This text is taken from the Courrier de l’économie of September 5, 2022. To subscribe, click here.
During the first week of the election campaign, the parties gave their opinion on the future of the Generations Fund. And not everyone agrees. What is it exactly? And what do the parties propose?
Roughly speaking, it is a financial tool created in 2006 by the Liberal government of Jean Charest, intended to reimburse Quebec’s debt. Each year, the government pays money into the Generations Fund, managed by the Caisse de depot et placement du Québec and which grows every year. The idea behind this strategy is to invest the state’s money in order to then be able to repay the debt more quickly. In 2022, the book value of this fund was $15.7 billion.
The objective of the 2006 law on the reduction of the debt – which established the Generations Fund – is “to force the government to make surpluses”, summarizes Pierre Fortin, professor emeritus of the University of Quebec in Montreal. “Surpluses that must be used to repay the debt,” he adds.
This law goes even further than that of the “zero deficit” of 1996, adopted under the government of Lucien Bouchard, explains Mr. Fortin. “Ten years later, not only was it no longer necessary to run deficits, it was even necessary, from then on, to run surpluses. »
The future of the Fund questioned
“The question we must ask ourselves today is: have we achieved the objective we set ourselves with this law, which was to reduce the weight of Quebec’s debt? notes Mr. Fortin. Does the state of public finances require that we continue to make surpluses? Or is it time to return to Mr. Bouchard’s law? »
As a reminder, the objectives of the Generations Fund are as follows: that, by fiscal year 2025-2026, the debt representing accumulated deficits does not exceed 17% of Québec’s gross domestic product (GDP) and that the gross debt does not exceed 45% of GDP.
The first objective has not yet been achieved, because the debt representing accumulated deficits was still 21.7% in the last budget. However, the second objective was achieved. As of March 31, Quebec’s debt was estimated at approximately 43% of GDP.
So, what future should we reserve for the Generations Fund? Last December, a group of Quebec experts declared that “debt reduction should not be an endless exercise” and that efforts could instead be devoted to other aims, such as the fight against climate change.
During the first week of the electoral campaign, the parties thus argued over the question of whether to reduce, cancel or above all not touch the payments. According to Pierre Fortin, if one chooses to reallocate Fund payments for other purposes, one must ensure that this is done in a thoughtful and responsible manner.
“Quebec has choices to make,” he said. Where do we put the money? In the energy transition? In tax cuts? We must not lose sight of the aging of the population and the rise in the costs of the health system, which will weigh on government spending. I am not against tax cuts, but the parties must then demonstrate that we will not have to increase them again later to take care of our seniors and future generations. »