Balancing Quebec’s budget will take more than spending cuts

Opinion letter by Yves-Thomas Dorval, President & CEO, Quebec Employers Council

The Gazette, p. A13 – December 2, 2014

There has been intense political activity at the provincial level in 2014, leading to a colourful fall that has passed by briskly, distinguished by very sustained parliamentary activity in a dying Quebec economy with uncertain prospects. Business investment is stagnating at the same level as in early 2011 and Quebec has lost 30,000 jobs in the past year, while nearly 100,000 jobs have been created in Ontario. The Conference Board of Canada’s fall report released on Nov. 27 therefore projects that Quebec’s growth in 2015, estimated at 2 per cent, will be the second-lowest in Canada, ahead of New Brunswick’s 1.6 per cent.

We could speculate at length about what is wrong and what is slowing Quebec’s growth compared to the performance of our neighbours. Of course, we will benefit eventually, as is already the case for export companies whose cumulative volume has increased by 7.7 per cent during the first three quarters of 2014, compared with the same period in 2013 (versus an increase of 5.3 per cent in Canada).

What we can probably take from the Quebec government’s economic update is that, although the Quebec economy is dragging its feet, it seems like there is potential to be unlocked; but we have to get on with it.

It will be recalled that, at the time of his first budget this past June, Finance Minister Carlos Leitão anticipated a deficit of $3.1 billion for the 2013‑2014 budget year and $2.35 billion for 2014‑2015. But putting some order in our public finances is still a big step, and the economic update will serve to measure just how big. It should therefore come as no surprise that several strong moves have been announced over the past few months, focusing mainly on the expenditure column.

Leading by example, Treasury Board president Martin Coiteux firmly repeated on Nov. 24 that the government intends to fight the deficit for 2015‑2016 by announcing a reduction in the size of the state to free up $690 million without affecting the basket of services, an assertion that we should no longer be making.

Much remains to be done in the time leading up to the next provincial budget. The unions of government employees are preparing to renegotiate collective agreements in 2015, which promises to be a bitter process, and public opinion has been volatile on the subject. The government has announced that it will build a “21st-century state” (which it has yet to define), reorganize the health-care and school-board systems, review the tax system, and fine-tune a number of government programs. Let us be honest: no single part holds a monopoly on these intentions. Yet, we once again hear the same tiresome chant, “I never voted for that,” when at least three parties have promised a “major cleanup” in one form or another.

Therefore, the main question we should be asking over the next few months is why Quebec should always be more generous than elsewhere in North America when it has less collective wealth and more public debt. In particular, we should ask how to increase our collective wealth while modifying our programs and expenses according to our ability to pay.

The government will therefore also have to focus on what should be done on the revenue side to restore confidence among entrepreneurs and investors, and to stimulate investment, the labour market and the economy in general. If the objectives on the revenue side are not there, it will be that much harder to restore balance.

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