Finance Minister Eric Girard tabled a budget on Tuesday marked by a record deficit of $11 billion, accompanied by a plan to reduce state spending in anticipation of next year’s tabling of a new roadmap which could postpone the return to balanced budgets until 2030.
The shortfall included in the government’s 2024-2025 financial plan exceeds the previous peak of 10.7 billion, reached in 2020-2021, at the heart of the pandemic, the minister recognized during a press conference. “It could be the highest deficit in dollars,” he said, while hoping for a financial improvement that could reduce its magnitude.
Last year, Mr. Girard had forecast a deficit of three billion dollars for 2024-2025 as part of a plan to return to budget balance which was to expire in 2027-2028.
Prime Minister François Legault and Minister Eric Girard had warned in January that future deficits would be larger than expected due to salary increases granted to state employees. According to budget documents, an additional sum of four billion dollars was added to Quebec’s expenses, mainly due to the improved conditions offered in the new collective agreements.
“We made the choice to invest in our human resources,” said Mr. Girard. “It is very important for the sustainability of the public health system, for our public school, that the quality and accessibility of services improve. So, yes, that brings a high deficit in 2024-2025. »
State spending will be $157.8 billion this year, up 4.4%, while revenues will be $150.3 billion, up 2.4%. The health sector alone weighs 61.9 billion in this balance sheet. Money inflows are also lower than first forecast for 2024-2025 due to a drop in tax revenues, Hydro-Québec revenues and federal transfers.
On this subject, Mr. Girard recalled that Quebec is demanding a right of withdrawal with full financial compensation from the new federal dental care and drug insurance programs. “Prime Minister Mulroney has died, and I remind you that in the Meech Lake agreement, there was a clause which limited the power to spend with full financial compensation in the areas of jurisdiction in question,” he said. said.
When will the budget be balanced?
Beyond the 2024-2025 budget, the deterioration of the government’s financial framework is broader, and its impact is felt on the 2023-2024 financial year, which will end at the end of this month of March with a deficit of 6 ,3 billions. It was estimated at $4 billion a year ago. Also, while the budget balance was to be achieved in 2027-2028, a deficit totaling 4 billion is now expected for this financial year, and the equivalent for the following year.
Mr. Girard announced that a new plan to return to zero deficit will be tabled in one year, due to the overhaul of the Balanced Budget Act last December. This objective could be achieved by 2029-2030 “at the latest”.
The minister remained vague on the path that remains to be marked out to achieve a zero deficit by then. In the immediate future, he is banking on a recovery in the economy which would be favored by a drop in interest rates during the second half of 2024. “In the 2025 budget, I will know the destination,” said Mr. Girard.
The budget plan expects gross domestic product growth of 0.6% this year and 1.6% next year.
A first turn of the screw
The government has announced a first turn of the screw to reduce its spending by a billion dollars in the business aid sector over the next five years.
The tax credits supporting jobs in the technology sector will be notably revised, notably in the emblematic video games sector set up by Bernard Landry which notably led to the arrival of Ubisoft in Quebec. The objective is to refocus tax assistance on value-added jobs. “We look at the tax credits for technology companies, which were created when the unemployment rate was over 10%. Today, the unemployment rate is less than 5%,” noted Mr. Girard.
State companies such as Hydro-Québec, Loto-Québec, the Société des alcools du Québec and Investissement Québec will also be contacted. The objective is still to raise a billion dollars over five years. “Each company will have to make efficiency efforts, either in terms of revenue or expenses,” warned the Minister of Finance. The bulk of these budgetary optimizations, which should total 2.9 billion by 2028-2029, will however be applied after the 2026 election.
At the same time, a larger operation could be prepared, because the government will launch a major review of all of its spending this spring. “We will have to ensure that we do not affect services to the population,” said Mr. Girard.
The minister also ruled out any increase in Quebec sales tax “in the coming years”.
“Glee” in spending
Liberal MP Frédéric Beauchemin deplored the fact that the Legault government is reducing its aid to businesses without further preparation, and judges that Minister Girard is counting on too optimistic income growth. “What we are seeing today is a government that is in total loss of control, that has no plan to return to a balanced budget and no plan to revive the economy. The CAQ spends without limits and spends poorly,” he summarized.
Solidarity MP Haroun Bouazzi, for his part, deplored the weakness of investment in housing. “There is nothing to stimulate the construction of new homes and new apartments. “It won’t change anything for the first buyers,” he stressed.
For his part, PQ leader Paul St-Pierre Plamondon attributed the financial situation revealed Tuesday to the successive largesse of the Legault government, particularly for four-year-old kindergartens, seniors’ homes and tax cuts. “We went about spending with a lot of joy,” he said.
Conservative leader Éric Duhaime, for his part, accused the CAQ government of incompetence.