The province’s economy is currently doing better than many expected, so the Quebec government will have some wiggle room in drafting this year’s budget, set to be unveiled on Tuesday.
What does that mean? More Quebecers are employed with good jobs than some economists had forecast. Crucially, for Finance Minister Eric Girard’s budget math, that also means those people are paying more taxes and fewer people are relying on social safety net programs.
That is welcome news for a government that has foreshadowed both spending increases and tax relief in its upcoming budget — “having your cake and eating it too,” according to some economists and political analysts.
Quebec finance minister ‘disappointed’ with Ottawa’s funding proposal
Rosemary Barton Live speaks with Quebec’s finance minister, Eric Girard, about Ottawa’s health-care funding proposal. Girard says he is ‘disappointed’ with the $1 billion that has been allocated to Quebec, adding that the offer ‘will not make a difference.’
It’s a strategy economists usually warn against. When the economy is going well, they say, governments shouldn’t necessarily offer tax relief but should instead take advantage of increased tax revenues to pay down debt — which Quebec has a lot of, some of which is due to recent expensive COVID-19 and inflation relief plans.
But that isn’t what the budget is likely to show on Tuesday. As usual, the finance minister has been close-lipped about the contents of the documents, but Girard did say that the government will stick to the commitments it made during last year’s election campaign — which likely means more spending, not less, along with a tax cut that some are criticizing as untimely.
So, here’s what you can expect:
Lower taxes
One controversial promise that the CAQ has made is a pledge to cut taxes by one per cent for the two lowest tax brackets.
If the government comes through on that promise, which Girard has suggested it will, that would save a taxpayer earning $55,000 a year $378, but it will save higher-income earners even more.
During the election, Legault said Quebecers making $80,000 a year would save $630 in taxes per year.
It’s a proposal that has some economists raising their eyebrows.
Nearly 35 per cent of Quebec’s population will not earn enough income to benefit from the tax break according to l’Institut de recherche et d’informations socioéconomiques (IRIS).
“It would be an unfair tax cut because it would mainly favour taxpayers with higher incomes,” said Guillaume Hébert, a researcher with IRIS, in an interview.
The government has said the $2-billion measure would be paid for by the government reducing its payments to the Generations Fund, a rainy day fund.
That money, IRIS contends, would be better spent in the public sector, in the health or education system, for example.
The timing of the tax cuts, when the government is handling debt from COVID-19 relief measures and is promising to increase spending, is also causing concern.
“At some point, you want to make these promises, that’s fine,” said Moshe Lander, a senior lecturer in economics at Concordia University, “but it has to be accompanied by government spending cuts elsewhere or higher taxes, not lower taxes.”
But that isn’t what most observers expect.
Premier François Legault has often said Quebec taxes need to come down to be more in line with rates in other provinces. (Sylvain Roy Roussel/Radio-Canada)
Increasing spending
In the lead-up to the 2022 election, where the CAQ secured a second four-year mandate, François Legault’s party made lots of expensive promises — $29.6-billion worth.
Not all of those promises are expected to appear in this year’s budget, but spending increases are likely.
“I think that they will increase health-care spending quite significantly and I think education is a major priority,” said Daniel Béland, the director of the McGill Institute for the Study of Canada. “So it’s a government that likes to be popular, right? [Legault] doesn’t like to bring bad news.”
It’s a combination, Béland said, of tax reductions and spending increases that appears to makes more sense as a political decision than an economic one.
It’s also a combination that would lead to a greater budget deficit — which happens when the government is spending more on programs than it receives from taxes.
But that deficit, Lander predicts, will be lower than expected – possibly around the $5-billion mark. A lower deficit than expected, however, deserves no praise because it is coming because of economic prosperity that the government did not engineer, he said.
“When a government tries to take credit for that and says that, you know, the deficit is smaller, they don’t deserve a pat on the back,” said Lander.
The smaller deficit, however, will allow them to couch the budget in optimistic language and a commitment to get back to budgetary equilibrium at some point down the line, Lander predicts.
“They’re gonna create the magic act of smaller deficit than expected on a path to balancing budget while at the same time cutting taxes and raising spending.”
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
