Leitão spends, but what is he buying?
Opposition says voters won’t be fooled by Liberals’ pre-election budget
Welcome to the electoral buffet — where everybody gets to eat their fill.
In tabling the 2018-2019 provincial budget Tuesday — which boldly promises five years of fiscal peace and bright blue skies — Finance Minister Carlos Leitão has nailed down one of the last planks in the Liberal re-election campaign.
But don’t count on him to admit that.
“What do you mean electoralist?” Leitão said at a news conference where he defended himself for announcing some of the most lavish government spending Quebec has seen in years.
Asked if the Liberal government is trying to buy a place in the hearts of Quebecers worn out by four years of belt-tightening, he bristled.
“We would never do that because, these days, with all of you media folks here, those kind of tactics just don’t work,” he said. “What we are doing is exactly what we said we would do. We are spending according to our ability to spend.” But for Quebecers used to bleak budget news, the numbers are eye-popping.
The last time a Quebec government broke the five per cent spending increase barrier was in 2008-2009 and that was in the middle of a recession. The Liberal government of the day increased spending by 6.6 per cent and ran a deficit.
Such fiscal largesse — Leitão and Treasury Board President Pierre Arcand are increasing overall program spending by a whopping 5.2 per cent and have dressed it up as the fruit of financial discipline — but many will see it another way.
They are more likely to say this is an anti-Coalition Avenir Québec budget designed to defang François Legault, the leader of a party that has made its name specializing in populist measures such as his recent plan to lower school taxes. His is a party riding a wave of voter discontent; the Liberal budget is designed to cap that before it’s too late. The election is Oct. 1.
So much money was being shovelled in Quebec City Tuesday, the only real question in this exercise was who, if anyone, was left out of the mix. Health care, the issue that has dominated Quebec’s political discourse for months following the wage increases for medical specialists, gets a 4.6 per cent spending increase ($1.6 billion more).
The government says that money will go to front-line services for citizens and help ease the workload of nurses.
Education is next. Spending is up by five per cent, which means $1.3 billion more. A rare event, Quebec’s education spending actually will be ahead of the network’s cost increases.
The list goes on. From renewing the popular RénoVert tax credit to $250 million for disgruntled taxi drivers, to free Sunday museum visits and money for the English-speaking community, Leitão opens up the tap.
Overall, Quebec has come up with a total of $3.7 billion in new initiatives — some for families but even more for the splashy public transit projects in the major cities the Liberals started announcing weeks ago in an unprecedented spending frenzy.
Quebec is feeling so flush it is offering to share some of the revenue ($60 million) from the newly created Cannabis Sales Revenue Fund with the cities and towns to cover their new costs of administering and policing the legalization of pot.
And after ignoring business in his November economic update, Leitão comes to their rescue with a big $2.2-billion tax cut.
So how does he pull it off ? For one thing, Quebec’s economy is booming, which means revenues are up. It also picked up $12 billion in federal equalization transfer payments for 2018-2019, which is more than the year before.
And Leitão dips into the stabilization fund Quebec has built up over the last few years to the tune of $1.5 billion to pay for spending today.
The opposition said the ruse is fooling nobody.
“Today, he is handing out the candy,” Parti Québécois finance critic Nicolas Marceau told reporters, adding such spending is unsustainable in the long run and in reality represents a new string of deficits.
“On Oct. 2 (the day after the election), the cuts will be back. It’s cynical, desperate and completely irresponsible.”
Québec solidaire MNA Manon Massé described it as “yo-yo politics.” A government takes power, scares the people using austerity measures and then starts spending just before the election and calls it sane management.
“The people of Quebec are not fools,” added her QS colleague, Gabriel Nadeau-Dubois.
“We can sum up (premier) Philippe Couillard’s mandate in the following way,” added Legault at a news conference. “He cuts, he taxes and now he tries to buy you off.”
So how credible is this budget so close to the election? Nobody can predict with accuracy where revenues and expenses will be in five years, which is the timeline Leitão uses as his base of projections.
Quebec’s auditor general, who will be reviewing the budget to produce a neutral pre-election report in August as part of a new pre-election protocol, will face the same conundrum.
(Legault said Tuesday if he becomes premier, he will re-do the exercise, anyway).
It’s true Quebec remains among the most indebted provinces in the country, but Leitão now is able to boast the gap is closing. Ontario is to table its own budget Wednesday and it will show the province is running a deficit.
But the change of tone from one year to the next was obvious Tuesday.
Only a year ago, the government was warning about grey economic skies ahead and the need for steady hands at the rudder in a period of uncertainty.
Now Quebec has entered a “virtuous circle of growth,” Leitão said later in his speech to the legislature, adding the province is well on its way to meeting the target of having creating 250,000 jobs over the course of its mandate.
He downplayed the possibility Quebec’s current economic high might be about to deflate in the wake of American protectionism and a generalized slowdown.
“I don’t think there will be a recession anytime soon,” Leitão said, noting even if it did happen, Quebec still has a $2.4-billion stabilization fund as a buffer.
He said that’s enough to cushion as much as a three per cent drop in economic growth.
The numbers buried in the budget are less rosy. After topping all the provinces with three per cent economic growth in 2017, Quebec’s economy is forecast to grow in 2018 by only 2.1 per cent.
In 2019, well after the election, growth will drop to 1.7 per cent.
But delivering his fifth and last budget before the election, Leitão sounded like a man who had completed a perilous journey.
“We have restored confidence in the future,” Leitão told the house. “We want to build a strong, open, fair Quebec.”
Sticking to his habit of translating expressions used in his native Portugal, Leitão waxed poetic.
“Hope is good, but success is even better,” he said.
He cuts, he taxes and now he tries to buy you off.