Ontario’s 2026 budget is both forgettable and obsolete

Even by the standard set in recent years, the 2026 Ontario Budget is uninspired. Inside is the usual mix of tax cuts, health spending, and another vague pot of money for corporations. On the outside, even its name, “A Plan to Protect Ontario,” was lifted from last year’s budget, adding to a general sense that policy in Ontario is set to cruise control. 

World events, however, may soon force some deeper reflection on the state of the province. The 2026 budget would have been finalized around the time the U.S. and Israel attacked Iran and upended global oil markets. On page 150, the budget estimates oil prices in 2026 to average just US$59. This is a budget that is already obsolete.

Those who have the least will be hurt the most by what is coming. After a decade of allowing Ontario’s social protections to wither, we are completely unprepared for an economic shock. As the Association of Municipalities of Ontario has warned, an economic downturn could see the number of unhoused rise from the already elevated 85,000 in 2025 to 300,000 in ten years.

Our continued inability to rethink and redesign our systems so they uphold and advance everyone’s economic and social rights is not only a moral shortcoming, but a costly economic mistake. If we want a resilient and equitable future, we must commit to ambitious investment and reform.

With that, let’s dive in.

The big picture: Déjà vu

If the economy is growing, government revenues tend to increase each year. If spending increases more slowly than revenues, the deficit will shrink over time.

For three years in a row now, Ontario budgets have used this logic to promise that a return to balance is within reach. With each new edition, however, the promised surplus is pushed out another year to a future that never quite arrives.

Figure 1: Recent evolution of Ontario’s deficit/surplus projections

There are two main explanations for this trend:

• First, as the Financial Accountability Office of Ontario (FAO) has hinted, the government is systematically underreporting health spending so that revenues appear to outpace expenses over time. This is prompting calls for greater transparency from people like Ontario’s former chief economist Brian Lewis, who rightly questions whether the province is being straight with the public about its fiscal plan.
• Second, Ontario has a revenue problem. Another FAO analysis found that Ontario had the lowest per capita revenue and per capita spending among all provinces in 2022 – a full 24.2 per cent below the average for the rest of Canada. With each successive budget, the government further erodes the tax base by cutting taxes on an assortment of items – gasoline, small businesses, new homes, etc. The government is careful to calibrate each year’s tax cuts so that they do not require offsetting spending cuts, thus obscuring their material long-term impact. The CCPA estimated the cumulative cost in 2024 at $7.7 billion a year. Adding the tax cuts of the budgets since then would put this number well over $11 billion, or about enough to balance the budget.

Putting all of this aside, Ontario’s deficits, as shown in Figure 1, continue to be modest in comparison to a budget that has grown to $244 billion. We have the fiscal room to invest more if we want to. Circumstances may soon require it.

Health spending steals the show

With revenues increasing as the economy grows, it is natural to ask how much more money there will be in 2026-27, and where it will go. Compared to the current year, next year’s revenues (before tax cuts) are projected to grow by about $7 billion, with a bit more borrowing bringing the total up to $7.4 billion. Figure 2 breaks down where the money will go.

Figure 2: New spending in 2026-27 by destination ($ billion)

Source: Author’s calculations based on the 2026 budget.

It will be a surprise to many that so much new revenue is going to tax cuts and interest on debt. Still, as always, the real showstopper is health. As a share of all program spending, health has grown from 41 per cent in 2018-19 to a projected 46 per cent by 2028-29. Indeed, health is the only sector where program spending is likely to significantly outpace inflation in the coming years (see Figure 3).

Figure 3: Real program spending by sector over time (2025 dollars)

Source: Authors’ calculations based on Ontario’s Public Accounts and the 2026 budget. Data for 2025/26 onward are interim estimates or budget projections.

If we go a step further and control for Ontario’s considerable population growth since 2018-19, spending increases on a per capita basis are much lower. As shown in Figure 4, real per capita program spending has increased by an average of about one per cent per year since 2018, with most of this growth gobbled up by the health system. Notably, the 2026 budget allocates considerably less money per person to post-secondary education and to children and social services than in 2018-19.

Figure 4: Percentage change in real per capita program spending by sector, 2018-19 to 2025-26 (2025 dollars)

Source: Authors’ calculations based on Ontario’s Public Accounts and the 2026 budget. Data for 2025/26 are interim estimates.

If we extend this analysis out to 2028-29 using the budget’s spending projections and ministry of finance population estimates, health will continue to grow faster than inflation and population growth – even with the government’s implausibly low spending assumptions noted earlier (see Figure 5).

When we exclude the health sector, real per capita program spending everywhere else is projected to be down 4 per cent compared to 2018. Despite the government’s recent announcement of a $6.4 billion investment (partly offset by cuts to OSAP), real per capita post-secondary education spending is projected to be down a staggering 28 per cent since the government took office.

Figure 5: Projected percentage change in real per capita program spending by sector, 2018-19 to 2028-29 (2025 dollars)

Source: Authors’ calculations based on Ontario’s Public Accounts and the 2026 budget. Data for 2028/29 are budget projections.

The withering of social protections

If there is one bright spot for social services in the budget, it is funding for autism. The Ontario Autism Program will see an investment of $186 million in 2026-27, bringing spending from $779 million in 2025-26 to $965 million next year.

Other than that, the 2026 budget offers little more than the continued withering of Ontario’s social protections.

As John Stapleton has noted, sometime during 2027, Ontario Works rates will reach 21.6 per cent below their real dollar value in 2018, marking a slow-motion repeat of the explosive Harris government cuts of 1995.

A single person on Ontario Works receives a maximum of $733 per month – the same amount since 2018. Had the rate kept pace with inflation, it would now be $917 a month. Other program parameters are also affected: Thanks to inflation, a recipient’s earnings are clawed back sooner, and recipients are pushed off assistance earlier.

This was a cut by stealth. It came with no Cabinet decision, no announcement, and no public justification. The government has simply done nothing and hoped Ontarians would look away.

When asked about lackluster investments in social services, the Ontario government often reframes the problem as one of economic growth. Once we grow the economy, the argument goes, we will have more money for things like social assistance. Or, in the words of the 2026 budget, “A strong, resilient economy helps support the world-class social services that families in Ontario count on.”

As shown in Figure 6, since 2018, social assistance recipients have not seen economic growth translate into more support. The numbers simply don’t back up the talking point.

Figure 6: Social Assistance spending as a percentage of Ontario GDP over time

Source: Authors’ calculations based on Ontario’s Public Accounts and Expenditure Estimates.

The impacts of chronic underinvestment in social services are wide-ranging, as deep poverty destabilizes every aspect of a person’s life. This is not only a moral failure, but a denial of poverty’s severe and expensive ripple effects, including the slow unravelling of our social fabric.

No investment to address the homeless crisis

As Maytree has argued, Ontario’s social assistance policies are creating and perpetuating homelessness. Yet the budget offers no new investment to address the scale of the homelessness crisis and attack its root causes.

Instead, the government’s signature housing policy is to remove the HST on new homes valued up to $1 million for one year. This policy will almost exclusively benefit higher-income families, and it comes at the immense cost of $1.4 billion next year.

Compare that to Ontario’s annual spending on provincial subsidized housing, which the FAO estimates will be just $217 million in 2027-28. Adjusting for inflation, spending on subsidized housing has declined since 2004, even as Ontario’s population has grown by more than 25 per cent. Unless something changes, 1.13 million households – that’s about 17.6 per cent of all Ontario households – will need some form of subsidized housing by 2027-28.

Instead of cutting taxes for buyers of new builds, Ontario could spend the same money to increase its support for low-income households by a factor of six.

Verdict: No plan for what comes next

The 2026 budget has many shortcomings, the most important of which is that it leaves Ontario dangerously unprepared for what comes next. An economic shock will bring higher prices, slower growth, and mounting insecurity, falling hardest on those who are already closest to the edge. After years of eroding social supports, there is no buffer left.

This is the moment that will test whether “protecting Ontario” means protecting every Ontarian. If it does, the government must be prepared to raise revenues from those who can afford to contribute more so we can shore up our social protections, strengthen income supports, build or acquire deeply affordable and supportive housing, and invest in the foundations of our shared economic and social security.

There’s still time to choose a better path.