Opening the floodgates… with some caution
Québec Finance Minister Éric Girard tabled his 2021-2022 budget on Thursday afternoon. This budget postpones the return to a balanced budget by two years – it is now scheduled for 2027-2028. Instead of tackling deficit reduction in the short term, the Coalition Avenir Québec government has chosen to invest an additional $15 billion in the five (5) priorities it has identified:
- strengthening our health care system
- supporting educational success and youth
- accelerate growth and the transition to the new economy
- supporting Quebecers;
- ensuring fairness.
In Mr. Girard’s view, the priority must be to consolidate the post-pandemic recovery ” before implementing a plan to restore fiscal balance.” Measures to reduce spending and/or increase revenues will therefore await the return of “full employment”. It should be noted that the return to a zero deficit in 2027-2028 depends in part on a substantial increase in federal transfers to the provinces for health care. In addition, the government reiterates its commitment “not to increase the tax burden.”
The budget includes $2.2 billion in new measures to increase productivity and stimulate business investment. Among other things, Mr. Girard announced a reduction in the tax rate for Quebec SMEs (from 4% to 3.2%) on the first $500,000 of taxable income.
In the area of health, in addition to the $11.9 billion planned to fight the pandemic, the government is announcing $2 billion over six years to improve services for seniors (addition of 500 long-term housing spaces) and $1.3 billion to improve health care and services ($527 million to improve front-line care).
In education, substantial amounts ($1.2 billion) are announced to support academic success and encourage perseverance at the college and university levels. This includes countering the negative, demonstrated effects of the pandemic on young people’s learning.
A few measures are planned to facilitate work-family balance, including $97 million to create 3,600 new spaces in family daycare services.
An amount ($214 million) has been announced to extend support to the cultural sector, which has been hard hit by the measures taken to fight COVID-19. The tourism sector will receive $205 million.
The Quebec government had already earmarked more than $130 billion for its ten-year infrastructure plan (2021-2031). Minister Girard is adding $4.5 billion to this already colossal sum. Thus, on average, Quebec will invest $13.5 billion annually in the construction and restoration of roads, buildings and public transportation.
In total, including pandemic measures, Quebec government spending will have increased by an average of 4.3% per year between 2020-2021 and 2022-2023. In the current context, this is not unreasonable.