Quebec Budget 2015: Liberals balance books with no tax hike

Liberals promise Quebec's 2015 budget, tabled today, will help to "better deliver services at a better price," with balanced books and no tax hike.

Health, education to feel the biggest spending crunch

Quebec Finance Minister Carlos Leitao accuses the opposition parties of delaying debate on Bill 28.

Liberals promise Quebec's 2015 budget, tabled today, will help to "better deliver services at a better price," with balanced books and no tax hike.

But it's a plan that will only work if the economy continues to grow and the government can continue its tight control over public spending.

Spending cuts are at the heart of the $100-billion budget delivered by Finance Minister Carlos Leitão this afternoon in the National Assembly.

The reduction in spending won't come from direct program slashing, but rather in anticipated and aggressive belt-tightening in some of the government's largest departments: health, social services and education.

"This control of spending, confirmed in recent months, is the result of a collective effort of all Quebecers," said Leitão.

"The return to a balanced budget is not the end. Quite the opposite, in fact, it is a point of departure and gives new momentum to Quebec."

The path to zero deficit

For months, the provincial government has pushed forward with its zero deficit mission by targeting what it called inefficiencies in the way the government administers and delivers services, and handles other expenses including the cost of the public sector payroll.

Today, Quebecers learned just what that will look like financially.

Overall, spending growth will be capped at 1.5 per cent in 2015-16, a low ceiling the likes of which hasn’t been seen since Lucien Bouchard was in power in 1998.

Education will see an increase of only 0.2 per cent, which, after inflation is factored in, essentially amounts to a cut.

Likewise, health and social services will see spending growth reduced to 1.4 per cent, an expected move as the government pursues dramatic restructuring of the province's health-care system.

"We are making reforms, we are doing things differently," said Martin Coiteux, Treasury Board chairman.

"It's not that we are reducing services. We are looking at ways to live within a budget envelope which is relatively smaller than what we would like, but this is this the required step to rebuild our room to manoeuvre."

Coiteux said the aim is to better manage the public purse and deliver more fiscally responsible services.

However, the opposition accused the government of balancing the budget on the backs of students and patients.

"It's easy to table a budget that is balanced in appearance when you don't care about the consequence on your economy or you don't care about the consequences on the services provided to citizens," said Nicholas Marceau, Parti Québécois finance critic.

Likewise, labour unions, that have for months protested against spending controls, said the government is suffocating the public sector without respecting workers.

"If there is some fat in the system, it is gone, it is long gone. There is no more economy in trying to be more efficient," said Pierre-Antoine Harvey of the public services union CSQ.

Tax relief to come

This budget is the first to reach a zero deficit since 2008 – an election promise that the Liberals have been chasing fiercely since the beginning of their mandate last spring.

It's also one that includes a glimpse of another election promise: the eventual reduction of the health tax introduced by the Liberal Party in 2010. While it won’t start until January 2017, the tax will eventually be phased out over three years.

It also includes incentives under the creation of a so-called tax shield, which will protect an estimated 400,000 lower income workers by limiting the loss of certain tax credits if they do extra work to supplement their income.

Many of the initiatives outlined in the budget had been previously announced, including the government’s maritime strategy, which will see money for the Magdalen Islands and investments to the ports in Montreal and Quebec City to boost cruise ship traffic.

The province's debt to GDP ratio, which will peak at 54.9 per cent this month, will drop to 54 per cent by the end of March 2016.

While there were some promises to ease the tax burden on Quebecers, many of those plans won't be realized until subsequent budgets. 

The government implemented several of the recommendations of the Godbout commission. The commission, which released its report last week, recommended lowering income tax, while increasing sales tax and other fees to make the province's tax system more equitable.

Leitão said the government plans to further consult with taxpayers and stakeholders before making any dramatic reforms to the tax system.