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2002 > 2003 Budget : Now, because now is the time for ACTION

Maintaining a zero deficit

"Tabling an economic action plan while maintaining a zero deficit will mean taking a number of difficult actions. However, the government is maintaining its objective of balancing public finances", Pauline Marois affirmed in her speech to the National Assembly.

New economic forecast

After four years of particularly strong growth, including a 4.7% increase in 2000, the March 29, 2001 Budget forecast that the economy would slow to 2.7% in 2001 and 2.6% in 2002. However, various factors, such as the September 11 terrorist attacks, have accentuated the slowdown and delayed the recovery anticipated for the end of the current year.

The 2002-2003 Budget will serve in part to offset this negative situation. The action plan presented in the Budget should result in a 0.7% increase in Québec’s GDP next year, thereby creating or maintaining some 16 000 jobs. In fact, the Québec economy is now expected to post real growth of 1.1% this year and of 1.7% in 2002.

New financial framework

This new economic growth forecast is a downward revision of the forecasts presented in the last Budget Speech. This will not be without consequences for the level of tax receipts. In September, the ministère des Finances published the Quarterly Presentation of Financial Transactions as at June 30, 2001, which contained no major adjustments of the revenue forecasts. However, the new situation leaves us no choice today but to lower the forecasts by $1.8 billion for 2001-2002 and 2002-2003.

In these conditions, Québec could easily have ended up with a deficit. The government has therefore used every means at its disposal to maintain a balanced budget.

Use of the balance of the $950-million reserve

The creation of a $950-million reserve out of the surpluses accumulated in 2000-2001 was announced in the last Budget Speech. The reserve was intended to fund non-recurring expenditures in priority sectors.

Today, we must respond to another important need, that of preventing the economic slowdown from plunging Québec into deficit again.

To date, $280 million of the reserve has been earmarked for new spending. Accordingly, the balance of the reserve is $670 million. The government will use this amount to balance the budget. Thus, an amendment to the bill concerning the reserve will be proposed to that end.

Originally, the $950 million was to be put toward investments in health, education, research and the fight against poverty. In reality, the 2002-2003 Budget provides for much larger investments in these same areas, while maintaining a zero deficit.

Increase in the tobacco tax

Consultations prior to the Budget clearly showed that an increase in the tax burden might adversely affect Québec’s competitiveness. As a result, the government chose to include in this Budget only revenue measures that could not impact on competitiveness.

It therefore opted to increase the tobacco tax. The Québec tax is among the lowest in Canada today. This is the case because our society is determined to avoid a resumption of tobacco smuggling. Smoking causes major diseases, and raising the price of cigarettes has proven to be one of our most effective preventive measures. Since the government raised the price of a carton of cigarettes by $2 a few months ago without causing a noticeable increase in smuggling, the Budget announces an increase in the tobacco tax of $2.50 per carton as of November 2, 2001. This increase should generate revenues of $125 million over a full year.

For his part, the Minister of Revenue will introduce new measures to curb tax evasion. These initiatives will result in the recovery of $100 million per year from the taxpayers involved.

Rigorous management of spending

The 2002-2003 Budget should prevent the economy from deteriorating, while maintaining a balanced budget, as it is an action plan that has the advantage of being self-financing. The gross cost of the plan will not exceed $641 million for 2001-2002 and 2002-2003. This is because the plan is comprised primarily of investments whose costs will be spread over several years.

The action plan enables more than $3 billion to be injected into the economy, which will generate an additional $306 million in tax receipts, constituting an initial self-financing source.  

A reallocation of $281 million in spending, to offset the additional costs in this Budget and meet the agreed spending targets, will be another self-financing source.

For 2001-2002 and 2002-2003, the government has adopted a strategy that consists in maintaining the program spending targets—$41 929 million and $43 223 million respectively—set in March. The government will honour this commitment, which represents an annual increase of 2.8% in 2001-2002 and 3.1% in 2002-2003.


To find out more
Budget Speech
The Government's Budgetary and Financial Stance
Section 3


© Gouvernement du Québec, 2001