The Parti Québécois minority government announced it will table a budget on Nov. 20, four months ahead of schedule, taking advantage of the opposition parties’ weaknesses and wanting to reassure the business community over the province’s economic outlook.
The document will define the path towards balancing the budget by the end of the 2013-2014 fiscal year. This will require tighter controls on spending, as well as fiscal policy changes to generate the additional revenues needed to cover the cost of freezing tuition fee hikes and hydro electricity rates.
The financial community welcomed the news, saying that a budget will end the speculation regarding the government’s fiscal strategy following several controversial announcements that included changes to the health tax and the creation of new tax brackets for high-income earners.
“It is something we have been anticipating,” said Moody's Investors Service’s assistant vice-president and lead analyst on Quebec, Michael Yake. “We were under the impression that if they waited until March, which is a typical time for a budget, that was perhaps a little bit too long, because they do want to implement some fiscal measures right away, and the only way to have a clear indication that they are able to meet their targets would be to have a mini-budget or some sort of update in the fall. So we were expecting that, and I think the investment community would appreciate that.”
Mr. Yake noted that the investment community was in a “bit of a shock” when the PQ made several announcements after taking power, but was “now adjusting to the new reality.”
Political considerations also came into play in the decision to table an early budget. PQ government insiders argued that it will be easier this fall to reach an agreement with the opposition parties to pass the budget rather than wait until next spring.
The PQ appeared convinced that the Liberals, who will choose a new leader on March 17, 2013, were in no position to defeat the minority government this fall. And with its 19 elected members, the Coalition Avenir Québec, which holds the balance of power, will still need time, according to the PQ’s assessment, to fill its empty coffers before considering going into another election campaign.
Premier Pauline Marois, who took over the reins of power less than two months ago, appeared determined to adopt a financial framework that will guide her government past next spring and well into the following year before having to face the electorate again.
Finance Minister Nicolas Marceau justified tabling an early budget by blaming the former Liberal government for the province’s financial predicament. He explained that “the extent of the adjustments” needed to achieve a balanced budget by 2014 compelled the government to “act quickly.”
Mr. Marceau added that the newly elected government faced a $1.6-billion shortfall due to cost overruns on infrastructure programs, as well as a lack of control on program spending by the former Liberal regime.
“Despite the difficult situation with which we are confronted, I want to reiterate the government’s commitment to balance the budget next year [2013-2014]. Delaying the deadline would have important consequences on Quebec’s economy and finances,” the minister stated in a press release.
The opposition parties said the decision to table an early budget was another indication of what they contend was the improvisation that has characterized the PQ government from the beginning. While the Liberals showed no signs of wanting to negotiate with the government, the CAQ left the door open to achieving a consensus but only if the PQ was willing to make concessions.
“We will remain firm in our opposition to tax hikes and refusal to cut spending,” said CAQ finance critic Christian Dubé. “If the government refuses to back down it will give us no choice but to vote against it.”