Of all the provinces, Quebec has the most sustainable fiscal policy in the long term, namely until 2097!
This is what the Parliamentary Budget Officer (PBO) proposes in its recent report on the financial sustainability of the federal government, provincial governments, local governments (municipalities) and public pension plans (CPP and QPP).
According to the PBO, François Legault’s government currently has financial flexibility that would allow it to increase spending or cut taxes by about 1.8% of Quebec’s GDP, or $10 billion. This $10 billion amount (in current US dollars) would subsequently increase at the rate of GDP growth.
With this hypothetical $10 billion spending increase or tax cut coming into effect, the Quebec government would still manage to stabilize the government’s net debt (as a percentage of GDP) over the long term.
- Listen to the economy part with Michel Girard above QUB radio :
And what about Ontario? As surprising as it may seem, the current fiscal policies of Doug Ford’s government in Ontario are not sustainable in the long term, according to the PBO study.
“Permanent tax increases or spending cuts equal to 0.2% of GDP [1,8 milliard $, en dollars courants, augmentant en fonction du PIB par la suite] would be necessary to stabilize the state’s net debt in the long term [en proportion de l’économie].”
Many readers must be wondering: “Is it too good to be true, this surprising $10 billion headroom in the Quebec government’s fiscal policy while the Ontario government is $1,000,000 short?” $8 billion?”
Be assured. As an independent and impartial federal agent, Parliamentary Budget Officer Yves Giroux reports to the Canadian Parliament and not to a minister in Justin Trudeau’s government. For this reason, his rigorous independent and impartial economic and financial analyzes are valued by all parliamentarians.
Archive photo, QMI Agency
Where does “our” room for maneuver come from?
To be honest, we pay the price! According to the PBO study, in 2022, Quebecers paid taxes of all kinds into the coffers of the public sector (government, municipalities, etc.) equivalent to 28.9% of GDP, or $159 billion.
Of all the provinces, the state of Quebec wins the prize for “autonomous income” that comes directly from household pockets.
While we paid about 28.9% of our GDP from our own revenue (taxes), Ontarions’ pocketbooks were only exploited to the tune of 21.9% of their GDP.
For the other Canadian provinces, here is the percentage of GDP represented by own-source revenue paid to their respective governments in 2022:
- 16.21% in Alberta
- 20.5% in Manitoba
- 23.4% in British Columbia
- 21.2% in Saskatchewan
- 20.9% in Newfoundland and Labrador
- 21.1% on Prince Edward Island
- 21.5% in New Brunswick
- 25.0% in Nova Scotia
As you can see, Quebec is the “greedy” province, even though it largely dominates in terms of independent tax revenue.
THAT SAID…
However, not everything is rosy in Quebec. According to the PBO:
- Quebec’s long-term demographic growth prospects are below the national average.
- In the long term, real GDP growth in the province is expected to be below the national average.
- This situation is mainly due to weaker labor productivity growth and stagnation in the growth of total hours worked.
THE IMPORTANCE OF FEDERAL TRANSFERS
But with revenues from federal transfers (including increases in equalization rights relative to the size of the provincial economy) largely offsetting the increase in health care spending, Quebec will remain viable in the eyes of the PBO!
Federal transfers received by Quebec accounted for 5.7% of GDP in 2022. And in 2097, the PBO calculated that they will account for 6.7% of GDP.
According to PBO forecasts, Quebec provincial revenues (34.6% of GDP in 2022; 35.5% in 2097) exceed program expenditures (32% of GDP in 2022; 33% in 2097).
For this reason, Quebec has good long-term financial viability.
WILL LEGAULT HELP THE LOWEST?
With its $10 billion in room for maneuver, the Legault government has the financial means to improve the situation, particularly for low- and middle-income households who are struggling with the rise in the income index.
It’s incredible that one in ten Quebecers has to use a food bank every month!
I’m keeping my fingers crossed that the government’s financier, Finance Minister Éric Girard, shows financial compassion towards the less fortunate in his economic update on November 7th.
