In late November, the Finance Minister of Quebec presented an economic update on the state of public finances. As should be expected, it did not include any grand announcement.
First, Minister Leitao announced that the budget has indeed been balanced this year. Even better still, the expected $2.3-billion deficit for last year has been reduced to $1.1 billion. In short, the roughly $4 billion in cuts since 2014 that IRIS has identified are finally bearing their fruit.
Stubbornly, the Minister has been refusing to use the word “austerity”. Since spending has increased by 1.6%, he prefers the term “rigour”. Sadly —for the Minister’s sake— this figure means little because it does not take into account either inflation or population growth (as an indicator of the growing needs of the population). Concretely, the budget has been balanced, but bearing the cost are the quality and accessibility of the services offered by the state.
Spending, revenue, and the Generations Fund
In the meantime, the government’s revenues have increased substantially. With a 4.1% growth, the money coming into the state coffers exceeds the amount going out.
What does this all mean?
In contrast with the Minister’s claims, this situation does not at all mean that “public finances are under control”. It rather signals that the strategy orchestrated in the last two years by the government is starting to show results.
As soon as he was elected Premier, Mr Couillard rolled out a communication strategy which presented an alarming view of public finances. Building on the report prepared by Godbout and Montmarquette, the Premier could allege that there existed an imaginary $5.8-billion deficit. The idea was quite simple: to come up with an impressive deficit to justify equally massive cuts.
Another core element of the strategy relies on the sacredness of maintaining payments to the Generations Fund. Since 2009 and to this day, 56% (i.e. $8.9 billion out of $15.6 billion) of all public deficits are due to the government choosing to put money into a hedge fund rather than investing in services for the population.
Let’s be clear: the province of Quebec did not balance its budget this year. If we exclude payments to the Generations Fund, there was already a slight $100-million surplus. It might not be much, but it’s already quite different from the alleged $1.1-billion deficit. This year, Quebec will go even further and accumulate a $1.5-billion surplus.
So what is the government trying to do?
It seems to be playing cat and mouse, either exaggerating deficits or covering up surpluses in the Generations Fund. This little game serves as both a justification for the restraint program and a pretext to ignore public pressure.
Oh, sorry, I forgot: the Minister did respond to public pressure by announcing new money —$80 million— for the education sector. It’s a good start! Only $420 million left to pick up the pieces from the last years’ $500-million cuts…
To sum up, in the end, the important part for the government is to leave itself enough wiggle room for the upcoming tax cuts just in time for the next elections. It’s all so original. In the meantime, the cuts are really hitting Quebec hard.
Philippe Hurteau is a researcher with IRIS, a Montreal-based progressive think tank.