The Quebec government is not doing enough to return to budgetary balance, says the MEI

• Quebec government spending has increased by $54.1 billion since the Legault government took office.

Montreal, November 21, 2024 – Repeated deficits show the Legault government’s lack of control over public finances, says an MEI researcher in reaction to the Quebec economic update presented earlier today.

“Quebec is facing an unprecedented deficit,” points out Gabriel Giguère, senior policy analyst at the MEI. “You might expect to see a little more effort from the government in order to move toward balancing the budget.”

The finance minister maintained his projection of a $11 billion deficit for the 2024-2025 fiscal year. This is the largest deficit in the history of Quebec. For the coming year, the government increased its deficit projection, from $8.5 billion to $9.2 billion.

When the budget was tabled, the government committed to launch a government spending review in the spring of 2024. The results of this exercise are to be integrated into the 2025-2026 budget.

Interest payments on the Quebec debt will cost taxpayers $9.9 billion this year. The government projects that the Quebec debt will reach $236.6 billion on March 31, 2025.

The researcher notes that Quebec government spending has grown by 51 per cent since the Legault government took office, going from $106.5 billion in 2019 to $160.6 billion this year. This represents a $3 billion increase from last March’s estimates.

“Instead of looking for creative solutions to the province’s challenges, the Legault government is content to increase spending left and right,” explains Mr. Giguère. “The fact is that since it took office, spending has gone up by about half. That’s just not sustainable!”

The researcher recalls that Premier François Legault campaigned on the elimination of 5,000 civil servant positions in 2018. Today, the government has 9,838 more civil servants than when it took office. In all, there are 72,806 more public sector employees than there were in 2018-2019.

The latest projections show that the increase in the capital gains tax will bring in $2.8 billion over five years, including $1 billion this year alone.

“The government does not have a revenue problem; it has a spending problem, and the capital gains tax hike confirms it,” says Mr. Giguère. “This measure undermines growth and savings, and amounts to sacrificing future prosperity for a bit of quick cash this year.

“If not for Minister Girard’s decision, Quebec would have enjoyed a more attractive fiscal environment than the rest of the country.”

After leaving the matter in some doubt for several days, Quebec Finance Minister Éric Girard announced this past April that he would follow the federal government’s lead and increase the capital gains inclusion rate to 66.6 per cent.

In a publication released in May, the MEI explained that such a tax increase has the effect of reducing the availability of venture capital by lowering anticipated returns, and could lead to the deferral of potential sales by venture capital investors.

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The MEI is an independent public policy think tank with offices in Montreal, Calgary, and Ottawa. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

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