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2012 Québec budget: Timidity and omissions

| March 26, 2012

On March 20, Québec's Finance Minister, Raymond Bachand, tabled his third budget. This budget year follows in the wake of those of the last few years. The government is still insisting on transforming public service funding in accordance with the user-fee revolution logic (so dear to Mr. Bachand's heart), developing the Plan Nord, and reforming the pension plan.

Limited royalties

The government announced with pomp and circumstance the outcome of its mining royalties reform. If, from 2006 to 2010, the yearly average of state-collected royalties reached only $42M, 2011-12 promises a bounty with its projected royalties of $365M. However, the current regime, based on companies' profits and not on the extracted ore's value, consequently deprives Québec's state of $410M on an annual basis. With a mineral production valued at $7.7G, if a royalty rate were levied, payments to the state could climb up to $775M.

In addition, the government created a new section at Investissement Québec, Ressources Québec, which will in time be allocated an investment budget of $1.2G. What does this new entity have to offer? It will ensure state participation in foreign companies which exploit the province's natural resources. The profits generated by this state participation in the ownership of companies benefiting from government assistance will not however be dedicated to funding State missions, but to funding the new exploitation projects in the North. Bachand thus accepts to buy shares in private companies in order to subsequently better support them.

Private pensions and financialization

To provide everyone with a decent retirement income, Finance Minister Bachand wants to introduce a voluntary retirement savings plan (VRSP). Inspired by RRSPs, VRSPs place the whole of the financial effort on workers and let them face on their own the financial risks associated with stock exchange fluctuations. By introducing VRSPs, the government chooses to entrust private fund managers with the management of Québécois's pensions in order to satisfy the demands of Bay Street.

With this regime, the employers will be completely cleared of their responsibility to fund their employees' pensions. Nonetheless, employers will be responsible for managing the dedicated sums and following up with the selected fund's manager.

Activity-based funding in health care

Even though no new fees were announced in this year's budget, the government opened up the door to transform the health infrastructure's funding. Facilities currently enjoy historical funding; in other words, a stable and predictable allowance which enables them to meet the population's needs. This year, a group of experts will be brought together to study activity-based funding for facilities.

This reform, inspired by the reform in higher education at the beginning of the 2000s, will consequently tie the funding of health-care facilities to their capacity to represent themselves as more efficient and competitive than their neighbours. If the government does go down this road, the population's needs will no longer determine the funding level of health-care facilities, which will depend instead on meeting organizational efficiency objectives that the Ministry will determine and apply top-down. IRIS has already posted its reflections regarding the issue on its blog.

Methodological flaws

In addition, two fact sheets aim to present the outcome of governmental action on the population's disposable income and the struggle to end poverty. However, important points are missing.

We are told that inequalities are decreasing in Québec, but in most of the Ministry's calculations, the richest 10 per cent are not considered. Yet this portion of the population's earnings has increased heavily in the last years. For instance, the average income of households earning over $250,000 has risen from $482,000 to $517,000 from 2005 to 2009. Furthermore, the government launched into a series of case studies to demonstrate that Québec's population has more disposable income. Yet in its budget the government does not mention in a single instance household debt, which is constantly increasing. If disposable income is so fast growing, why is household indebtedness mounting?

Conclusion

In short, the budget contains no surprising nor major announcements. On the Finance Minister's own admission, it contains meagre investments of little more than $200M. The government is surfing on the regressive measures of the last few years, refusing to consider measures more adequate than user fees to finance public services and stubbornly restraining itself from demanding mining royalties worthy of the name. The result is thus predictable: the population is asked to tighten its belt, but not mining companies nor financial institutions.

Simon Tremblay-Pepin is a researcher at IRIS, a Montreal-based progressive think-tank. This article was first posted on Behind the Numbers.

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