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Éric Girard, Québec’s Minister of Finance, just tabled a sixth budget aiming especially to meet the financial imperatives of the Budget’s two main priorities: health and education.
Written in thick red ink, this budget does not slash public services. On the contrary, far from being severe, it injects much more money into funding health and education while revising certain other tax assistance initiatives for businesses which will enable the government to save money.
This Budget therefore presents a significant deficit and results, according to the government, from factors such as “stagnant economic activity, low runoff in Hydro-Québec’s basins, massive government investment in public services—in particular to improve working conditions for public and parapublic sector employees—stronger-than-expected demographic growth and the pace of infrastructure investments […]”.
Furthermore, with growth now expected to hover around 0.6% for 2024, while forecast GDP growth was 1.4% in the last budget for that year, the Québec government will be in a deficit until 2029-2030.
Let’s keep in mind though that the Balanced Budget Act, updated in December 2023, gives the government greater flexibility in balancing its finances. This is why, for reasons including a significant deterioration in economic conditions, the government can henceforth postpone the return to a balanced budget.
However, it now intends to table its plan when the 2025-2026 budget is published, with the aim of achieving a zero deficit by 2029-2030, i.e., two years later than originally planned when this objective was announced in the 2023 Budget.
As a result, the deficit for 2024-2025 would not be $2.9 B as announced in November 2023 at the time of the government’s economic update, but closer to $11 B. So, instead of returning to a balanced budget in 2027-2028, public finances are expected to record a deficit of $3.9 B over the same period.
Health and education at the heart of the budget
It comes as no surprise that health and education are a priority in this budget. An amount of $5 B will be injected over five years in the State’s two main missions, including:
- $1.8 B for improving access to care and services and increasing hospital fluidity;
- $1.1 B for ensuring the continuity and quality of care and services for seniors;
- $819 M for fostering the educational success of young people;
- $421 M for promoting success in higher education.
A few measures for businesses and the economy
Despite the government’s extremely limited margin for financial manoeuvre and the significant support for the Budget’s two main priorities, we are bound to recognize that the Budget is providing close to $1.9 B over five years for economic priorities divided into four main areas.
These amounts comprise investments for supporting strategic sectors ($443 M) including measures such as:
- Setting up industrial laboratories in innovation zones ($125 M);
- Promoting the adoption of new technologies and research ($203.6 M);
- Growing Québec’s aerospace sector ($74.5 M).
In parallel, only $9 M will be injected over three years to support entrepreneurship and succession despite the fact that this is a very important issue.
Second, with regard to measures for growing the available labour pool and productivity in the construction industry, the Budget plans on investing $126 M.
Third, with a view to contributing to the prosperity of the regions ($888.5 M), the Budget provides investments for:
- Supporting Québec’s forestry sector ($347.5 M);
- Boosting mobility and vitality in the regions ($337.1 M), including only $27 M more for supporting regional air service;
- Supporting the development of the bio-food sector ($107.5 M).
Fourth, to facilitate immigrants’ economic and social integration ($400 M), an amount of $320 M will be injected to respond to the significant increase in the francization clientele and enhance the offer of services for certain clientele.
Adjusting certain tax assistance measures for businesses
Lastly, the Budget plans on generating savings of $874.5 M by 2028-2029 by amending the tax credits supporting jobs in the IT sector, that is, the tax credit for the development of e-business (TCEB) and the tax credit for the production of multimedia titles (TCMT). As such, “to improve fairness in the assistance offered and optimize the impact of tax credits targeting sectors that are labour intensive from an IT standpoint”, the Budget Plan intends to:
- Gradually harmonize the TCEB and TCMT base rates as of 2025;
- Refocus tax assistance to the IT sector on the highest value-added jobs as of 2025;
- Amend the tax credit for film production services as of 2024.
Furthermore, for tax purposes, the Budget plans on eliminating the tax credit to foster the retention of experienced workers, offered to employers, which will represent a financial gain of $251.9 M over five years.
For more information on the tax measures announced in this Budget, please download the Tax Bulletin.
