The die is cast, or almost, since the Quebec government will likely table a budget on Tuesday which, in its own words, will be “largely in deficit.” » This would be the fourth budget in a row of this ilk. This is a source of concern for all citizens, which deserves our attention.
We certainly recognize that several contextual parameters have made things more difficult for the current government, including the pandemic, economic stagnation, and the reduction in federal transfers and Hydro-Québec royalties. As for the cost of negotiations with the public sector, we are not among those who see it as an economic defect, despite the obvious accounting realities that they underlie.
Notwithstanding the above, we call for better planning for the future and an update of the targeted course to restore the situation. When the budget was tabled in March 2021, the government anticipated a return to balance in 2027-2028, a target reiterated in all subsequent budgets as well as in fall updates, the last dating from November 2023.
Since then, nothing has held up, even though several of the causes of the deterioration of the budget balance were predictable. Quebec thus risks embarking on a trajectory similar to that of the federal state, whose expenditures, deficits and public debt charges have continued to grow beyond forecasts.
Balance
Luckily, in Quebec we have a law that acts as guardian of the temple. Under the new provisions of the Balanced Budget Act adopted in December, a five-year plan to return to balance must be tabled no later than the 2025 budget, which would push the zero deficit to 2029-2030 , after eight deficit budgets in a row.
We can only encourage the government to present as of Tuesday (and not in 2025), a plan to return to balance over a realistic horizon of a few years. We must rectify the situation quickly, especially since we have debt reduction targets to respect, guaranteeing intergenerational equity. The net debt, well above the provincial average, must fall below 35.5% of GDP by 2032-2033.
So what can we do to get there without returning to a reduction in services to the population and without harming the necessary competitiveness of our businesses, which are already largely paying the price for the current uncertainty?
The response from our business base is clear: give our businesses the best possible conditions to stimulate growth. In our opinion, we must provoke a particularly vigorous recovery by actively stimulating labor productivity, investment and re-employment, then refocus priorities around a few targeted interventions, at no or low cost.
First, the current situation presents the government with the opportunity to improve access to tax and financial incentives offered to businesses, where the application parameters are still too complex for them. This would also be an opportunity to seize with these incentives, to help them gain productivity.
Access to risk capital must also be strengthened. In 2023, investments have unfortunately fallen by 50% in Quebec. It would therefore be appropriate to bring forward, from 2027 to 2025, the deployment of the balance of the $500 million planned for the capitalization of funds for the Quebec Strategy for Research and Investment in Innovation.
Succession
Furthermore, several thousand entrepreneurs will sell or transfer their companies in the short term. This population of companies ensures competition that stimulates productivity. To preserve it, a selective and ambitious program of loan guarantees intended for buyers would make it possible to mobilize the financial sector around the issue of entrepreneurial succession, crucial for recovery as well as for our long-term prosperity.
Finally, entrepreneurs are clear: regulatory and administrative burden is a serious obstacle to productivity. The Federation of Chambers of Commerce of Quebec recently formulated several proposals aimed at increasing the ambition and effect of the next omnibus bills in terms of relief. We need to act more urgently on this front.
Minister Girard does not have an easy game ahead of him and he will have to be able to count on all the strengths of Quebec to restore budgetary balance. Quebec businesses have a crucial role to play in revitalizing our economy, generating sustainable growth and developing projects that, throughout Quebec, will allow us to finance our social progress.