I’ve been covering the budgets of the governments of Canada and Quebec since 2005, and I can tell you that the Parti Québécois’ first-year budget looks more like an election campaign financial framework than a proper Treasury budget exercise. It is a political document, well made, useful and interesting, but frankly cheerful.
The exercise is commendable. The Parti Québécois has invested a lot of time in preparing its first year budget, a work that certainly deserves our interest and attention. However, it would have been desirable for the PQ team to have used multiple scenarios to give the population a broader insight into the plausible financial situation in the first five years of a sovereign Quebec.
Both federalists and sovereigntists seemed to agree from the start that a sovereign Quebec would be financially viable. Neither worse nor better, said Bernard Landry. But still one of the richest countries in the world. From Jacques Parizeau to Jean Charest to Philippe Couillard, there is consensus on the viability of an independent Quebec, even if a majority of Quebecers do not believe it is the way forward for Quebec.
But let’s go beyond everyone’s personal political beliefs. Paul St-Pierre Plamondon’s budget management would have gained credibility if he had not erred on the side of optimism. For years, Quebec’s finance ministry has always been conservative in its forecasts, underestimating economic forecasts and undermining reservations here and there to give itself leeway.
This allowed the Legault government to limit deficits during the pandemic, achieve better-than-expected budget balances and also cut taxes – a questionable but entirely legitimate political decision.
The strength of the PQ’s work is to produce a pro forma study that takes into account current federal spending as it stands, without taking into account the policy decisions that a Quebec government might make.
But in my opinion, the Parti Québécois’ mistake with its first year budget is to bet on the ideal scenario: no economic instability, no political uncertainty, no destabilization that would affect GDP, fiscal balance and creditworthiness, Trade, access to free trade agreements, etc.
It is certainly difficult to predict the unexpected. It would therefore have made sense to consider and present several scenarios.
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Parti Québécois leader Paul St-Pierre Plamondon shakes hands with PQ MP Joël Arseneau. (archive photo)
Photo: Radio-Canada / Sylvain Roy Roussel
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In fact, the PQ goes so far as to assume that economic growth would be stable, even stronger than expected, with smaller deficits than a Quebec province and resulting savings of $12 billion over seven years.
In fact, in some cases, such as the separation of Montenegro and Serbia, there is a temporary acceleration of economic growth. The worst imaginable scenario in Quebec’s case would be that economic growth continues at the same pace. Any other plausible and likely scenario would lead to a slight acceleration in growth, writes Paul St-Pierre-Plamondon.
This is a really exaggerated claim. Mr. St-Pierre Plamondon cites a study by economists Vincent Geloso and Kevin B. Grier, who explain that the election of the PQ in Quebec in 1976 and 1994 had a slightly positive effect on the economy.
In the references of this last study, the case of Serbia-Montenegro is mentioned. This study is entitled The Economic Impact of Political Disintegration: Lessons from Serbia and Montenegro; It was written by economists Vassilis Monastiriotis and Ivan Zilic.
The researchers say that independence led to a significant increase in Montenegro’s GDP, but this was short-lived: in our main results, the positive effect of Montenegro’s independence on income appears to have been completely eliminated by 2014. In contrast, we found no evidence of an independence dividend for Serbia.
The PQ leader also talks about the case of Slovakia, which seceded from the Czech Republic. But he neglects the consequences of Brexit, the separation of the United Kingdom from the European Union, for the economy. It is different than founding a country, but all political situations are different.
In the case of Brexit, Les Échos wrote on February 1 that leaving the EU would reduce the size of the UK economy by around 4% in the long term, according to the public budget forecasting organization OBR. According to an analysis by Bloomberg Economics, Brexit costs around 124 billion euros per year.
The important thing is not to question every number mentioned in the PQ budget – $82 billion recovered, $9 billion in overlaps, deficits of $5, 10 or 15 billion, it’s all plausible. However, it is reasonable to wonder what benefit the PQ will gain from presenting only the bright side of its project if Quebecers choose independence.
I’m not saying the PQ isn’t correct in citing the examples it gives. However, to be cautious, why not present three budget scenarios, as governments often do in their budget assessments? A pessimistic scenario, an optimistic scenario (the one presented by the PQ) and an average or plausible scenario.
Such a presentation would have been welcomed by economists and would have allowed the Parti Québécois to speak more fully about its project.
I repeat: carrying out this exercise deserves our interest. It’s difficult and the Parti Québécois is trying to gain credibility on the economic front. René Lévesque, Jacques Parizeau and Bernard Landry worked tirelessly to create strong economic foundations for the Parti Québécois. This work remains effective today and the PQ relies largely on the work of former Finance Minister Nicolas Marceau.
However, the Parti Québécois could go further in this type of exercise under the leadership of a leader who wants to be transparent and direct with the population.