Montreal, February 4, 2021 – The return to a balanced budget in the medium term is necessary, and it must be achieved by controlling governmental expenditures. One way to do this is to set up a standing expenditure review committee, as the federal government did following the financial crisis of 2008-2009, shows a publication launched today by the MEI.
In recent months, governments have had to spend astronomical sums of money to counter the effects of the pandemic and related health measures. But continuing to pile up debt at such a rhythm could compromise the health of our public finances and shift a heavy burden onto the shoulders of subsequent generations.
“Thankfully, the current provincial government says it wants to return to a balanced budget in five years, as required by the Act to reduce the debt. But to get there, the figures clearly show that the solution is to control spending, not to raise taxes,” points out Miguel Ouellette, author of the publication.
Indeed, the income tax burden of Quebec taxpayers is already higher than that of all other Canadian provinces except Nova Scotia. If we take into account total tax revenues collected by all levels of government, Quebec takes the title as the province with the highest tax burden (38.9% of GDP) in Canada. Same thing for expenditures: Quebec is among the Canadian provinces with the highest level of program spending, corresponding to 22.2% of its GDP in 2018-2019, compared to the Canadian average of 18.6%.
“One thing is clear: Quebec taxes and spends far more than the Canadian average. Yet there is no indication that the services provided by the Quebec government are of such high quality as to justify spending more than the other provinces,” says Miguel Ouellette. “The return to a balanced budget must therefore be accomplished through spending control.”
Stephen Harper’s example and the 2008 crisis
In 2008-2009, the federal government under Stephen Harper set up a committee to reduce the deficit and get out of the economic crisis that had shaken the planet. Each department had to present proposals aiming to identify savings of 5% to 10% to include in the following annual budget.
“This committee generated recurring savings of over $5 billion and contributed significantly to the government’s ability to balance the budget. That’s not nothing! Moreover, 70% of these savings came from reductions in administrative procedures, not in services provided to the population,” explains Miguel Ouellette.
“In order to ensure our longer-term economic health, a standing expenditure review committee needs to be put in place so that Quebec can return to a balanced budget as soon as it can,” concludes Mr. Ouellette.
The Viewpoint entitled “Quebec Must Set Up a Standing Expenditure Review Committee” is available on our website.
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The Montreal Economic Institute is an independent public policy think tank. Through its publications, media appearances, and advisory services to policy-makers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.
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