The Parti Québécois fiscal plan for a sovereign Quebec is based on wishful thinking

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The late Parti Québécois premier Jacques Parizeau liked to brandish his PhD from the London School of Economics whenever his federalist opponents warned of disastrous economic consequences for Quebec if the province ever separated from Canada.

Indeed if there is one thing the charisma-challenged Mr. Parizeau had going for him, it was his credibility when it came to making the economic case for Quebec independence. He could argue that Quebec would be better off economically as an independent country more authoritatively than any other separatist politician ever could.

To the chagrin of some of his more left-leaning sovereigntist comrades, who envisioned creating a kind of Sweden on the St. Lawrence River, Mr. Parizeau was also adamant that an independent Quebec would need to keep the Canadian dollar. A Quebec currency, or what the late Liberal premier Robert Bourassa jokingly referred to as the “Laurentian franc,” would be subject to successive depreciations as speculators played on investor anxieties about the economic viability of the new country.

Current PQ Leader Paul St-Pierre Plamondon made a major rookie error last week by arguing for the creation of a Quebec currency if the province separates from Canada. “Quebec will gain from having its own monetary policy focused on our own economic imperatives and not those of Alberta and Ontario,” the 46-year-old PQ chief said on the eve of PQ’s tabling of an updated fiscal framework for an independent Quebec.

For a politician who had been riding a wave of late, Mr. St-Pierre Plamondon may be taking the wind out of his own sails by suddenly talking up sovereignty at a time when most Quebeckers are far more preoccupied with bread-and-butter issues. Keeping the hardline PQ base satiated always requires some sovereignty promotion. But in recent years, that exercise has largely been confined to PQ conventions. Mr. St-Pierre Plamondon’s currency musings just made him look out of touch.

Oddly, the 84-page document on the finances of an independent Quebec that Mr. St-Pierre Plamondon tabled on Monday assumes that the new country would continue to use the Canadian dollar, at least initially. It goes on to state that a sovereign Quebec would repatriate more than $80-billion a year in federal taxes that Quebeckers now pay to Ottawa, enabling the new country to direct those funds to its own priorities rather than subsidizing Alberta oil producers or building pipelines.

The PQ document disposes of the thorny question of the $14-billion that Quebec currently gets in equalization payments, first by pointing out that Quebeckers now pay for a portion of federal transfers through the taxes they send to Ottawa. On a net basis, it says, Quebec gets $9.6-billion in equalization. But the $8.8-billion an independent Quebec would save by eliminating the overlap in federal and provincial spending would cover almost all of the remaining gap.

Ottawa’s ballooning debt level since the pandemic is presented in the PQ document as a major reason Quebec needs to leave the federation as soon as it can. Only, it pegs Quebec’s share at just 17.6 per cent of the $1.2-trillion federal debt, or about $211-billion – well below Quebec’s 19-per-cent share of the Canadian economy and 22-per-cent share of the national population.

That single assumption alone is enough to discredit the entire document. But the PQ fiscal framework is silent on the mechanism an independent Quebec would employ to assume its share of the federal debt. If it were to replace that debt with Quebec bonds, as the rest of the country might insist on during the negotiations that would follow a “Yes” victory in a future sovereignty referendum, all bets are off as to how that would turn out. Those talks could make federal-provincial negotiations on Alberta’s potential withdrawal from the Canada Pension Plan seem cordial in comparison.

As it stands, the PQ document simply assumes a sovereign Quebec would pay the same interest rate – 2.28 per cent – on its share of the federal debt as Ottawa paid on federal borrowings in 2021-2022. Yields on federal bonds have surged to nearly 4 per cent since then. An independent Quebec, with or without its own currency, would almost surely face higher borrowing costs than Ottawa.

The last PQ politician to present a fiscal framework for a sovereign Quebec was, well, François Legault, when he served as the party’s finance critic in 2005. Mr. St-Pierre Plamondon hoped to embarrass the current Coalition Avenir Québec Premier by trotting out some of his old quotations about the “urgency” of Quebec separation. But the tactic largely backfired. “An independent Quebec would be viable,” Mr. Legault, an accountant by training, replied on Tuesday. “But you need to tell Quebeckers the truth. … You need to tell them there would be sacrifices to be made in the current context.”

With his fantasy budget, Mr. Plamondon has shown why he is no Jacques Parizeau.

Editor’s note: (Oct. 25, 2023): A previous version of this story incorrectly referred to the size of Canada's federal debt.