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Bridges and Tax Relief or Slush Funds and Cricket

Author: Kevin Gaudet 2007/08/06
The President of the Ontario Cricket Association says that if he had known he would have received $1 million when all he had asked the Ontario government for was $150,000, he would have asked for $2 million. Thank goodness he didn't. Instead of throwing money at interest groups, the McGuinty government should be putting cash towards capital infrastructure like roads, bridges and sewers, and providing tax relief so taxpayers themselves may choose which interest groups they prefer to fund, if any.

The Auditor General of Ontario (AG) recently issued a scathing report after investigating controversial Ontario government grants in excess of $32 million given to organizations, some with Ontario Liberal Party connections. His report blasts the McGuinty government for its lack of planning, controls, or oversight when it poured out the money in a mad end-of-year spending spree in 2006 and 2007. Many of the groups didn't even ask for any money while others received far more than they ad asked for. Still others were handled verbally with no formal application process and no outline of what the money would be used for.

If the finance minister managed money this way in the private sector he would be fired and prosecuted. In the current financial climate post Enron, Worldcom, Nortel, Global Crossing, Bre-X, and Tyco, rules have been put in place to require spending is better managed, transparent and accountable. Sadly, these rules do not apply to government. But they should.

Two recent stories importantly highlight the perverse consequences from seeking short-term political gain at the expense of a prudent long-term policy view: one about collapsing bridges and the other about sketchy government grants. When governments throw around tax dollars in an effort to buy votes by endearing themselves to targeted groups, they are playing a game that not only cheapens those groups when they accept the cash, but also takes away from priority policy areas. A 2004 TD Bank report suggests the current national infrastructure spending deficit is somewhere between $50 billion and $125 billion and is growing annually.

The problem of governments spending on programs instead of capital infrastructure is not limited to the provinces. Spending is up at all levels of government including the federal and municipal levels. The federal government has been making an effort to address the capital deficit in the military but continues to transfer substantial sums in grants. At the municipal level Toronto, as just one example, spends $40 million on granting programs similar to the ones investigated by the Ontario AG.

Spending must be reduced in non-priority areas like those granting programs subject to the abuse referred to in the AG's report. Doing so gives government the fiscal room to reduce taxes and invest in priority infrastructure. A provincial Gas Tax Accountability Act would require that 100% of fuel tax revenue go to roads, bridges and highways. It would require that such spending be transparently reported in the Public Accounts. It would add over $1 billion to infrastructure spending in Ontario.

The choice is clear for politicians. It is between vote-buying program spending and investments in long-term infrastructure renewal. The answer is equally clear. Bridges and tax relief make better sense that cricket.

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