As reality sets in, Liberal campaign promises take a back seat
Call it trying to squeeze that last drop of juice out of the lemon.
With taxpayers tapped out and the population nearing its tolerance level when it comes to the Liberal austerity agenda, Quebec turned to hunting under the couch cushions for loose change on Thursday.
Foreign and branch government offices in Ottawa and Vancouver will be closed, government agencies with similar mandates merged or scrapped, and consulting contracts slashed.
But those are just the symbolic money- saving measures included in Thursday’s budget operation at the National Assembly.
What will be felt by the already beleaguered health and education sectors is a fresh round of spending cuts, and they and opposition parties wasted no time crying foul.
The cuts were included in the province’s spending estimates tabled at the same time as Finance Minister Carlos Leitão’s 2015- 16 budget, a first balanced budget in six years.
“We cannot talk of a balanced budget when we drastically cut services to the population,” Parti Québécois finance critic Nicolas Marceau remarked, describing fresh spending cuts as “massive” and the worst in 15 years.
“Quebecers thought they were bad last year, they have not seen anything yet,” he said.
The big numbers are the start of the story.
After l i miting g overnment spending growth to 2.3 per cent in 2014- 15, overall government program spending increases will again be reduced, to 1.2 per cent, in 2015- 16 as the government puts in place the last puzzle pieces of a balanced budget.
Overall, Thursday’s budgetary operation outlines a total of $ 729 million in fresh cuts or, in the parlance of the government, efforts to be absorbed.
Broken down, while spending in absolute numbers in health and education goes up, the increase barely registers on the radar once inflation and normal cost increases are factored in: education gets 0.2 per cent; health 1.4 per cent.
The detailed spending estimates outline the real impact of the con- tinued cuts — $ 45 million less for the province’s school boards, $ 21 million less in the CEGEP system and a $ 10- million loss to universities.
To put that in perspective, the federation of Quebec school boards estimates that after factoring in only inflation and normal operating costs, the system needs $ 350 million more a year to keep its head above water.
So we are a long way from the Liberal election promise only a year ago, which was to increase health spending by four per cent a year and education by 3.5 per cent.
The gap did not go unnoticed by reporters.
“You were mistaken?” a reporter asked Treasury Board President Martin Coiteux, who found himself in the hot seat at a news conference flanked by Leitão as the budget was made public.
“To get there we need to get manoeuvring room,” Coiteux pleaded, noting — as he did at last year’s budget — that the mess the Liberals inherited from the Parti Québécois was worse than expected.
“That was the height of the mountain we had to climb,” he said. “And we did it.”
In fact, Coiteux’s whole spin off the top was that the government is getting the job done.
In reality, the unwritten theme of the day was — with the exception of balancing the books in 201516 as promised — everything the Liberals promised is going to take a lot longer to put in place than expected. It could have been worse. The government caught a break with lower debt financing costs and some moderate economic recovery fuelled by the lower dollar and U. S. recovery, but Coiteux was reduced again to asking Quebecers to tighten their belts and be patient.
“We are aware this again will require a provincewide effort,” Coiteux said.
“Premier Philippe Couillard and his ministers have the courage to make the hard decisions.”
There were other indications Leitão may have got carried away in saying this would be a good- news budget. For example, Quebecers will have to wait until 2017 to see the beginning of the elimination of the unpopular health services tax.
The Liberal promise was to eliminate it over four years starting in 2016.
The government did act to create the tax shield proposed by last week’s Godbout commission on tax reform, but the tax relief — like other tax measures — doesn’t kick in until 2016- 17.
“It’s not really the budget of 2015, it’s the budget of 2017,” Coalition Avenir Québec Leader François Legault quipped in reaction to the number of things shovelled ahead.
Legault went further, noting the cuts to education and other sectors will translate into bad news for taxpayers. He estimated the cuts and fee increases the Liberals have imposed since taking power in April 2014 have cost the average Quebec family $ 1,300 a year.
“We’re balancing the budget a lot on the backs of the middle class,” Legault said.
On the plus side, Leitão does promise to gradually reduce the corporate tax — from 11.9 to 11.5 per cent — which will benefit 90,000 businesses.
But again, it will take until 201920 for Quebec to have the same corporate tax rate as its biggest economic partner, Ontario.
With all the focus on the delayed tax reductions and current spending cuts, other budgetary measures, such as relaunching the Plan Nord and implementing a new maritime strategy, were barely noticed.
And the real elephant in the room was the savings Quebec expects — and has included in its forecasts — in wage concessions from the 541,000- strong common front of unionized employees.
As a reminder, the government is offering a two- year wage freeze followed by three years of one per cent increases.
The unions, grouped into a common front, are seeking 4.5 per cent a year over the next three years for a total increase of 13.5 per cent.
Coiteux estimates that if you add in other increases the unions are seeking, the real total is 28 per cent, a number that would put the zerodeficit plan in peril.
He conceded last weekend that negotiations are not going well and he has personal “doubts” that a deal can be reached.
Still, Leitão told the legislature that it is “with pride” that he tabled the budget, his second since being named minister and a rare balanced budget in Quebec history.
For the record, over the last 40 years, 35 Quebec budgets have had deficits.
“A balanced budget is excellent news, but there is more good news,” Leitão said.
“One year after coming to power, we can be pleased with the progress made and the results obtained. We did not shy away from asking the hard questions in order to eliminate the deficit and get us back on a sound financial footing.”
Turning to the future, he predicted Quebec’s economic growth should be two per cent in the new year.
What he did not mention is that such forecasts have been wrong eight of the last 10 times.
It’s not really the budget of 2015, it’s the budget of 2017. We’re balancing the budget a lot on the backs of the middle class. FRANÇOIS LEGAULT, CAQ leader