Québec Budget 2023-2024: Prudence and continuity
Updated: Mar 30
On March 21, Finance Minister Éric Girard presented Québec's 2023-2024 budget. This was the first budget exercise for the Coalition avenir Québec government since October's election.
In addition to fulfilling several campaign promises for the CAQ, Québec's 2023-2024 budget is anchored in two major realities: the threat of an impending recession and an inflationary surge that is not yet under control. These circumstances are eroding the purchasing power of Quebecers.
Add to this the uncertainty of the international context and a possible increase in electricity rates, and this year's budget was a perilous exercise for the province. As demonstrated in his approach to this year's budget, Minister Girard understands his role as a facilitator of the government's agenda and avoids encroaching on the responsibilities of his colleagues.
What the numbers say
Provincial spending for 2023-2024 is estimated at $147.9 billion;
Revenue is projected at $147.7 billion;
Québec's real GDP gap with Ontario should remain below 10% through to 2026;
The projected deficit for 2023-2024 is $4.0 billion after a $2.3 billion payment to the Generations Fund and a $1.5 billion reserve for the Stabilization Fund;
The CAQ government is still projecting a balanced budget by 2027-2028, with a surplus now expected as early as 2025-2026.
Québec is not officially anticipating a recession, but its economic growth forecasts of 0.6% in 2023 and 1.4% in 2024 are not very reassuring, so growth is expected to be lower than spending growth. Moreover, the presentation of an alternative plan in the event of a recession raises fears of a sharper-than-expected slowdown. Fears of runaway inflation and successive interest rate hikes, coupled with labour shortages, could complicate Québec's task in any economic recovery.
The budget remains faithful to the main priorities announced during the last election campaign: reducing the tax burden on individuals, health care, education and the economy. It is also the Québec government's response to the significant increase in the cost of living that has continued in recent months. From an economic point of view, some of the measures contained in the budget are of particular interest.
The Québec budget proposes tax cuts for individuals and corporations. The tax cuts for individuals, applied to the first two tax brackets, will lead to an increase in disposable income for households, which will benefit, among others, businesses and other service providers. After three years of pandemic restrictions, Quebecers are spending more, and the surplus they will have will be used to reduce their personal debt and to pay for some one-time expenses.
On the business side, the government is proposing a tax holiday on employers' health care expenses when they carry out a major investment project in Québec.
Health continues to lead the government in new spending, and the size of the department continues to grow. This year, $3 billion is earmarked to make the system more flexible. This includes amounts related to the creation of Santé Québec, the agency that will eventually manage the system. $710 million is earmarked for access to front-line clinics. The total labor costs of the system are expected to increase significantly.
To mitigate a potential recession, the government is increasing the Québec Infrastructure Plan by $7.5 billion over 10 years. In addition, $615 million over six years will be used to address labour shortages by increasing support for the recruitment and francization of immigrants and improving short-term training programs.
The government's response to inflation is once again in the form of new spending. We are talking about one billion dollars for housing, almost $400 million for the day care network, $770 million for public transport and $125 million in new money for the entire community.
The government also intends to make contributions to the Régie des Rentes optional after the age of 65 for people who already receive a pension. The equivalent in reduced contributions will also be given to the employer for each worker who opts out of the contribution system, which is progress.
No intervention has been proposed regarding the opening hours of shops.
As for alcohol, the specific tax on alcoholic beverages will not be increased and the legal hours of sale will remain the same. The price of licences will continue to be indexed according to the tables already established. The tax increase on tobacco products (announced on February 8, 2023) will be maintained and included in the budget.
Measures to support the employment and retention of older workers are a welcome contribution.
An additional investment of $2.3 billion over five years has been announced. However, most of this money is a rollover from the previous two budgets. Most of the new money is explicitly announced as "post-pandemic catch-up".
Despite the uncertain global environment, Québec remains in better financial shape than most other provinces in the country. The budget presented today focuses on the three pillars identified by the government since it took office: education, health and the economy. It adds a reduction in the tax burden on individuals to give families some breathing space and to combat the impact of inflation on households.
In line with what the premier and his finance minister have been saying in recent weeks, this budget remains serious and prudent. Coming back from an election, the budget represents a willingness from the CAQ government to keep its word and deliver on many of their election promises, while leaving some room to maneuver in case of bad days. There is also a lot of room for the various ministers to intervene in their respective areas.
As a result, some of the more difficult decisions seem to have been postponed. The budget presented today is definitely a wait-and-see budget, with few new structural measures. It is as if Québec has found its momentum and is satisfied with it. Adjustments in health and education, improvements in infrastructure, tax cuts for individuals. It's interesting, but it remains relatively timid.
While reaffirming its commitment to a balanced budget by 2027-2028, the Québec government provided more details on the means to achieve this goal, including a reduction in payments to the Generations Fund, the investment fund for royalty revenues (mining, water, etc.) and Crown corporations (lottery, electricity, etc.).
For businesses, the budget remains relatively timid in addressing the labour shortages that continue to affect many companies and slow growth. We would have liked to see more funding for the training of specialized workers or for immigration.