April 2010

2010-2011 Quebec budget
A year to get ready

They announced it last year. This latest budget provides clear confirmation: in 2011, Quebec will begin the task of putting its financial house in order. Which leaves us barely one year to adjust our financial planning to suit.

On March 30, three weeks after his federal counterpart (it was one of those months!), Finance Minister Raymond Bachand tabled a budget that was surprising for the fiscal load it places on Quebec’s individual taxpayers. Now that the initial shock has worn off, it’s easier to see just what issues prompted Mr. Bachand to make his choices.

  • The Quebec budget is based on a different vision of the future than its federal counterpart:  the federal budget relies on economic growth to increase government revenues; the Quebec budget assumes that economic growth won’t be enough to balance the budget, especially given the province’s expected demographic evolution.
  • Quebec has given itself a shorter horizon, as shown in the table below:
    Planned horizon for achieving a balanced budget


    8 years
    Canada6 years
    Québec4 years
  • The equation is simple:  if you rely less on economic growth and give yourself less time, the only other options for eliminating the deficit are to impose spending restraints and to introduce new charges for taxpayers.
  • That’s why, instead of matching the economic flavour of the federal budget, the focus of the Quebec budget is decidedly fiscal.

The tax shock

There has been plenty of talk in recent days about the government’s choices – some of which will be hard for taxpayers to swallow. No matter what we think of them, however, it’s a good idea to start preparing for the consequences without delay:

  • 1¢ per litre yearly increase in gas prices effective April 1;
  • new health-care funding contribution of $25 per adult in 2010, $100 in 2011, and $200 in 2012;
  • QST up 1% in 2011 and another 1% in 2012.

These three measures will end up taking more than $1,000 a year out of your pocket if you have two children and your household income is in the $75,000 range – and $1,400 if your income is $125,000. Less affluent families will receive some relief in the form of a new solidarity tax credit. As well, the QST reimbursement on the purchase of a new house will be increased to a maximum of $8,772 in 2011.

But wait, there’s more. We also have to get ready to absorb the following charges:

  • probable additional fuel tax levy of 1.5¢ per litre for Quebec City and Montreal;
  • probable introduction in 2012 of a health “deductible” – i.e., a deterrent fee for health care services;
  • announced increase in university tuition fees for 2012;
  • announced increase in hydroelectricity rates for 2014.

Have your own business?

If you own a business, don’t worry:  the finance minister has decided to leave you some breathing room so that you can create jobs. As we can see below, if we exclude various measures such as a royalty for water used in production processes, the contribution required from the private sector is small.

In the interim…

Announcements like these can have an insidious effect:  initially, we react with shock – but then forget all about it and find ourselves unprepared when the measures take effect some months or years later.

This time, we’d do well to remember what’s coming down the line:  the amounts at stake will run to thousands of dollars and could have a huge impact on our household budgets. Planning a trip in 2012? Don’t forget that you’ll have less money on hand to pay for it. Thinking of buying a bigger house? Think about the combined effect on your disposable income of the QST hikes and all the new tariffs (to say nothing of higher mortgage rates).

Observers have said that this budget relying on specific service-related taxes marks a change in philosophy. No doubt the state of public finances as we move out of the recession does require decisive action. Let’s leave it to others to judge whether the government’s current approach is the right one, and simply note the inevitable reality:  in the years ahead, we will all have a little less money in our pockets for our personal projects. Frankly, it might be a good idea to sit down with your financial services professional and do a little planning!