Bloomberg News

Ontario’s McGuinty Steps Down Amid Budget Impasse

October 16, 2012

Dalton McGuinty said yesterday he is stepping down as Ontario premier amid controversy over canceled power plants and an inability to implement budget cuts in his minority government.

McGuinty, after nine years as premier of Canada’s most populous province and 16 years as Liberal leader, said he chose to resign in order to allow his party to renew itself and to spend more time with his family.

“It’s time for renewal, it’s time for the next Liberal premier,” McGuinty, 57, told lawmakers from his party yesterday.

A Forum Research poll released last month found the Liberals had the support of 20 percent of voters, compared with 37 percent for the Progressive Conservatives and 35 percent for the New Democratic Party.

McGuinty’s resignation comes as opposition lawmakers accuse his government of hiding the costs related to cancellation of two power plant projects, and refuse to support a public sector wage freeze to curb the province’s deficit.

Finance Minister Dwight Duncan released a budget update yesterday that forecast the deficit would be C$14.4 billion ($14.7 billion) in the fiscal year that began April 1, more than C$400 million less than forecast earlier in the year. Duncan said the government remained on track to eliminate the deficit by 2017.

Ontario’s credit rating was downgraded by Moody’s Investors Service on April 26 to Aa2 from Aa1 and the outlook revised to stable from negative amid concern about stalling growth.

Policy Thrust

“Most likely whoever steps in next will keep the primary thrust of policy in place,” Douglas Porter, deputy chief economist at BMO Capital Markets, said in an e-mail. “Of course, the bigger issue is who wins the next election.”.

McGuinty yesterday said the government has “reached an impasse on a very important matter of public policy,” referring to the lack of support for his budget measures. He will ask the lieutenant governor to suspend the legislature and would remain premier until his party chooses a replacement.

Nelson Wiseman, a University of Toronto associate professor of political science, said the resignation gives the Liberals the best chance to keep power and prevent opposition parties from bringing down his government at a time when his popularity has sagged.

“You have a minority government so the timing of the next election isn’t in the hands of the government,” Wiseman said.

Before last year’s election campaign, the government called off the construction of two natural-gas power stations after local residents had opposed the sites. TransCanada Corp. (TRP), based in Calgary, will build one near Kingston, Ontario instead of Oakville, near Toronto.

Censure Motion

Energy Minister Chris Bentley has been facing a censure motion from the opposition after they accused him of hiding documents that show the decisions caused the projects’ cost to soar.

In elections last October, the Liberal Party fell one seat short of the 54 needed to form a majority and needed opposition help to govern.

McGuinty was forced to make concessions to the New Democratic Party to pass his budget in June, agreeing to a new tax on people earning more than C$500,000 a year in exchange for cuts to help combat the province’s budget gap.

He has failed to find backing for efforts to freeze government wages, in a move that has led to bitter confrontations with the province’s public sector unions.

McGuinty’s party will convene a leadership convention “at the earliest opportunity,” Yasir Naqvi, president of the Liberal Party, said in a statement. The party’s executive will meet today to determine the timing and rules of the leadership campaign, the party said.

The move to suspend or “prorogue” the legislature, will also suspend committee hearings into the power plant decisions.

To contact the reporters on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net; Ari Altstedter in Toronto at aaltstedter@bloomberg.net

To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net


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