(Quebec) To avoid widening its record deficit of $11 billion for 2024-2025, Quebec is emptying half of its contingency cushion and starting to clean up its tax expenditures. The age of eligibility for the tax credit for career extension increases from 60 to 65 and this tax assistance will be reduced for the better off.
Published at 11:00 a.m.
This is what the economic update presented by Finance Minister Eric Girard reveals on Thursday.
In his March budget, he announced a deficit of $11 billion for this year, after payment to the Generations Fund which is used to reduce the debt. This is a record in absolute numbers. It maintains this target in its economic update, as does the return to a balanced budget in 2029-2030.
However, the Legault government had to take measures to avoid digging its financial hole even further. That’s because spending is increasing more than expected, by nearly $3 billion, the economic update says.
Five things to know about the economic update
For example, health spending is up by 900 million compared to forecasts, in particular due to the higher cost of using workers from private agencies. Quebec also had to pay $250 million due to flooding last summer. A lag in the pace of infrastructure construction also increases spending by 786 million for the current year – the restrictions making headlines this fall in the health and education sectors aim to avoid budget overruns more important. Some tax credits also cost more than expected.
In the income column, we notice a higher than expected increase in federal transfers, of 1.6 billion. These are sums paid by Ottawa for the reception of asylum seekers and the construction of housing.
The government’s financial situation thus deteriorated overall by 1.3 billion, a sum which risked increasing its deficit. And that’s without counting the cost of its new initiatives in this economic update, reaching 365 million this year. The biggest measure: the payment of 250 million dollars for transport companies – aid which will total 879.6 million in four years.
However, in order for the deficit to be maintained at 11 billion, Quebec draws 750 million from its “contingency provision” which aims to deal with unforeseen events. He now has 750 million left. He also announces the start of his cleaning in tax expenditures.
The career extension tax credit is revised to save 227 million this year – 887 million in four years. Nearly 200,000 workers aged 60 to 64 will lose an average of $1,000 due to the increase in the age of eligibility. The increase in capital gains taxation, a measure already announced and imitating an announcement from Ottawa, will also bring in 413 million this year.
These fiscal measures allow the government to announce that Quebec’s “structural deficit”, the one that will have to be absorbed by 2028-2029, now amounts to 3.2 instead of 3.9 billion.
That said, in the shorter term, the outlook is less good. The deficit forecast for next year, therefore in 2025-2026, increases from 8.5 to 9.2 billion.
As planned, the government will present its plan to return to budget balance in the next budget. It is on this occasion that he will unveil the results of his comprehensive review of tax expenditures, as well as the expenditures of departments and agencies.
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