The Legault government will soon modify the Act to reduce the debt and establish the Generations Fund in order to allow it to grab hold of the additional revenue dedicated annually to the fund, which will exceed the $3 billion mark.
This is what Finance Minister Eric Girard suggests in his recent budget update, entitled “Update on Québec’s Economic and Financial Situation”.
According to page E 19, regarding the payment cap: “For information purposes, payments to the Generations Fund which would amount to $3 billion per year as of 2023-2024, instead of the payments currently planned. .”.
Payments to the Generations Fund currently provided for in Minister Girard’s “Multi-Year Financial Framework” for the next four fiscal years, ie 2023-24 to 2026-27, amount to $18.6 billion.
By limiting payments to 12 billion (4 x 3 billion per year) to the Fund, this will allow the Legault government to get their hands on a new kitty of 6.6 billion dollars.
For electoral purposes
What will the CAQ government do with this large additional revenue from the revenue initially allocated to the Generations Fund?
It is from these “diverted” receipts from the Fund that François Legault and his fundraiser Eric Girard will finance the famous tax cut promised during the election campaign.
Estimated by the Caquists at 7.4 billion over four years, this tax cut will come into effect in the next 2023-24 budget, said Minister Eric Girard. It is important to remember that this tax cut is a regressive measure: it is obviously the wealthiest (with incomes of $100,000 or more) who will receive the greatest tax savings. The tax savings will be $760 per year for $100,000 or more; $520 for the $70,000; $320 for the $50,000; from $100 to $200 for the $30,000 to $40,000; a big $10 for the $20,000; $0 for under $20,000.
- Listen to Michel Girard’s economic column at the microphone of Philippe-Vincent Foisy on QUB radio :
The official goal…
The Act to reduce the debt and establish the Generations Fund was adopted in 2006.
It aims to reduce the weight of Québec’s debt in order to ensure a prosperous future for generations to come. Article 1 of the law then set the objectives of reducing the debt as a percentage of GDP at 25% by March 31, 2026 at the latest.
In 2010, following the financial crisis of 2008-2009, the law was amended: the objective provides that the gross debt may not exceed 45% of GDP, while the debt representing accumulated deficits may not exceed 17% of GDP.
As of March 31, 2023, according to Minister Eric Girard, the gross debt ratio of $224 billion to GDP will stand at 40.4%. And the debt ratio representing accumulated deficits ($107 billion) will rise to 19.3%. The Caquiste government will modify the Generations Fund law by setting it “a new debt reduction objective covering the next 10 or 15 years”.
“The target to be reached must be established according to the current challenges and those that Quebec will face in the years to come. We are thinking, for example, of the aging of the population, the reduction of GHGs and Quebec’s needs in terms of public infrastructure,” the Update mentions.
So much for the theory.
In practice, the Legault government will use part of the revenue allocated to the Generations Fund to finance its election promise of a tax cut.
- Listen to Michel Girard’s economic column at the microphone of Philippe-Vincent Foisy on QUB radio :
The Generations Fund in brief
Photo archives, The Journal
Michel Audet Former Minister of Finance
- Created in 2006 by the Charest government
- Instigator: Michel Audet, Minister of Finance
- Objective: reduce government debt
- Goal: Improve intergenerational equity
- Sources of revenue: hydraulic resources, mining revenue, indexation of heritage electricity, tax on alcoholic beverages
- Annual payment: more 3 billions since 2020-21
- Book value in March 2023: $19 billion
