Quebec Finance Minister Carlos Leitão says the tax cuts and new spending in the province's economic update are more than a ploy to get re-elected next fall.
They are, he told Daybreak host Mike Finnerty on Wednesday, the result of "strict, rigorous spending rules" in the first years of the Liberal government's mandate.
"Now we have sufficient margins to do it," he said, a day after announcing a $2.4 billion surplus for the 2016-2017 fiscal year.
The annual tax relief could range from $278 for individuals to $756 for a family of four with a combined income of $88,000.
As well, health and education will see their budgets increased by $630 million and $444 million respectively, but those amounts will be stretched over six years.
- More on economic update: Quebec Liberals offer big tax cuts with elections less than a year away
Here is a transcript of the interview, edited for length and clarity.
Mike Finnerty: You are the shepherd of our economy and the fiscal health of our public services. Critics say that your real priority is something different, that you are are cutting the taxes to win the election. Have they got that right?
Carlos Leitão: I also heard that I'm Santa Claus, but that might be for another day [laughs]. What we have done with yesterday's announcement is introduce a significant reduction in the tax burden. We did that because we can do it now. We've said right from the start, in 2014, that we were going to put our house back in order, and then when we would start running surpluses that half of those surpluses would go to tax reduction and that's exactly what we are doing now. We have accumulated about $4.5 billion in surpluses and of that in 2017, $2.3 billion will go to tax reduction, so we are just doing what we said we would do.
MF: Speaking of what you said from the start, I'm going to read you a quote from the Liberal election campaign platform:
"The province's essential missions, health and education, shall be protected. The budget for health and education will rise annually, by four percent and 3.5 per cent respectively." But you actually only gave 0.2 per cent to the education budget in 2015 and not much more to health care, so you didn't really do what you set out to do.
CL: Well, we did, because if you make those calculations just on one year then, yes, you end with some numbers just like that one. But if you take a four-year average, then you start to come up with numbers closer to what we are saying. We maintain that health and education needs to have the appropriate budgets. At the same time, we need to be realistic and we need to responsible. When we came in in 2014, we were facing a very serious situation where spending was running out of control.
MF: I hear what you are saying, but you did promise to do it at a different pace. The thing is that it opens you up to a different criticism that you ramped up the cost-cutting measures at the beginning of your mandate, breaking your promise, so that you would be in this position now just before the election so you could pass out the goodies, and that your number one priority isn't necessarily health care and education, it's about getting re-elected.
CL: I would obviously not agree with that. The key to our economy and our future in our capitalist system is confidence: business confidence and consumer confidence. People have to have confidence in their economy. The key to achieving and maintaining that confidence is a healthy fiscal outlook, a healthy fiscal balance. Where we were in 2014 was anything but healthy in that respect. We had to regain control of our public finances, which we did. It was a lot tougher than what we thought it was going to be. But it had to be done.
MF: What explains the timing of the tax cut, 10 months out from the Quebec election, if it's not the Quebec election?
CL: It is the fact that now we can do it. Now we have sufficient margins to do it. Our friends in the opposition, particularly the Coalition Avenir Québec, were promising those same tax reductions in 2014-2015. How would they have financed that?
MF: Maybe they would have gone a bit more slowly at the beginning. Why is it a good thing in your view to have starved the health and education budgets in the first two years only to reinvest them in the last two years? Why does that make sense?
CL: We installed some strict, rigorous spending rules because the trend in which they were engaged in the previous years was unsustainable. It's unrealistic to pretend that one can continue to increase program spending at the rate at which we were going, which was about four to five per cent every year over the previous 10 years. You can't do that, or one of two things will happen: either you will accumulate a huge amount of debt or you have to raise taxes to levels that are totally unsustainable. So we had to break that trend, which wasn't easy to do and I wasn't necessarily happy to do, but it needed to be done.
MF: I want to ask a question on a different topic, a big change coming down the road: the Société Québécoise de Cannabis. You're the minister in charge of it. Economically speaking, is it a good idea for the government to get into the business of selling cannabis? You did not want to go into this direction, did you?
CL: You are right. I didn't think, and I still don't think, that it is up to the state to engage in that activity. But at the same time, we consulted, we had long discussions around caucus and all kinds of groups, and the consensus in Quebec, as is the case also in Ontario, is that this should be handled by a Crown corporation — in our case, a subsidiary of the SAQ.
MF: But it might run a deficit, this Crown corporation. That's entirely possible, isn't it?
CL: At the start it is, and I don't expect this activity to ever be a huge source of revenue, because we are approaching this issue from a public health perspective. We don't intend to maximize production and sales. Our objective is to control and hopefully diminish consumption of this product.
MF: But there is this incredible economic and business opportunity, and I hear you on the public health side. But you are willing to let that go, based on some concerns, maybe even some prudishness, toward something that hundreds of thousands of people do use regularly and safely, and they have for decades, back as far as most people can remember.
CL: I remember [laughs].
MF: Exactly. But this is a business we're bringing out of the black market, and instead allowing it to become a thriving part of our economy. Instead of allowing it to become a thriving part of our economy it's going to go into the public sector? Is that a missed opportunity?
CL: No, I don't think so. This is not a trivial product. I understand the need to bring it out of the black market and into the light. I think the repressive approach of the last 30 years obviously didn't work. What I'm saying at the same time is that this is not a trivial substance, this is still a dangerous substance.