protect front line services, and; we will ensure that our province is modern and fiscally sustainable for this generation and for future generations. 

Thank you.

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