Watch: 2014 Quebec Budget straight up
QUEBEC CITY — In an inadvertent reference to former Quebec premier Pauline Marois’ election campaign, Carlos Leitao said Wednesday that he is “determined.”
“This budget opens doors to a better future for Quebec,” he noted.
While the provinces newest finance minister said that he is committed to returning to a balanced budget and to government transparency, he also made an interesting reference to his roots.
“In the country where I was born, we say a esperanca sempre entra quando deixamos a porta aberta, which means ‘hope always comes through an open door.’”
Watch: One on one with Finance Minister Carlos Leitao
He told Global News that for the first time in Quebec history, the province has a finance minister who is “not of anglo or French stock,” which he hoped would bring a perspective shift.
“It’s a way of saying that Quebec is an open society,” he said. “Quebec is changing and this was a nice way of showing it.”
However, the goal of the province’s new budget isn’t that different from the one presented in February. Just like the Parti Quebecois, the Liberals are aiming for a balanced budget.
Balancing the budget
Leitao announced that the Liberal government intends to “trim” the budget deficit by over $2.3 billion in 2014-2015 and completely erase it by 2016.
“There is no denying the truth,” said Leitao. “Spending continues to grow faster than revenue.
“Returning to a balanced budget is not an obsession, it’s an obligation.”
READ MORE: How does Quebec’s new budget affect you?
Following in the footsteps of the federal government, the Quebec Liberals are not going to cut where it hurts, in the pockets of its citizens – who are already paying some of the highest taxes in North America. With the provincial debt heading towards $10.8 billion for 2014-2015, Leitao is choosing to tackle debt reduction with a softly, softly approach: no major cuts but no spending increases either.
“Tax increases over the past five years, such as PST, the health fund, high earners’ income taxes, and the gasoline tax come to roughly $6 billion,” Stephen Gordon, a professor in economics at Laval University, told Global News.
“What the Liberals are suggesting is that these increases have not been enough. They have to look at spending.”
The government is hoping that by keeping income projections low and spending increases at a minimum, the budget will almost balance on its own.
To do this, the Minister said he will be asking for a mandate for a hiring freeze on all public and parapublic agencies until 2015, with a projected savings of $600 million. On average, over the past five years, there have been 6,250 new full-time jobs each year, with 15,000 government employees retiring. The Liberals would like the discretion to replace retirees in one department with new hires in another.
Growing the economy
With spending on hold, the government hopes that focusing on five areas will help grow the economy: capitalizing on natural resources, resurrecting the controversial Plan Nord, implementing a “maritime strategy,” supporting small businesses and investing in infrastructure.
Open for business
The Finance Minister minced no words when it came to taking advantage of the province’s natural resources.
“Quebec is open for business,” said Leitao. “We are not ashamed of having natural resources and we intend to develop them fully.”
This includes investing in forestry, mining and electricity. The government is hoping to pass a bill that would allow Hydro-Quebec to invest in public transit electrification projects. It is looking to develop small hydroelectric plants to create jobs in rural and Aboriginal communities.
Leitao also has ambitious plans to build a fourth major power line to feed the growing demand for electricity north of Montreal, creating 1,000 jobs over five years at a $1.1 billion price tag.
Plan Nord is back
The Liberals are resurrecting their controversial Plan Nord. With an investment of $63 million for 2014-2015, the government is renewing its focus on the economic, social and environmental development of Northern Quebec, so that “all regions of Quebec profit.”
READ MORE: What is the Plan Nord again?
Leitao is also hoping to acquire equity interests in the mining, oil and gas sectors, so as shareholders, Quebecers can share directly in the profits.
Could this plan be considered socialism through the back door?
“It’s through the front door,” said Laval University economist Stephen Gordon. His concern is that the proposed Capital Mines Hydrocarbures Fund would be supporting companies that can’t get private investment from elsewhere. “My question as an economist would be: ‘What is the market failure here that needs to be fixed?’”
A boost for SMEs
The Liberals are looking to provide investment, tax relief and tax reduction for the 175,000 small-to-medium-sized businesses (SMEs) in the province.
With $20 million going towards helping Quebec businesses compete outside the province, $150 million to support innovation, $500,000 to help take advantage of possible entrepreneurial collaborations with university research, $100 million for an angel capital fund and the creation of a private-public partnership venture capital fund, $9.5 million to encourage women in business and $2.5 million for social economy businesses, there seems to be a lot of money for small-to-medium sized businesses in the province.
However, some analysts believe that simply throwing money at small businesses isn’t the answer.
“There’s a fetish for small firms, but what we really want is support for young, growing firms,” said Gordon. He noted that a lot of SMEs are mom-and-pop type businesses that aren’t really going to grow exponentially.
“What we really need are businesses that can offer better jobs, pay higher wages, do research and development, and innovate.”
But Françoise Bertrand from the Fédération des chambres de commerce du Québec told Global News that with so many public and parapublic agencies devoted to helping small-to-medium sized businesses in the province, it shouldn’t be a problem finding the ones that could benefit most from this type of investment.
“In Quebec City alone, there are 45 agencies that help businesses, there are 650 employees there, so if they don’t know who the businesses that we should help are, then let’s close them as soon as possible.”
The Liberals are also committed to keeping head offices in Quebec, and encouraging head offices from other companies to come.
“The best support we can give them is an environment that is conducive to economic growth and that offers a competitive tax system.”
A maritime strategy
The Liberals are positioning Quebec to be the “hub of transatlantic shipping traffic,” which would include the development of intermodal transportation for trains, ships and trucks (and possibly, a future pipeline) via the Port of Montreal.
Taking a page from the province’s history books, the Liberals are reviving the St. Lawrence as a shipping hub for import-export activities – and a tourist destination.
“From the shores of Quebec to western shores of Lake Superior, this seaway is the shortest route between the ports of Northern Europe and the American Midwest, two of the most industrialized areas in the world.”
Leitao is hoping to take advantage of the trade agreement between Canada and the European Union to create major logistical hubs for import-export activities between the two continents.
The government also wants to encourage more tourism along the St. Lawrence, with $80 million invested over three years to redevelop the Dalhousie site in Quebec City, and sustainably develop tourist attractions, such as international cruises and marine mammal observation activities.
Watch: West Island Budget Reaction
Leitao is committed to investing in infrastructure. He said that it provides substantial support for economic growth and he hopes that by adding an extra $300 million to the $11.2 billion already earmarked for investment projects, the Liberals will create jobs and “better plan future investments” by studying what should be made priorities.
The Liberals are saying that they’re committed to transparency and to this end, they are proposing that monthly reports on financial transactions will be made public on fixed dates, and three months before a general election is held, a pre-electoral report on Quebec’s finances will be released.
© Shaw Media, 2014