Commission on the Reform of Ontario's Public Services

Chapter 11: Business Support
The productivity lens should also be applied when using subsidies to attract foreign business
investment to Ontario. Some flexibility will be needed, as there may be opportunities where
government support can attract a substantial anchor investment to the province. Such action,
however, should be reserved for exceptional or extraordinary cases. In the global context,
especially as developing economies ramp up their business investments, Ontario must
collaborate nationally and build international bridges to be competitive. Efforts should continue
to strategically target international investment based on the province’s potential to
improve productivity.
Similarly, further consideration needs to be given to whether a productivity focus should apply
across all industries or if it needs to be fine-tuned to specific industry sectors. Our preference
is for a more broad-based approach.
Recommendation 11-3: Refocus the mandate of business support programs from job
creation to productivity growth in the private sector.
Consolidate Funding
To develop new and better business support programs, the government must change the
process by which ministries allocate funds for such programs. Currently, direct business
program funding resides within a ministry’s “envelope,” or annual funding allocation.
Tax-based support is currently not counted as part of this allocation. This hinders alignment
and decreases efficiency, as money cannot easily be shifted away from underperforming
programs. As well, it often results in duplicated and unco-ordinated efforts by different
ministries.
Recommendation 11-4: Starting in 2012–13, make ministries responsible and accountable
for tax expenditures that align with their respective program areas. Ministries should initially
be provided with the means to fund the tax expenditures (i.e., a net zero impact for the
ministries), but after that they will have to manage the pooled envelope of tax expenditures
and direct business support programs to meet budgetary targets.
This will provide an incentive to tighten inefficient tax expenditures as the ministries
responsible for the tax expenditures will have the ability to reform tax expenditures when
seeking potential savings.
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