Can we afford a strong health and social service system? Part 1

Back to balanced budgets

The 2023-2024 budget was tabled on March 21, together with the real financial data for the 2022-2023 fiscal year. As it turns out, while the government was betting on a $3 billion shortfall before contributions to the Generations Fund, the deficit proved considerably lower than forecast, at barely $1.6 billion. Once again there is a discrepancy between the government’s projections and the actual results.

Should we chalk this up to incompetence on the part of the Finance Ministry’s economists? It’s actually a ploy to allow successive governments to boast better than “expected” results and to redistribute the surplus as they please during election campaign periods. And if it weren’t for the government continuing to make some payments towards the Generations Fund, the budget would be balanced by 2025.

The public debt is under control

Apart from the rapid reduction of the pandemic-fuelled deficit, another factor to consider in assessing the health of public finances is the public debt. There are two key measures essential to a clear understanding: the debt-to-GDP ratio, that is, the extent of public indebtedness in relation to the total wealth produced by our economy, and the debt service burden, that is, the amount of money the government must spend each year to service its debt, divided by its consolidated revenue.

With respect to the first indicator, following a decline starting in 2014-2015, it reached 40% this year, and the Ministry of Finance expects it to continue falling until it reaches 37% within four years. This puts us well below the 45% threshold established in the Act to reduce the debt and establish the Generations Fund and attests to public finance sustainability in the medium-term.

At 6.6% by 2027, the debt burden remains squarely in the safe zone.

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Admittedly, with rising interest rates, this situation could conceivably change, resulting in an increase in debt service relative to the government’s consolidated revenues. This is true, but at 6.6% by 2027, the debt burden remains squarely in the safe zone. Moreover, it would be surprising to see central banks stick to the current monetary policy direction given the risks of an economic slowdown.¹

How to spend the money

Finding itself in an enviable financial position, the Québec government quickly reverted to its old ways and yielded to the temptation of handing out goodies. The tax breaks announced in the budget amount to an estimated $1.7 billion. This was met with a chorus of voices, which includes the APTS, urging the government to instead use that money to fund public services, which are in an alarming state of decay.

In the case of the health and social service system, funding for services to Quebecers has never been restored to the level it was at before the 2008 financial crisis. To counter the destabilizing effect of successive rounds of budget cuts and reinvestment, we need stable funding.

In establishing this kind of mechanism, the government would be sending a strong message to Quebecers and to public sector health and social service employees, namely, that from now on, there will be no return to a balanced budget at the expense of the public system’s capacity to fulfill its missions.

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A budgetary shield to stabilize the health and social service system

For this reason, the APTS has called on Finance Minister Eric Girard to introduce a budgetary shield to ensure sustained funding for the health and social service system. We proposed that the government mandate an independent body (the Auditor General, for example) every year to analyze the costs of maintaining the current level of services in the health and social service system and of meeting the new needs of Quebecers. At a minimum, the Ministry of Finance would then use the figures produced by this independent body as a basis for preparing the budget. In establishing this kind of mechanism, the government would be sending a strong message to Quebecers and to public sector health and social service employees, namely, that from now on, there will be no return to a balanced budget at the expense of the public system’s capacity to fulfill its missions.

To learn more about the APTS’s demands at the pre-budget consultations, read our brief Les clés d’un budget profitable à tou·te·s.

Further reading:

• The secret to a strong health and social service system

¹  Quoi surveiller en 2023 : Une récession devrait aider à faire baisser plus rapidement l’inflation, Desjardins – Études économiques, January 2023.