Legault government keeps breaking spending records
Premier François Legault’s government has recorded the two highest years of Quebec government spending — per person, after adjusting for inflation — since 1965, when current methods for calculating spending began. And absent a sharp change in direction, his government will also likely record another deficit when it tables its next budget in March.
According to a new study published by the Fraser Institute, from 1965 to 2021, the latest year for which data are available, per-person program spending was highest in 2021 (at $15,562) and 2020 ($15,260), both under the Legault government. Those were pandemic years, of course, so some increase in spending was understandable. But even excluding Covid-related spending, they remain the two highest spending years per person in Quebec since 1965 — and most likely ever, since per-person spending that year, as the Quiet Revolution gathered steam, was only $2,942.
The government’s latest fiscal update indicates it plans to continue its high-spending ways, projecting deficits of $4 billion, $3 billion, $2 billion, and slightly less than $1 billion for the next four fiscal years and then budget balance, finally, in 2027-28.
That steady glide path does look like a plan. But governments are notorious for failing to meet their fiscal commitments over any medium term that extends beyond two years. (Those that do prioritize balance within two years tend to have success.) Ominously, Finance Minister Eric Girard has already warned that the deficit will be larger than originally forecast, which almost certainly means a balanced budget will be pushed further into the future.
The unavoidable arithmetic of unbalanced budgets is that deficits fuel debt accumulation, which Quebecers must ultimately finance with taxes. Projections suggest that with a net debt (total debt minus financial assets) of $210 billion in 2022-23, the government’s debt interest will hit $9.9 billion, or $1,127 per person. Debt interest is now the government’s third-largest budget category after health care and education. Because of higher interest rates and continuing deficits, it is expected to hit $11.1 billion by 2027-28 or almost 10 per cent of total provincial government revenue.
Unlike many other government expenditures interest payments are not discretionary. They must be paid. And once paid, they’re no longer available for health care, education or even tax relief.
What’s the solution?
The deficit is simply the difference between government spending and government revenue in a given year. To reduce it the government must either find more revenue (i.e., increase taxes) or reduce spending. Given that higher taxes can hurt economic growth by discouraging entrepreneurship, work, investment and saving, the better choice is to rein in historically high spending. This is not just an abstract theory — research conducted over many years in many countries, including Canada, shows spending cuts have much less damaging effects on the economy than tax increases.
To protect Quebecers from the costs of deficits and the debt accumulation they bring, Quebec’s upcoming budget should rein in spending. If not, Quebecers will pay the price.