Posted at 11:00 a.m.
The Public Policy Committee (CPP) of the Association of Quebec Economists presented its proposals to Minister Eric Girard for his next budget. The CPP believes that major reforms are necessary to modernize Quebec’s public apparatus in order to deliver the services promised to the population and to achieve the economic, climate and financial objectives that Quebec has set itself.
It is essential that the government adopt a plan now with measures spread over several years.
Staying the course towards balanced budgets and debt reduction
In the current context of risks related to geopolitical issues and the evolution of the pandemic, a strong economy and sound public finances remain more essential than ever to the State’s ability to deliver the services promised to the population in a sustainable manner. .
The progress made in reducing Quebec’s debt level in the years preceding the pandemic was significant. Despite this, Quebec’s debt remained higher than the average for the other Canadian provinces as of March 31, 2021, and the pandemic has pushed it up.
The CPP believes that the Balanced Budget Act and the Act to reduce the debt and establish the Generations Fund have had positive impacts on public finances, and that they must not only be maintained but also modernized.
In this regard, the CPP fully supports the modernization proposals, developed in collaboration with the Research Chair in Taxation and Public Finance at the University of Sherbrooke, the Center interuniversitaire de recherche en analyze des organizations and the Institut du Québec, released last fall.
Labor Shortages: Shifting to Wealth Creation
The strong recovery from the spring 2020 low has brought to the fore the labor shortages that existed in 2019 before the pandemic and will continue.
In an economy with such shortages, jobs “created” by one project are largely at the expense of other projects that could create other jobs.
The CPP of the Association of Quebec Economists therefore recommends that the government carry out a systematic review of government interventions in economic development in order to replace the criteria related to job creation with criteria related to the creation of wealth, in particular the improving existing jobs and increasing productivity.
Modernizing services and linking pay increases to productivity
Several deficiencies in the Quebec health system had already been identified before the shock of the pandemic. However, health care spending in Quebec was already among the highest in the Western world in 2019, the result of strong growth since 2004. This growth did not stem mainly from the aging of the population, but rather from the inflation of costs, top of the list are pay increases for physicians. Significant new expenses have since been incurred to combat the pandemic, including the hiring of thousands of new employees and significant salary catch-ups for several groups.
Beyond the financial stakes, the problems in the public services cannot be solved by the continual increase in the workforce in a context of persistent labor shortages. Long-term solutions will have to involve accelerating the modernization of technology and the organization of work in the public sector.
Technological modernization will not be possible without a revision of the organization of work, which is strongly framed by the provisions of collective agreements from another era.
Outdated work organization and deficient technology mean, for example, that nurses spend too much of their working time on administrative tasks.
The ASDEQ CPP therefore recommends that the government quickly adopt a plan spread over several years to accelerate the modernization of the technological infrastructure of the health network and public administration. The government should also adopt a transparent remuneration policy based on clear principles, including a direct link between increases in remuneration and the modernization of work organization to improve productivity and access to services.
In such a context, the government will have to prioritize the effective delivery of the services already promised to the population and the repair of existing infrastructures rather than the addition of new programs or the construction of new infrastructures.
Tax reform
Quebec has chosen to provide itself with more public services than its neighbors and these services require imposing a higher tax burden. However, Québec places its tax burden more heavily than elsewhere on production activities, including labour, which is becoming increasingly harmful in a context of labor shortages.
A tax reform would help Québec achieve the very ambitious objectives it has set for itself in terms of economic catch-up with Ontario. Ecotaxation also has a role to play in achieving our greenhouse gas reduction targets.
The ASDEQ CPP therefore invites the Minister of Finance to develop and make public tax reform scenarios with the objective of improving Quebec’s economic performance, scenarios integrating a set of tax-neutral changes that would not increase not the overall tax burden, would protect low-income households and maintain the progressivity of the tax system.
Ecofiscal measures should be part of the scenarios considered in order to prepare the population to change their behavior now to limit their environmental footprint, while taking into account the different realities experienced by citizens who do not live in large urban centres.