The economic update of the Quebec government on November 7 was presented, according to the communication lines of the Coalition Avenir Québec (CAQ), as “a prudent and responsible update of public finances” in the face of economic uncertainty. The government assures that “it will never cut state missions or services to citizens.” However, the government is forecasting spending growth of 1.6% next year, which is dangerously similar to the two years of austerity imposed by the Couillard government.
Just to maintain the same level of health service from year to year in the context of inflation in technology costs and an aging population, public health spending typically grows by about 4% per year . Given that health represents more than 40% of Quebec government program spending, the economic update predicts a 2.4% drop in spending across all portfolios other than education and health. Ultimately, the government plans to impose austerity measures in its next budget.
The Minister of Finance denies it. He says that because spending has increased significantly during the pandemic, growth rates will be lower. However, this argument is only valid if public spending was artificially high due to the pandemic and would naturally fall afterwards.
This is far from the case. One-time spending to combat COVID-19 is generally absent from the 2023 budget, but the needs of citizens, businesses and public service networks have increased during and after the pandemic, especially as the post-pandemic continues. inflation, probably followed by a recession. However, the government has consciously decided not to respond to certain important needs, for example by refusing to sufficiently cover the deficits of public transport companies, not to provide cities with the necessary money to adapt their infrastructures to change climate and empower public sector employees. with salary increases that do not match the increase in the cost of living.
We must certainly welcome the announced investment in construction and housing aid, Quebec being the only province to double the 900 million in five years transferred by Ottawa. However, the needs remain dire and many more social housing will need to be built to deal with the housing crisis.
It seems obvious to me that these needs will not naturally diminish after the pandemic; Spending growth of 1.6% next year therefore represents a period of austerity.
This austerity, however, was avoidable. Just over a year ago, the CAQ proclaimed during the election campaign that the good health of public finances allowed it to hand out checks of $400 to $600 to more than 90% of taxpayers, in addition to promising a tax cut . At the very least, these misdirected checks will have cost $3.5 billion in a single year, while the tax cut will cost more than $1.5 billion per year permanently ($9.2 billion over six years, based on the 2023 budget).
This tax reduction helps to please the AQ wing of the party, unhappy with the centrist government of the first term of the CAQ. However, any tax cut benefits the wealthiest more, simply because they pay more in taxes: A taxpayer making $100,000 or more a year saves $814, compared to $210 for someone making $40,000 a year . A person earning $20,000 will save $8 a year. A “prudent and responsible management of public finances” would have kept these 1.5 billion in the State’s coffers to avoid budgetary austerity.
Clearly, this tax cut is politically useful for the government: it allows us to “starve the beast” and tell public service unions and cities that their demands are unrealistic. Governments are always reluctant to transfer additional funds to other levels of government as they cannot govern how the money is spent. Moreover, it is the person who receives the money and provides the service who generally gets the public recognition. Governments also seek to regulate civil servants’ salaries, knowing that higher wages do not necessarily translate into service improvements visible to voters, even though the costs are obvious to taxpayers.
The truth is that in a context of labor shortages and a widespread perception of a crisis in public services, offering a wage increase below inflation risks harming public services, while causing a major social crisis . Similarly, reducing the supply of public transport and not financing the adaptation of cities to climate change seems ill-advised in 2023.
During the next election campaign, the economic situation will have improved and the CAQ suggests that it will propose additional tax cuts, even if the needs increase even more after the austerity of 2024-2025. Who knows if Quebecers will not reserve the same fate for the outgoing government as for the last party that imposed these austerity measures.
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