In an economic update, Quebec’s Finance Minister Eric Girard announced measures totaling $8.3 billion over five years aimed at protecting purchasing power and stimulating the economy. However, these initiatives will cost the public treasury only $313 million—approximately $63 million annually—amounting to just 0.04% of the province’s current year expenses, which stand at $167 billion.
Analysis of $8.3 Billion Measures
The low financial impact of these measures is seen as positive, especially given the fragile state of public finances. Concerns had been raised that the government might reduce taxes to enhance its popularity a year before elections.
What Makes these Initiatives a Mirage?
- Almost half of the $8.3 billion in so-called new initiatives are not genuinely additional. They primarily involve the annual indexing of the tax regime, a practice carried out by all Quebec governments over the past two decades.
- This indexing adjusts income thresholds based on inflation, preventing an inadvertent tax hike on residents. The government estimates this measure to cost $4.1 billion over five years, but it is already included in the budget projections.
Explaining the Windfall
Significant financial benefits stem from the favorable performance of two key programs that serve Quebec residents, yet are outside the government’s direct control. These programs are:
- Quebec Pension Plan (QPP): Strong returns from long-term interest rates and stock market performance led to an 11% return in 2024 and 4.6% in the first half of 2025. This allowed a reduction of 0.2 percentage points in the contribution rate, giving an average saving of $71 per worker.
- Quebec Parental Insurance Plan: A planned 13% cut in contributions results in an average saving of $66 per worker.
Combined, these reductions lighten the financial burden on workers and employers by approximately $137 annually. Notably, the overall relief from these two programs reaches $3.7 billion, which constitutes 45% of the total $8.3 billion in measures.
Remaining Financial Initiatives
After accounting for the aforementioned measures, only $598 million remains allocated for businesses and regions. However, the finance minister employed accounting strategies to effectively halve this amount, indirectly sourcing from the Fund for Electrification and Climate Change, despite the initiatives not addressing climate issues.
Current Budget Deficit Status
The financial situation presented indicates a current year deficit of $9.9 billion, which is $1.5 billion lower than earlier projections. While this news is encouraging, significant challenges remain ahead. Achieving a budget balance requires controlling the growth of spending below inflation and addressing a projected annual shortfall of $2.5 billion within three years, with no solutions currently identified.
The outlook anticipates economic growth of just 1.1% by 2026, which further complicates the path to a potential budget surplus.
