The Top Line
The Government of Quebec unveiled its Budget 2017/18 today. Since winning Election 2014, the Quebec Liberal Party has tabled a series of austere budgets that aimed to bring the Province’s fiscal books into balance and reform the Province’s business environment. Fiscal year 2015/16 was the turning point back to budgetary balance, while the Budget 2017/18 fiscal plan, which includes an array of new spending and tax cuts, may be viewed as the Government’s reward to taxpayers.
Economic and Fiscal Outlook
The projected surplus for fiscal year 2016/17 is $250 million. Budget 2017/18 does not provide definitive balance projections for the coming years, but the Government expects to have surpluses of some amount over the coming five-fiscal cycles.
Quebec’s real GDP is expected to grow by 1.7% in 2017/18 and 1.6% in 2018/19, which will feed into increased consolidated revenue for the Government, at a rate of 3.7% in 2017/18 and 2.7% in 2018/19. Government expenditures will remain below that growth rate, with most of the excess Government income allocated to the Generations Fund – a trust fund that pays off the Province’s debt.
Much like Federal Budget 2017/18, innovation is the overriding theme of Quebec’s annual fiscal plan. Over the coming five-fiscal years, the Government will spend $834 million on a variety of programs meant to spur Quebec’s economic growth by increasing innovation across a number of economic sectors. Notable investments include:
- $305 million, to be spent by 2020/21, allocated for the Province’s next scientific research and innovation strategy, which is in development;
- $100 million to make Montreal an artificial intelligence supercluster – a proposal which echoes last week’s Federal Budget allocation of $125 million in federal funds to create such clusters across the country; and
- $432 million for a series of programs meant to spur entrepreneurship and offer financing to growing businesses.
Infrastructure and Public Services
In line with increased spending on infrastructure at the federal level of Government and in several other provinces, Quebec’s Government will make a wide variety of investments in infrastructure in the coming years, totalling a planned $91 billion by 2027. In the near-term, Budget 2017/18 allocates $1.3 billion for Montreal’s proposed light-rail network, which awaits a federal funding contribution to become reality.
Meanwhile, the Government increased spending on health care and education for the coming years, after a series of austere budgets meant those services had to make due with less funding as the Government pursued the goal of balanced budgets.
Leveraging balanced fiscal books and a growing revenue base, Budget 2017/18 enacts a few modest tax reductions, including:
- Reducing corporate tax rates by 0.1% annually, for a total reduction to 11.5% by 2020 from the current rate of 11.9%;
- A reduction of the health services tax on small and medium-size businesses; and
- An immediate elimination of the health services tax on consumers.
Quebec will have a General Election on October 1, 2018, with one more budget due between now and then, and the Quebec Liberal Party’s success at issuing successive balanced budgets, reducing provincial debt, and presiding over a period of growth for Quebec’s economy will form the backbone of the Party’s platform for re-election. In that light, Budget 2017/18 is very much the opening salvo by the Liberals in Election 2018. The Opposition Parties have already started to similarly position themselves for the election, arguing that the spending in Budget 2017/18 is a ploy for re-election and does not do enough to fund services that were denied funding in earlier Liberal budgets.