Commission on the Reform of Ontario's Public Services

Chapter 11: Business Support
An Illustrative Example:
In many cases, current incentives are geared towards stabilization instead of industry transformation. Ontario’s new Risk Management
Program (RMP) is an example of a business support program in which incentives are not aligned with productivity growth and market
principles. This program helps manage business risk by providing income stability to participating farmers in grain and oilseeds, cattle,
hog, sheep and veal, as well as edible horticulture sectors. As it is currently designed, it is a so-called “risk-sharing” program, but the
province assumes the lion’s share of the risk by assuming all the liability to compensate for any drop in commodity prices. A significant
drop in prices could drive up the cost of the program by hundreds of millions of dollars, with no share being borne by the businesses.
Programs like the RMP serve to support the status quo. By focusing the program objective on maintenance, not improvement, it
provides businesses with no incentive to increase efficiency or expand markets — the very activities necessary to increase incomes
and jobs. Instead of stabilizing industries, the province should be shifting efforts towards investments in innovation that support
efficiencies and productivity gains. In the case of the RMP, investments in equipment and process improvements that help farmers
become more competitive and less sensitive to shifting costs are the preferred route.
Reviewing the RMP, and other programs like it, within a broader context of support for businesses could lead to a more integrated
bundle of mutually supportive and complementary initiatives that support producers in the short term but also align incentives to assist
the target sectors in achieving long-term competitiveness and, in turn, job creation.
Currently, Ontario has a hodgepodge of direct and indirect programs scattered across a
variety of ministries with various economic development mandates. This unco-ordinated
system leads to duplication in delivery and processing, resulting in unnecessary costs. Many
firms, especially small ones, have difficulty navigating this complex program landscape, which
is further complicated by the existence of federal and local subsidies and other programs.
Business support programs are fragmented and lack clear and coherent objectives.
This creates significant challenges for tracking and evaluating program costs against
outcomes. As data on outcomes are often poor and inconsistent, it is unclear whether the
programs are achieving any economic benefits for Ontario.
Some argue that since other jurisdictions employ subsidies to lure business investment,
Ontario must do the same to remain competitive. This line of thinking can lead to situations
where companies are able to bid up incentives across competing jurisdictions, resulting in
what is known as the “winner’s curse.”
The government’s business support programs require a reset in light of Ontario’s fiscal and
economic challenges. If we were to design business support programs from scratch, they
would not look like what we have now.
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