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Quebec Premier Pauline Marois receives the Charter of Quebec Values from Citizenship Minister Bernard Drainville Sept. 10, 2013 at the legislature in Quebec City. (Jacques Boissinot/The Canadian Press)
Quebec Premier Pauline Marois receives the Charter of Quebec Values from Citizenship Minister Bernard Drainville Sept. 10, 2013 at the legislature in Quebec City. (Jacques Boissinot/The Canadian Press)

Lifting the veil from Quebec’s economy Add to ...

The Islamic veil that Quebec civil servants would no longer be authorized to wear in the workplace under the province’s proposed new secular charter is quite becoming to Pauline Marois’s Parti Québécois government.

By stirring the Quebec identity pot, the PQ is recreating a recipe that proved successful to former Action Démocratique du Québec leader Mario Dumont. His opposition party made a surprisingly strong showing in the 2007 elections after taking advantage of some isolated incidents in cosmopolitan Montreal to stoke fears in the province’s more remote regions of immigrants and minorities.

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But the raging debate about the veil and other religious symbols has also served to conceal the state of Quebec’s economy. One year after the PQ took power, the province’s growth has slowed to a crawl. So concerning are the latest figures on fiscal revenues that Ms. Marois is now open to pushing back the zero-deficit target it was to hit this fiscal year.

This about-face would embarrass Nicolas Marceau, the economics professor turned Finance Minister who has tried to reassure credit-rating agencies at every turn by stating that “eliminating Quebec’s deficit is non-negotiable.”

Just how bad is Quebec’s situation? In April and May, the first two months of this fiscal year, the province recorded a $1.2-billion deficit. That is on par with the deficit Quebec reported at the same period last year, but the government promised it would balance its books this year, whereas last year it was shooting for a $1.5-billion deficit – and it missed its mark, ending up $1.75-billion in the red.

Consumption taxes, which roughly account for a third of the revenues Quebec levies on its own, are down 0.8 per cent over those two months. Corporate taxes fell by 12.2 per cent. That is consistent with the latest GDP figures, which show Quebec’s economy contracted at an annual rate of 1.6 per cent over the three months that ended in May – and that was before the province-wide strike in the construction industry.

More recent labour statistics provide little reassurance. Quebec’s unemployment rate stood at 7.9 per cent in August, compared with 7.6 per cent a year ago when the PQ was campaigning. The province created a mere 5,000 jobs in the past year. This pales in comparison to neighbouring Ontario, which added close to 150,000 jobs in the past 12 months.

Of course, there is no magic wand a provincial government can wave to boost the world economy and improve its exporting prospects. But Ms. Marois has been pretty quick to throw in the towel during her year-one interviews. While balancing the books remains the goal, it is “not a dogma,” she said last week in Le Devoir.

Such a letdown is reminiscent of the flip-flops that characterized the PQ’s first months in power; they couldn’t scrap the health-tax entirely, they diluted mining reforms and they ended up indexing tuition fees. But in this case, the wishy-washy message from Canada’s most indebted province per capita could backfire in the form of credit downgrades.

Increased taxes on Quebec’s overburdened taxpayers are out of the question, Ms. Marois rightly argues. But the Premier is also excluding spending cuts, believing they could hurt Quebec’s already frail economy. Unfortunately, this lack of will is politically motivated: It has little to do with the province’s GDP and everything to do with opinion polls.

When the PQ government made clumsy cuts to its social assistance program last spring, it provoked an uproar that was disproportionate to the lowly amounts it was hoping to save. Since then, however, the minority government has gone into good-news mode.

Opening hospital wings and university campuses, not to mention Ms. Marois’s empathetic response to Lac-Mégantic’s plight, has worked wonders for the PQ. Ms. Marois even went so far as to scold school boards for raising taxes, even if it was the PQ that cut their budgets by $200-million.

The PQ must take another look at its spending if it hopes to retain its fiscal credibility. The government doesn’t even have to cut that deeply. But it needs to stop spending on new initiatives like it was the week before Christmas, in a not-so-subtle attempt to buy itself a majority. Quebec is adding another 15,000 subsidized daycare spaces and is establishing a kindergarten program for underprivileged four-year-olds as if it were an oil-rich emirate. The government also continues to give out subsidies and interest-free loans to companies such as French multinational Danone as if they were candies.

If zero deficit is no longer a religion in the new, secular Quebec, then the PQ’s long-standing endowment culture should not be sacred either.

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