Quebec Finance Minister warns that spending will have to grow more slowly

Quebec Finance Minister Eric Girard, right, and Minister of Education Bernard Drainville takes questions during a press conference in Longueuil, Que., Monday, March 11, 2024. Girard will present the budget tomorrow and is expected to include a larger deficit than originally forecast. (Christinne Muschi, The Canadian press

At a time when Quebec is having to deal with a $4 billion structural deficit, Quebecers will have to temper their expectations of Quebec's ability to intervene outside health and education.

Finance Minister Eric Girard reiterated this message to the Montreal Chamber of Commerce on Monday, a week after the publication of the provincial budget.

"Since we've had a high level of spending, we're going to have to have a more moderate rate of growth in the future," the minister told the Montreal business community.

The government will therefore have to cap the rate of growth of its spending at 3 per cent in order to curb the budget deficit.

"Three per cent, what does that mean? That's four per cent for health, three per cent for education and two per cent for everything else," said Girard.

In this context, Girard tempered expectations for government missions other than health and education.

"No, there is no significant increase in this budget because I started by telling you what: 'health and education as a priority,'" Girard said when asked a question from chamber president Michel Leblanc.

"I recognize that this is extremely important," he added. "I think that these festivals need to work with the Minister of Culture (Mathieu Lacombe) and I recognize that they are important, that they are part of Montreal's reputation. I'm going to let people work together."

The minister did not seem any more receptive to the idea of extending the Palais des congrès in Montreal, a project supported by the Chamber of Commerce: "The Palais des Congrès was not given priority. But we did get the United Nations Convention on Biodiversity. So our Palais des Congrès is still up and running."

"We've met six times, and you've talked to me about it six times. There will surely be a budget if the project is as exceptional as you say it is," said Girard.

Tax expenditure

As part of its budget effort, the Ministry of Finance also intends to review its tax expenditure, i.e. the tax credits and reliefs granted to support various objectives.

Girard pointed out that there were 277 tax measures representing a reduction in revenue of $49 billion. Of this total, $40 billion went to individuals and $9 billion to businesses.

The Ministry of Finance has not set a specific spending reduction target on this front. The government expects to table its plan in 2025-2026 after reviewing its tax expenditure.

"We haven't put a figure on that," said Girard. "It will depend on how the economy develops, federal transfers and other conditions. (...) By waiting until 2025-2026 to table the plan, we will have a better idea of where the Quebec economy stands in more normal situations than those we are currently experiencing."

Quebec has already announced that tax credits for jobs in the information technology sector will be reduced and that aid to businesses to encourage the hiring of experienced workers will be abolished when the budget was unveiled last week.

Over five years, the government believes it will be able to reduce its tax expenditure by $1 billion with these changes.

"In fact, all the experts are telling us to do this, to systematically review the tax credits and spending you have created for their economic, fiscal and social effectiveness," said Girard.

This report by The Canadian Press was first published in French on March 18, 2024.