Raise the Hammer

Re: Economic Vitality

"In its 2010 budget, the Quebec government presents a clear and honest view of the dire fiscal situation that the province currently faces. For fiscal year 2009–10, the province is slated to post its largest deficit—$4.3 billion—since the recession of the early 1990s, and that number will rise to $4.5 billion in 2010–11. More troubling, Quebec expects its gross debt to rise to more than half of provincial GDP through the near term, peaking at 55 per cent in 2012. By 2011–12, debt-servicing costs will eat up nearly $8 billion of Quebec’s provincial budget.
In the face of a rapidly aging population (and the resulting shrinking tax base), the 2010 budget squarely addresses the challenge of fiscal sustainability. Health care—easily the largest spending component—will see growth capped at 5 per cent going forward. Furthermore, new health-care funds will be generated through the introduction of a “health contribution” that will raise $1 billion a year by 2012. A second consecutive 1 percentage point increase in the Quebec Sales Tax (QST), valued at $1.6 billion, will be effective January 1, 2012. Additionally, minor tax increases on mining royalties and compensatory taxes for financial institutions will also add to revenues. At the same time, the Quebec government has set itself the daunting task of restraining total program spending to 2.2 per cent annually after 2011–12. If these measures can be implemented as described, Quebec could return to fiscal balance as early as 2013–14. Regardless, delaying a return to fiscal equilibrium any further is simply not an option for Quebec.

Among the Canadian provinces, Quebec is arguably in the most precarious fiscal situation. The provincial net debt now stands at $129 billion—equal to 43 per cent of provincial GDP. (Two decades ago, Quebec’s net debt-to-GDP ratio was only 22 per cent.) According to figures released by the Organisation for Economic Co-operation and Development, Quebec is in the fifth-worst position in terms of fiscal debt burden in the western industrialized world. Only Italy, Japan, Belgium, and Greece have higher debt-to-GDP ratios. Between 2009–10 and 2011–12 alone, debt-servicing costs will rise 29 per cent, providing a strong incentive for Quebec to curb its spending growth."

http://www.conferenceboard.ca/topics/economics/budgets/quebec_2010_budget_EN.aspx