For the second time, the Ministère des Finances is making public a pre-election report on the state of Québec’s public finances before the general election is called.
Posted at 10:00 a.m.
The Auditor General of Quebec also has the mandate to rule on this report. It emphasizes that the assumptions made and the forecasts relating to the financial framework and the debt for the next three years are plausible, in all material respects. The pre-election report is therefore a credible and up-to-date portrait of the state of the economy and public finances in Québec.
What do we learn in the pre-election report?
In terms of economic indicators, despite the current uncertainty, economic activity continues to grow. In 2022, growth in gross domestic product (GDP), both real and nominal, appears higher. The inflation rate is revised upwards, from 4.7% to 6.5% in 2022, thus pushing nominal GDP growth from 6.4% to 9.6%. Despite these revisions, however, note that over the period 2022 to 2026, the main economic indicators are similar to the average private sector forecasts.
From the perspective of public finances, the projection of the budget balance within the meaning of the Balanced Budget Act is greatly improved compared to last March’s budget. The higher inflation propels government revenues upwards, in doing so, the budget deficit within the meaning of the law is greatly reduced, from 6.5 to 0.7 billion dollars.
The proposed financial framework even includes a provision for economic risks and other recovery measures of up to $10 billion over five years. A balanced budget would be achieved within the meaning of the law if such a provision were not to be used. However, with the election campaign, the political parties will most likely use it to finance the actions they intend to take to stimulate the economy in the event of a recession.
It should be noted that, without diminishing her conclusion on the plausibility of the assumptions, the Auditor General notes a very high current uncertainty with regard to the forecasts.
It also expressed its wish for the presentation of an alternative scenario taking into account the potential impact of uncertainties on the economic outlook and on the financial framework. Although the pre-election report presents a box on the effect of a recession on revenues, and each recession is different, we would have liked to know more about the overall effect of such an event on the budget balance.
For a common budgetary framework
Now that the pre-election report giving all the information on the state of public finances has been published, it must serve as a common basis on which the political parties will define their electoral commitments.
The Chair in Taxation and Public Finance at the University of Sherbrooke, in collaboration with the Public Policy Committee of the Association of Quebec Economists, invites political parties to include their promises having a budgetary impact in the financial framework of the pre-election report.
Moreover, so that electors can find their way around easily, the presentation of the financial framework must be done as uniformly as possible by showing the changes compared to the framework of the pre-election report.
The public finance simulator proposed by the Ministry of Finance makes it possible to standardize the way of presenting the financial frameworks of the parties1.
In addition, to help political parties, like the population in general, to estimate the cost for the government of modifying the main tax parameters (scale, rate, credits, etc.), the Chair in Taxation and Public Finance has developed a tax calculator2.
The parties now have everything in hand to present their financial framework on a basis comparable to that of the other parties. It goes without saying that such an approach promotes a better understanding of voters.
Finally, as political parties approach the starting gate, and prepare to make a series of electoral commitments, the pre-election report allows us to see what is possible within the current financial framework. Remember that in the event that they wish to make more expensive promises, they will have to show where they will take the money. Obviously, everything must be done with respect for the Balanced Budget Act originally voted, let us remember, unanimously in the National Assembly.