In his March 2022 budget, the Minister of Finance, Eric Girard, indicated that the CAQ government intended to propose changes to the Generations Fund next year. As the debt reduction targets relative to the gross domestic product are on track to be achieved, it is necessary to set a new objective for the next ten or fifteen years, can we read in its Budget Plan.
Obviously, we want the Generations Fund to collect less money, and not the other way around.
Since then, the pre-election report that the Ministry of Finance presented and that the auditor general, Guylaine Leclerc, deemed essentially “plausible” showed a notable improvement in the government’s budgetary situation. In just a few months, the deficit forecast for the current year has melted like snow in the sun, going from 6.45 billion to 729 million, after the payments to the Generations Fund which amount to a substantial 3.4 billion.
Fueled mainly by Hydro-Québec and by alcohol consumers (together, they account for three-quarters of contributions), payments to the Fund are expected to increase to more than $5 billion in 2026-2027. This instrument also relies on investment returns that generally exceed government borrowing costs. This is the beauty of the formula: the sums accumulated in the Fund have made it possible to reduce the debt more quickly than if they had been used to repay the debt directly.
François Legault did not wait for the next budget to announce a first change, i.e. a 39% reduction in payments to the Fund in order to finance the CAQ tax cut, i.e. one percentage point less at the rate of each of the first two tax brackets.
The Liberal Party of Quebec did not go with the back of the spoon with a reduction of these rates by 1.5 points this year, in addition to offering a host of generous reductions, allowances and credits. The financial framework presented Sunday by Dominique Anglade is that of a party which seeks to entice voters rather than to prepare to govern. In five years, Liberal commitments total $41 billion. Payments to the Fund remain unaffected, and the debt is bound to increase. Although only slightly: it is that a good part of the shortfall and new expenditure is compensated by additional income, some of which appears uncertain to say the least. This is the case with the recovery by the Quebec tax authorities of $3.4 billion, i.e. all of the shortfall attributable to tax havens, a recovery that depends on the federal government and international coordination that is not yet in place. square.
In a report submitted to the Minister of Finance in December, a panel of experts, made up mainly of university economists, pointed out that the laws on balanced budgets and the Generations Fund have unquestionably made it possible to improve the state of finances public. Quebec was the only province to see its debt decrease significantly. For these experts, however, debt reduction should not be an endless exercise. The Generations Fund must remain, but with new long-term targets.
And if we talk about intergenerational equity, we must note that young people attach more importance to the climate emergency than to debt reduction, which Québec solidaire and the Parti québécois seem to have understood perfectly.
Before committing to reducing taxes, under the phony pretext of remedying a specific situation, the CAQ should have carried out an assessment of the medium and long-term needs in health and education, as well as the investments necessary for the fight against climate change. Even if it means letting the PLQ, which no longer claims power, play its all out.