Context
In a favorable economic environment that helped to generate annual growth of 2.5% in the second quarter and reduce the unemployment rate (6.1% in October), the government’s budget had a surplus of $2.6 billion after only five months of the 2017-2018 fiscal year. The remaining question was how the Liberal government, after months of fiscal discipline, intended to use this surplus with less than a year to go before the next provincial election.
Minister of Finance Carlos Leitao made the announcement yesterday during the Fall fiscal and economic update in the Quebec National Assembly. The main goals of this announcement are:
- Improving Quebecers’ standard of living and reducing poverty.
- Increased academic success and improved health services.
- Fostering regional development.
Overall, this represents an additional investment of about $2 billion, where 50% of this will be directed first and foremost to Quebec households.
Key New Measures
- 1 billion tax reduction ($250 per person or $500 per couple).
- Support for families with children in school: $100 will be allocated annually for every child aged 4 to 16.
- Increases in education and health spending: $1 billion over five years will be invested, in addition to the $5 billion announced last spring. This represents an increase of 4.2% for the health services sector in 2017-2018.
- The 3rd Poverty Reduction Strategy Plan: $2 billion will be invested by 2023. The Minister of Employment and Social Solidarity, François Blais, will announce in the next few days the details of the program but specified that the priorities would be single parents with children.
- Regional development: $667 million will be allocated, including 367 million for the implementation of infrastructures to ensure better access to the very high-speed Internet.
Also, worth mentioning is the announcement of a readjustment of the school tax, which will be discussed with the School Boards.
Strategic Perspective
Less than a month before Christmas – and approximately 10 months away from the next provincial election – this is one of the Liberal government’s last major chances to score points with the public. While the opposition CAQ is challenging the Liberals in the polls following a recent cabinet shuffle that did not seem to have made a significant difference.
By avoiding too much sprinkling, and by concentrating its efforts on Quebec middle class households, the government probably wanted to cut off the legs of the CAQ by trying to reinvest in public services as well.
It also means that in the end:
- The estimated surplus of $1.7 billion in June will soon be swallowed up by the tax cuts announced today;
- Business tax relief will have to wait, maybe in next spring’s budget?
