Debt reduction to be focus of Quebec budget
QUEBEC The province plans to dip deeply into its Generations Fund to pay down $2 billion a year over the next five years on its debt.
Confirming Quebec’s 2018-19 budget will be tabled March 27 in the National Assembly, Premier Philippe Couillard and Finance Minister Carlos Leitão held a news conference to reveal a major element of the document in advance.
Overall, Quebec’s plan is to reduce the provincial debt by a total of $10 billion by 2022-23, thus saving about $1.1 billion a year in interest payments to the banks, which can then be used to fund the education and health system, Couillard and Leitão said.
“This piece of news stems directly from the sound management of our public finances and the good performance of our economy,” Couillard said. “This is a clear demonstration of our determination to build a strong Quebec, a new Quebec free of the weight of debt to benefit of future generations.”
About $13 billion is sitting in the Generations Fund kitty. It was created by the Liberals in 2006 to set aside money to pay the debt so it does not become the burden of future generations. As of March 31, 2017, the province’s debt was $203.5 billion or 51.9 per cent of the gross domestic product.
When the Liberals took power in 2014, the debt represented 54 per cent of GDP. Wednesday’s announcement means it will slip below 50 per cent by April.
Quebec’s stated goal is to reduce it to 45 per cent by 2025-26. Now that goal will be met sooner, by 2022-23.
But there are political motivations behind the decision. Specifically, the Liberal government wants to pull the rug out under the feet of the Coalition Avenir Québec, which has said in the past it would siphon funds out of the Generations Fund to reduce taxes.
On Wednesday, Couillard and Leitão ripped that idea to shreds, saying the CAQ idea would be illegal and amounts to embezzlement.
“(The CAQ plan) would be a catastrophe,” Leitão said.
The Liberals, on the other hand, believe they can score points with voters by tackling the debt and saying they managed to do it at the same time as reduce taxes over the last two years.
Leitão also dropped a few hints about his budget. He said there will be specific measures in three areas: Give more quality time to families, improve the standard of living for Quebecers and continue to invest in health, education and public mobility.
It will be Leitão’s fifth budget as minister — his fourth balanced one — and potentially the most important one politically as it comes at the end of the Liberal term.
There are a few givens Leitão has already floated as he conducted a round of 2018-19 pre-budget consultations.
Off the top, he has said individual taxpayers should not expect a large pre-election tax cut. Leitão has been saying for weeks the reductions included in last November’s economic update will suffice.
“In terms of personal taxation, we have done what we had to do back in November,” Leitão told the Montreal Gazette recently. “So in the upcoming budget we don’t intend to go very far in that (direction).
“There’s always room for some adjustment and we’ll look into that, but clearly in terms of the tax burden the budget will address issues on the business side and especially and particularly small businesses. Small business needs some attention from the tax perspective. The personal tax side has been covered.’”