Press release No. 1

2005-2006 Budget Speech

A budget of disciplined, responsible management for economic prosperity and social justice

“Abudget that enables Québec to Shine among the best.”

— Michel Audet

Québec, April 21, 2005 – The Minister of Finance, Michel Audet, today tabled the Québec government’s 2005-2006 Budget before the National Assembly. “This budget allows us to enter a new phase in the actions undertaken by our government since we took office,” said the Minister. “It is a budget firmly rooted in the liberal vision and values that our team has defended with deep conviction from the outset.”

Thus, thanks to disciplined management of public finances, the 2005-2006 Budget maintains a balanced budget while pursuing three objectives:

• staying the course of our priorities: health, education, culture, family, a lighter tax burden for Quebecers and the fight against poverty;
• encouraging wealth creation to ensure, in the long term, the maintenance and development of services for the population in all regions of Québec;
• modernizing our public infrastructures.

Staying the course of our priorities

Health: $826 million more for direct services to the population

“In the last election campaign, we promised to make health our priority, and we did that. Today we can be proud of having reorganized services and reversed the underinvestment trend of previous years by reinvesting $3 billion since taking office,” stated Mr. Audet.

The 2005-2006 Budget thereby injects $826 million to improve direct services to the population.

“Our track record in the area of health is sound, and this Budget enables us to continue our efforts to provide better health services to Quebecers,” affirmed the Finance Minister. Mr. Audet also announced that the Minister of Health and Social Services would soon be unveiling two action plans, one for mental health and the other to better support seniors, in particular by providing more home care.

The Finance Minister also announced that as of July 2005, medication will be completely free for persons 65 or older who receive the maximum guaranteed income supplement.

Mr. Audet also announced, in the 2005-2006 Budget, a reform of the support provided to persons with disabilities and natural caregivers. Thus, 80 000 natural caregivers and people with a physical or mental impairment will receive additional assistance of $43 million, representing an increase of 50% in tax assistance for these individuals.

Education: an additional $321 million for academic achievement

“The other main priority of our government is education,” continued the Minister of Finance.

This year, the government will invest $321 million more in education. In three years, the government will have invested over $1 billion in the academic achievement of young Quebecers.

Thus, in 2005-2006, the additional funding injected into the education system will better guide students toward success.

“We are going to double the budget of the homework assistance program. This program, which is now in place in 1 800 of Québec’s 2 000 schools, is a huge success that also facilitates work-family balance,” stated Mr. Audet.

The 2005-2006 Budget will also follow through on the government’s three-year plan to encourage reading in school. Moreover, as of September 2006, English second language instruction will be introduced beginning in the first grade.

“With the investments announced in the 2005-2006 Budget, we will have invested more in education in three years than the previous government did in nine years, reflecting our determination to emphasize success in school,” pointed out the Finance Minister.

Personal income tax reduction: $372 million

The Minister of Finance announced, in the 2005-2006 Budget Speech, a personal income tax reduction of $372 million, primarily resulting from the new $500 deduction for workers, which will take effect on January 1, 2006 and benefit 3.1 million salaried workers and 162 000 self-employed workers.

“On an annual basis, the deduction for workers represents $300 million. This is in addition to the $1-billion gain for taxpayers announced last year, primarily in favour of families, and the indexation of personal income tax, which will give taxpayers an additional $250 million in 2005-2006,” declared Mr. Audet.

This reduction in personal income tax brings Quebecers’ level of taxation closer to the Canadian average. The fiscal gap between Québec and the Canadian average has been cut almost in half, dropping from $2.2 billion to $1.2 billion in three years.

“This tax cut is within our means and it is also a mark of sound, disciplined management, affirming our determination to make Québec more fiscally competitive. I want to be very clear: there was never any question of reducing taxes to the detriment of a balanced budget,” asserted the Finance Minister.

$900 million over three yearsto support regional investment and development

The second main objective of the 2005-2006 Budget is to foster wealth creation and increase prosperity throughout Québec.

In light of demographic trends and a more competitive world economic stage, the 2005-2006 Budget is taking action on two fronts:

• stimulating private investment and job creation;
• making new development tools available to people in the regions.

The various initiatives announced in the 2005-2006 Budget Speech will inject close to $900 million over three years to better tap Québec’s full economic potential.

Reform of corporate taxation to promote investment

“The government’s priority of wealth creation is based on the conviction that Québec’s potential for growth and development is far from fully tapped. More must be done to stimulate private investment and enhance productivity,” indicated Mr. Audet.

The 2005-2006 Budget thus provides for three series of measures:

• To stimulate investment, the Budget is introducing a reform of corporate taxation with a reduction in the tax on capital of more than 50% by 2009, a 5% tax on capital credit for new investments in machinery and equipment and a reduction in the taxation rate of SMEs. With these measures, the Minister of Finance is sending a clear message to businesses: “Modernize and you won’t have to pay any more tax on capital!”
• Moreover, to facilitate business financing at the seeding and start-up stages, the Budget provides additional funding of $78 million for the “Régions” component of the regional economic intervention fund, FIER-Régions. To further the growth and expansion of businesses, the SME Growth Stock Plan will be created.
• To support R&D, innovation and exports, the Budget introduces several measures, including an increase to 37.5% of the refundable tax credit in respect of R&D salaries and the implementation of specialized consulting services to enhance exports and productivity.

$240 million for regional development and prosperity

“We intend to give the regions tools to enable them to take charge of their development and diversify their economy, while ensuring the sustainability of their resources,” indicated Mr. Audet.

To support the regions’ efforts to adapt and diversify and act on some of the priority recommendations of the Coulombe Commission’s report, $240 million will be earmarked over three years. These investments will help support workers, communities and businesses in single-industry towns and forest-dependent regions that are experiencing economic difficulties.

Thus, the 2005-2006 Budget allocates $75 million over three years specifically to improve forest management and ensure sustainable development.

Investments of $4.9 billion in infrastructures

The Finance Minister indicated that the third main objective of the 2005-2006 Budget is the modernization of public infrastructures. Mr. Audet thus recalled that major investments in infrastructures have been made over the past two years and that more will be made in coming years.

“In 2004-2005 alone, our infrastructure investments totalled nearly $4.1 billion. For 2005-2006, capital investments of $4.9 billion will be made both to maintain existing assets and build new infrastructures. That is almost double the investments made by the previous government at the start of this decade,” pointed out the Finance Minister.

The 2005-2006 Budget thus provides for average annual investments of $1.3 billion until 2007-2008 to repair and develop Québec’s road network.

In addition, the Budget calls for nearly $2 billion in investments in leading-edge health and education facilities in the coming year.

The Minister of Finance also announced the implementation of a new policy on the maintenance of assets, which will add $1 billion over three years to the efforts already made by the government to maintain our public infrastructures.

Finally, the Budget calls for increased government funding for the Société de financement des infrastructure municipales (SOFIL). A contribution of 25% by the Québec government, 25% by municipalities and 50% by the federal government will ultimately enable municipalities to invest close to $1 billion in infrastructures annually.

“Our government has made modernizing infrastructure throughout Québec one of its priorities. It is a dire necessity given that the previous government largely ignored its obligations in this regard,” Mr. Audet pointed out.

Disciplined management to maintain a balanced budget

“To encourage wealth creation and stay the course of our priorities, it is crucial that we continue to exercise fiscal discipline and maintain a balanced budget,” concluded Mr. Audet in his 2005-2006 Budget Speech.

The Minister of Finance announced that in 2005-2006, a balanced budget would be achieved, just as it was in 2004-2005, despite the pressure on Québec’s public finances stemming from the fiscal imbalance.

“We are going to continue our efforts to modernize government, thereby enabling us not only to save money and meet our spending growth target of 3.6%, but also to provide more efficient, better-quality public services to Quebecers,” declared the Finance Minister.

To close this 140 th Budget Speech, delivered at the National Assembly of Québec, the Minister of Finance, Michel Audet, recalled a conviction constantly reiterated by Robert Bourassa: that Québec’s economic strength is the only path to greater social justice.

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