Quebec unable to balance budget; will try for zero deficit in 2016
Published Thursday, November 28, 2013 1:52PM EST
Last Updated Thursday, November 28, 2013 7:06PM EST
The Parti Quebecois government has admitted its projections for the current fiscal year were way off, and there is no way it can balance the budget in the next fiscal year.
That promise, made in March, was based on running a $1.5 billion deficit in 2013-2014.
In a fiscal update provided Thursday Finance Minister Nicolas Marceau announced that the provincial deficit for the current year was closer to $2.5 billion.
He said the government was able to control spending, but saw revenues drop considerably, which he blamed on the economy growing at a rate of only 2.1 percent, much lower than the 3.6 percent predicted in the budget.
"Inflation was much lower than expected," said Marceau. "The growth of the economy [was slower] which affected the growth of revenue."
Harsh critiques of fiscal update
Critics scoffed at the suggestion that the provincial government had controlled spending, saying that Premier Pauline Marois has made $10 billion in spending promises in the past two months.
"This year they were supposed to limit expenditures to $1.9 billion. They're already up to $3.4 billion," said analyst Jean Lapierre. "I don't think their figures are reliable whatsoever."
CAQ finance critic Christian Dubé said Marceau was not telling the truth about controlling spending. "The PQ is lying, it's totally false," said Dubé.
Francois Legault said instead of subjecting Quebecers to more of the same, in the spring the CAQ would vote against the PQ budget.
"The Parti Quebecois was asleep and just woke up," Legault said. "Now we're going to hit a brick wall."
He said that the debt will leave a damaging legacy to future generations. “People can understand that we will leave this debt to our children and I'm sure that not what they look for,” said CAQ leader François Legault.
Quebec Solidaire leader Francoise David said that Marceau's update meant more economic worries for lower-income families.
She said that many people, especially women, will have to work and pay more -- when instead she would prefer the government pursue banks and mining companies to get more revenue.
“That means less professionals to work with the children who have difficulties in school for example,” said David.
Blames 2-year-old tax hike for drop in spending
According to Marceau the deficit for the current fiscal year will be $2.5 billion.
He said he will continue to cut in future years, and count on growth in the economy to produce a growth in revenue, resulting in a $1.75 billion deficit in 2014-2015, with a balanced budget in 2015-2016.
Marceau said he would be able to chop $400 million in expenses next year, and a further $600 million in 2015-2016.
Marceau blamed several factors for decreased revenue this year: multiple mining projects have been cancelled or delayed since the PQ came to power, resulting in a $115 million drop in mining royalties.
The amount of money spent on booze in Quebec has also decreased, cutting revenues at the SAQ by $144 million.
He also blamed a tax hike implemented by the Jean Charest Liberals nearly two years ago.
"We are seeing a decrease in consumption which we blame on the hike in the TVQ of 2 percent done by the previous government," Marceau said.
Marceau still likes the idea of getting back to black ink.
“The desirability of it remains but the feasibility is not there anymore,” said Finance Minister Nicolas Marceau, who cites weak consumer spending as the cause for lowered revenues.
A more robust is part of the equation required to meet that goal, however, as are $1 billion in cuts, $400 million of which must be axed by April.
Liberal leader Philippe Couillard blasted the PQ’s handling of the economy once again upon the news.
“He has not and his government has not been able to attract investment and develop the trust of the economic sector,” said Liberal leader Philippe Couillard, who objected to the lower-spending explanation.
“When the middle-class family hears that they're saving too much, I'm sorry middle class have a hard time making ends meet at the end of each month,” said Couillard.
The provincial debt is projected to reach $205 billion in two years.
On Jan. 1, 2012, Quebec raised its Provincial Sales Tax by one percentage point to 9.5 percent. At that time the province also stopped charging PST on the federal GST.