Connect with us

Business

Quebec budget | Black clouds on the horizon, warns the Institut du Québec

Published

on


(Quebec) With the specter of a recession, the Legault government must avoid distributing electoral candy to all taxpayers, warns the Institut du Québec, which also foresees a return to deficits from 2027 due to the aging of the population.

“It’s an election year budget, and the government is lucky to have more revenue. […] But you really have to be careful because of the uncertainty,” said in an interview with The Press its President and CEO, Mia Homsy.

“The responsible thing to do is to help people a little bit in a timely and targeted way and not spend all of the excess revenue,” she adds.

It is very important to concentrate aid where there are real issues, and not just that everyone has a check before the elections.

Mia Homsy, President and CEO of the Institut du Québec

As every year, the Institut carried out 10-year projections of the state of public finances in Québec, this time for the fiscal years ranging from 2022-2023 to 2032-2033. He estimates that due to the strength of the economic recovery in Quebec, the efforts required to rebalance the budget will be less significant than expected. Taking into account the payments to the Generations Fund, the deficit to be eliminated would be between $3 and $4 billion. Last year, the Institute evaluated it rather between 6 and 6.5 billion.

Clearly, before the payment to the Generations Fund, Quebec will be “in balance” next year, explains Ms.me Homesy. But beware of the mirage: soon enough, Quebec will be overtaken by the aging of the population, the ever-increasing costs of its health system and its lag in productivity.

Without a major shift, “we will have less income, and at some point, our health spending will plunge us back into deficit,” she explains.

Russian invasion in Ukraine

Another downside, these forecasts do not take into account the “extremely high uncertainty” linked to the Russian invasion of Ukraine, economic sanctions, inflation and the threat of a recession.


PHOTO FRANÇOIS ROY, LA PRESSE ARCHIVES

Mia Homsy, President and CEO of the Institut du Québec

[Pas d’]impacts of the conflict in Ukraine, this is the “hopefully” scenario. But even if all goes well, we go back to a deficit in a few years.

Mia Homsy

In the context, the intention of Prime Minister Legault, who affirmed the day before that the Coalition avenir Québec could propose tax cuts in its electoral platform, may leave one wondering.

“If we start announcing a reduction in the tax burden that is not compensated, we will have a structural deficit that is added to what we present,” says Ms.me Homesy. Rather, she believes that the government should prepare for a possible recession by not “wasting its ammunition” and by keeping “room to maneuver”.

No tax cut, says the PLQ

She’s not the only one asking for caution. The Quebec government must take advantage of its budget to prepare for a recession and has no leeway to reduce Quebecers’ taxes, according to former finance minister and Liberal MP Carlos Leitão. “One-off aid measures, yes, that, yes, but permanent changes in taxes, I don’t think so,” he explained.

“Central banks are in a very delicate position. Are they raising interest rates? Yes but how ? How fast? So, yes, there are significant risks for the global economy,” he said at a press briefing on Wednesday.


PHOTO EDOUARD PLANTE-FRÉCHETTE, LA PRESSE ARCHIVES

Carlos Leitão, former Minister of Finance of Quebec and Liberal MP

A recession is not inevitable, but it can happen. So you have to be prepared for such an eventuality.

Carlos Leitão, Liberal MP

On the side of Québec solidaire, we also rule out the idea of ​​a general tax cut, which would harm public services. “The government is constantly depriving itself of income, whereas in fact our fellow citizens, because there is no place in CPE, because they do not have access to a family doctor, pay otherwise. And this is where the injustice becomes flagrant,” lamented Manon Massé.

Manon Massé adds that Québec solidaire would not be against a rebalancing of the tax tables. “We’ll get back to you with that during the campaign, but people who earn less than $80,000, there, of course, we are able to observe that they pay for people who earn $250,000, $300,000, $400,000, 1 million. We are able to observe that. We must rebalance the whole and not just lower taxes, ”she said.



Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *