The Quebec government’s economic update of November 7 was presented, according to the communication lines of the Coalition Avenir Québec (CAQ), as “a prudent and responsible update of public finances” in the face of economic uncertainty. The government assures that it “will never cut state missions or services to citizens”. However, the government forecasts spending growth of 1.6% next year, which dangerously resembles the two years of austerity imposed by the Couillard government.
Just to maintain the same level of health service from one year to the next in the context of inflation in technology costs and the aging of the population, public health spending normally grows by around 4% per year. Since health represents more than 40% of the Quebec government’s program spending, the economic update forecasts a 2.4% drop in spending in all portfolios other than education and health. In short, the government plans to impose austerity measures in its next budget.
The Minister of Finance denies this. He says that since spending has increased significantly during the pandemic, growth rates will be lower. However, this argument is only valid if public spending was artificially high because of the pandemic and would naturally come down afterwards.
That’s far from being the case. One-time spending to combat COVID-19 is generally absent from the 2023 budget, but the needs of the public, businesses and utility networks have increased during and after the pandemic, especially as the post-pandemic continues. characterized by a period of high inflation, probably followed by a recession. However, the government has knowingly decided not to respond to certain important needs, for example by refusing to sufficiently cover the deficits of public transport companies, by not providing cities with the money necessary to adapt their infrastructure to climate change. and providing public sector employees with pay increases that do not match the rising cost of living.
We must certainly welcome the investment announced in construction and housing assistance, Quebec being the only province to double the 900 million over five years transferred by Ottawa. However, the needs remain dire, and much more social housing will have to be built to address the housing crisis.
It seems obvious to me that these needs will not naturally diminish after the pandemic; spending growth of 1.6% next year therefore represents a period of austerity.
This austerity was, however, avoidable. Barely more than a year ago, the CAQ proclaimed during the election campaign that the good health of public finances allowed it to distribute checks of $400 to $600 to more than 90% of taxpayers, in addition to promising a reduction of taxes. At least, these poorly targeted checks will have cost 3.5 billion in a single year, while the tax cut costs more than 1.5 billion per year permanently (9.2 billion over six years, according to the 2023 budget).
This tax cut helps to please the AQ wing of the party, dissatisfied with the centrist governance of the CAQ’s first mandate. However, any tax cut benefits the richest more, simply because they pay more taxes: a taxpayer earning $100,000 or more per year saves $814, compared to $210 for a person making $40,000 per year. year. A person who earns $20,000 will save $8 per year. “Prudent and responsible management of public finances” would have kept this 1.5 billion in state coffers to avoid budgetary austerity.
It is clear that this tax cut is politically useful to the government: it allows us to “starve the beast” and tell public service unions and cities that their demands are unrealistic. Governments are always hesitant to transfer additional funds to other levels of government since they cannot govern how the money is spent. Furthermore, it is the one who receives the money and provides the service who generally obtains public recognition. Governments also seek to regulate the salaries of civil servants, knowing that higher salaries do not necessarily translate into improvements in services visible to voters, although the costs are obvious to taxpayers.
The fact remains that in a context of labor shortage and widespread perception of a crisis in public services, offering a salary increase below inflation risks harming public services, all the while causing a major social crisis. In the same way, reducing the provision of public transport and not financing cities’ adaptation to climate change seems ill-advised in 2023.
During the next election campaign, the economic situation will have improved, and the CAQ is suggesting that it will propose additional tax cuts, even if needs will increase further following austerity from 2024-2025. Who knows if Quebecers will not reserve the same fate for the outgoing government as for the last party which imposed such austerity measures.