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Quebec’s portfolio spending: The bleeding must stop

Montreal, March 23, 2022 – As the Quebec government tables its 2022-2023 budget, the MEI’s researchers are emphasizing the substantial growth of portfolio spending in recent decades, taking into account the latest numbers, and presenting different scenarios that illustrate its magnitude.

They find an increase in portfolio spending of nearly 5.4% per year, on average, between 2000 and 2021. “This spending has increased far faster than government revenues for many years, which leads us to conclude that the trend cannot continue, and that spending growth must be reined in,” says Miguel Ouellette, Director of Operations and Economist at the MEI.

Portfolio spending: Time to apply the brakes

Since 2000, the Quebec government’s annual portfolio spending has increased by nearly $61 billion, taking inflation into account. This increase accelerated between 2009 and 2021, when spending climbed by almost $43 billion. With each new budget, spending hits new highs, while revenues fail to keep up.

“Each year, the government spends 5.4% more than the year before. This rate is unsustainable, especially given that the growth of revenues averages just 4.68%. The government has to stop piling up debt for future generations, as a simple matter of intergenerational fairness,” adds Mr. Ouellette.

The 2022-2023 budget: Similar to previous budgets

This year, the Quebec government will devote $127.8 billion to portfolio spending, which is 4.9% more than the previous budget and excludes measures related to COVID-19. The situation may be exceptional due to the health crisis, but even the pre-pandemic rate of growth would be unsustainable in the long term.

“With the aging of the population, the number of working-age adults is falling, while several spending items, for example health care, are increasing, which raises the contribution needed from each person to fill the government’s coffers,” points out Mr. Ouellette.

If the trend continues, in 2028, Quebec will devote more than $171.9 billion to portfolio spending.

“If the government had been content to grow its spending at the rate of inflation plus population growth, it would have saved $404.3 billion between 2000 and 2021. Even if we add 2% to this scenario, $107.5 billion would have been saved,” deplores the Director of Operations and Economist at the MEI.

In short, Quebec must rein in the growth of its spending to a sustainable rhythm, or else the public debt will just keep growing.

“A baby born today inherits a debt of $34,032. A family of four now carries a debt of $136,129. That’s why it’s important for Quebec to reduce its level of debt and slow the growth of its public spending. A tax increase is not the solution to this problem, as Quebecers are already among the most heavily taxed populations in Canada, and in the world. We could, however, try to attract more private investment, all while reining in spending,” concludes Miguel Ouellette.

To read the full publication, click here.

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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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