Towards the Girard budget | The time has come to review spending

Taxpayers, you must moderate your expectations in view of the budget that Finance Minister Eric Girard will present on March 12. Requests sent to the minister’s office flooded in again this year during pre-budget consultations, but the coffers are empty and recession threatens Quebec.

Unless we add to the debt, “we see no room for maneuver for new government initiatives in the years to come,” says Louis Lévesque, head of the public finance committee of the Association of Quebec Economists, who usually the ear of the Minister of Finance.

Prime Minister François Legault has already warned Quebecers that the deficit will be higher than expected due to salary increases granted to public sector employees. The return to zero deficit will be postponed over time. He also made it clear that there is no question of raising taxes.

In the memorandum they submitted to the Minister of Finance, Quebec economists believe that Quebec does not have the means to finance new services or reduce the tax burden. They point out that income growth is slowing and that pressures in health and education are increasing.

Instead, they suggest the government look at the expenditure column. Austerity, while the recession is upon us, is it really a good idea?

“It is not a question of slashing, but of constraining spending,” tempers Louis Lévesque. Quebec is not in recession, but rather in a pause in growth. »

Unbearable pace

Quebec spends more than the other provinces and the gap is currently the highest in the last 30 years, underlines the brief from the Association of Economists. In dollars, these additional expenses totaled 12 billion in 2022-2023. This pace of spending increases is unsustainable, economists say.

According to Louis Lévesque, the time has come to review activities “that the State no longer needs to do.” Over time, “we just added layers, we never took them away and we now have a historic level of spending”.

An example: tax credits for the video game industry and other programs linked to a chronic lack of jobs. “It was a good idea in a given context, but we are now in another universe,” he says.

Many public funds could be reallocated or used more efficiently: subsidies for the purchase of electric vehicles are another example. According to the Association of Economists, this is a tax expenditure that not only has a high cost, but also drives wealth out of Quebec.

A parliamentary budget officer

The current inflationary context is not favorable to an increase in consumption taxes, recognizes the Association of Economists, but in the medium term, Quebec will need to increase consumption taxes to be able to reduce the tax burden. individuals in state revenues.

Like the Chair in Taxation and Public Finance at the University of Sherbrooke, economists are in favor of an increase in the QST and an increase in the gas tax, which has not been indexed for 11 years.

Now that the Bank of Canada’s 2% inflation target is in sight, the context is more conducive to this rebalancing of taxation, underlines Louis Lévesque.

Economists also propose to Minister Eric Girard to create a position of parliamentary budget director, to be able to see beyond the current budgetary framework.

Five years, the current planning horizon of the Minister of Finance, is too short, underlines Louis Lévesque. “We have to look further,” he said.

He gives the example of public investment projects in infrastructure and the expansion plan announced by Hydro-Québec, which will have a significant cumulative impact on the debt of the province, municipalities and Hydro-Québec.

A parliamentary director could carry out long-term analyzes useful for decision-making and project prioritization.

This is a new expense, but its cost – estimated at 5 million annually if we rely on Ontario’s experience – is amply justified by the importance of the issues, according to the Association of Economists.