QUEBEC'S FISCAL SITUATION POINTS TO NEED FOR TOUGH CHOICES

Conference Board of Canada forecasts a $45 billion deficit or a 19.5 per cent provincial sales tax by 2030

MONTREAL, Nov. 18 /CNW/ - A new Conference Board of Canada report released today is unequivocal that the fiscal health of the Quebec government is at risk.

"If Quebec's taxation rates remain unchanged and historical trends in actual per capita program spending are maintained, the Quebec government will hit a wall in the future," said Mario Lefebvre, the Conference Board's Director of Quebec Affairs and Director of its Centre for Municipal Studies.

In the report, Quebec's Fiscal Situation: The Alarm Bells Have Sounded, The Conference Board of Canada forecasts that Quebec's real economic growth will be 1.6 per cent per year between fiscal year 2009-2010 and fiscal year 2030-2031. This tepid performance is due to weak demographic growth, which is anticipated to be only 0.7 per cent annually for the next 20 years.

In such a demographic and economic context, the Quebec government's revenue growth will be limited to an average of four per cent per year over this period. In comparison, expenditures are forecast to grow at an average annual rate of 5.1 per cent.

The substantial rise in expenditures will be due primarily to the rapid increase in the Quebec government's health care spending, which, according to the Conference Board's projections, will grow at an average annual rate of 5.9 percent over the entire forecast period.

Specifically, health care spending will rise from $27 billion in 2009-2010 to $90.2 billion in 2030-2031, an increase of approximately $63 billion. In fact, health care's share of total Quebec government revenues will grow from 43.1 per cent in 2009-2010 to 63.4 per cent in 2030-2031.

The province's aging population, particularly baby boomers, will lead to an increase in the number of people in age brackets where costs are highest. In fact, the 65-and-older age group will expand by an average of 3 per cent per year over the next 20 years, as opposed to the 5-24 age group that will expand by only 0.4 per cent during the same period.

Against such a backdrop, the Conference Board forecasts that, despite a continued increase in federal transfer payments, the Quebec government will post an annual deficit of more than $45 billion by the end of fiscal 2030-2031.

The study also shows, for instance, that if the provincial government tries to use the provincial sales tax exclusively to maintain a balanced budget until 2030-2031, the provincial sales tax rate would have to go to 19.5 per cent in 2030.

"The Conference Board of Canada is not telling the Quebec government what to do, but is pointing out that the Quebec government's financial situation is shaky and that maintaining the status quo is not an option," said Lefebvre.

The report is publicly available at www.e-library.ca.

For further information:

Brent Dowdall, Media Relations
Tel.: [phone]
E-mail: [email protected]