Ontario’s new 2018 budget has faced criticism from the usual suspects in Canadian punditry who have decried the new social spending it promises.
Randell Denley (formerly a Conservative candidate) complained in the Ottawa Citizen that the government is “spending wildly”. In the Toronto Sun, Lorrie Goldstein crowd the plan was a “house of cards”. Even former Harper Cabinet Minister John Baird got in on the action, calling the budget “so crazy”.
All of these columnists toss around big dollar numbers to make their case — $100 million of new spending, $1 billion of new debt! But these numbers don’t really tell us much. In the context of a budget for Ontario, is $100 million a lot? $1 billion? It’s hard to know.
One way to think about this more clearly is to determine how much we spend on social services as a share of our GDP. We can then compare this figure against the ratios of other countries to give us a rough approximation of what we can afford
Using growth projections from TD, we can estimate Ontario’s GDP in 2019 to be around $847.6 billion. The province’s social spending¹ at that time, should the government implement the proposed budget, would be around $145.4 billion.
Given these projections, we would expect Ontario’s spending on public services to reach around 17.2% of GDP by 2019.
This alone does not tell us much of anything. To determine whether 17.2% is too much or too little social spending, we need to compare that with similar ratios in other countries.
The OECD compiles data on social spending internationally. Using this, we can see that Denmark’s public social spending equals 28.7% of its GDP, Norway’s is 25.1%, Sweden’s is 27.1%, and Finland’s is 30.8%. The average ratio of social spending to GDP in Nordic countries is 27.9%.
The reality is that Ontario’s public social spending is well below the Nordic countries which are regularly ranked as the best places to live, largely due to the strong social safety nets their governments have invested in creating.
In order to achieve a comparable level of social spending, Ontario would have to allocate $236.5 billion per year to social spending — an increase of $91.1 billion beyond what is allocated in Ontario’s budget.
Contrary to the takes of many pundits, Ontario’s latest budget is a far cry from “spending wildly”. In fact, the modest spending increase of $18.3 billion over the next 3 years only gets us 1/5th of the way to where we ought to be.
- We include all program spending in this total except for that allocated to “justice”, such as courts, police, etc. This is typically not included in OECD social spending data.